SECURITIES AND EXCHANGE COMMISSION
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________.
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Commission file number 1-6732
DANIELSON HOLDING CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 95-6021257
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
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TWO NORTH RIVERSIDE PLAZA, SUITE 600
CHICAGO, IL 60606
(Address of Principal Executive Offices) (Zip Code)
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(312) 466-4030
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy of information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
State the aggregate market value of the voting and non-voting common equity held by nonaffiliates of the registrant computed by reference to the price at which the common equity was last sold, or the average bid and asked prices of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter. $34,795,021
OUTSTANDING STOCK (ALL CLASSES)
CLASS MARCH 15, 2004
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Common Stock, $0.10 par value 35,950,145 shares
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DOCUMENTS INCORPORATED BY REFERENCE
None
DANIELSON HOLDING CORPORATION
FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PAGE
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PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 18
Item 3. Legal Proceedings........................................... 18
Item 4. Submission of Matters to a Vote of Security Holders......... 18
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities........... 19
Item 6. Selected Financial Data..................................... 20
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 21
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 39
Item 8. Financial Statements and Supplementary Data................. 43
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 90
Item 9A. Controls and Procedures..................................... 91
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 91
Item 11. Executive Compensation...................................... 94
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.................. 97
Item 13. Certain Relationships and Related Transactions.............. 99
Item 14. Principal Accountant Fees and Services...................... 101
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form
8-K......................................................... 102
Signatures............................................................ 110
Certifications........................................................ 111
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PART I
ITEM 1. BUSINESS
INTRODUCTION
Danielson Holding Corporation ("DHC") is a holding company incorporated in Delaware with substantially all of its current operations conducted in the insurance services industry. DHC engages in insurance operations through its indirect subsidiaries, National American Insurance Company of California and related entities. DHC also has an equity interest in companies engaged in the marine transportation and services industry through its investment in American Commercial Lines, LLC ("ACL") and related entities.
In May 2002, DHC acquired a 100% ownership interest in ACL. On January 31, 2003, ACL and many of its subsidiaries and its immediate direct parent entity, American Commercial Lines Holdings, LLC ("ACL Holdings"), filed a petition with the U.S. Bankruptcy Court to reorganize under Chapter 11 of the U.S. Bankruptcy Code. Material uncertainty exists as to the impact of the bankruptcy on DHC's equity interest in ACL upon the conclusion of ACL's bankruptcy proceeding. While it cannot presently be determined, DHC's investment in ACL may have little or no value upon the completion of that bankruptcy proceeding. DHC, NAICC and DHC's equity investees, operating in the marine services industries, are not guarantors of ACL's debt, nor are they liable for any of ACL's liabilities.
DHC owns a direct 5.4% interest in Global Materials Services, LLC ("GMS") and a direct 50% interest in Vessel Leasing, LLC ("Vessel Leasing"). ACL owns 50% of GMS and the remaining 50% of Vessel Leasing. Neither of these two companies filed for Chapter 11 protection. GMS is an owner and operator of marine terminals and warehouse operations, and Vessel Leasing leases barges to ACL's barge transportation operations, which are in Chapter 11. DHC, GMS and Vessel Leasing are not guarantors of ACL's debt nor are they liable for any of ACL's liabilities.
As a result of the bankruptcy filing, while DHC continues to exercise influence over the operating and financial policies of ACL, it no longer maintains control of ACL. Accordingly, for the year ended December 31, 2003, DHC has accounted for its investments in ACL, GMS and Vessel Leasing using the equity method of accounting. Under the equity method of accounting, DHC reports its share of the equity investees' income or loss based on its ownership interest.
In conjunction with the uncertainty of the outcome of the ACL bankruptcy, DHC evaluated the carrying values of its investments in ACL, GMS and Vessel Leasing and recorded an impairment loss of $8.2 million for its remaining original investment in ACL during the quarter ended March 28, 2003. No impairment loss adjustments have been made to the carrying values of GMS and Vessel Leasing.
DHC had cash and investments, including investments in subsidiaries and restricted cash, at the holding company level of $62.8 million at December 31, 2003. DHC's cash amounted to $3.5 million, DHC's investments consisted of publicly traded bonds of $0.5 million. DHC has restricted cash of $37.0 million related to the Covanta escrow. DHC also had a $17.3 million investment in insurance subsidiaries. DHC had liabilities at the holding company level of $42.2 million, consisting primarily of a note payable of $40 million relating to the acquisition of the energy and water business of Covanta Energy Corporation ("Covanta") discussed below.
DHC expects to report, as of the end of 2003, aggregate consolidated net operating loss tax carryforwards for federal income tax purposes ("NOLs") of approximately $652 million. These losses will expire over the course of the next 19 years unless utilized prior thereto. See Note 13 of the Notes to Consolidated Financial Statements (hereinafter referred to as "Notes to Consolidated Financial Statements") for more detailed information on DHC's NOLs.
DHC's strategy is to grow by developing business partnerships and making strategic acquisitions. As part of DHC's ongoing corporate strategy, DHC has continued to seek acquisition opportunities, such as the recent acquisition of Covanta described below which management believes will enable DHC to earn an attractive
return on its investment. Such acquisitions will not necessarily complement its existing operations, and could be entirely unrelated to DHC's current businesses.
ACQUISITION OF COVANTA ENERGY CORPORATION
On December 2, 2003, DHC executed a definitive investment and purchase agreement to acquire the energy and water businesses of Covanta in connection with Covanta's emergence from Chapter 11 proceedings in bankruptcy. The primary components of the transaction are: (1) the purchase by DHC of 100% of the equity of Covanta in consideration for a cash purchase price of $30 million, and (2) agreement as to new letter of credit and revolving of credit facilities for Covanta's domestic and international operations, provided by some of the existing Covanta lenders and a group of additional lenders organized by DHC. DHC amended this Agreement with Covanta as of February 23, 2004 to reduce the purchase price and release from an escrow account $175,000 so that a limited liability company formed by DHC and one of its subsidiaries could acquire an equity interest in Covanta Lake, Inc., a wholly-owned indirect subsidiary of Covanta, in a transaction separate and distinct from the acquisition of Covanta out of bankruptcy.
As required by the investment and purchase agreement, Covanta filed a new, alternative proposed plan of reorganization, a new, alternative proposed plan of liquidation for specified non-core businesses, and an accompanying draft disclosure statement, each reflecting the transactions contemplated under the investment and purchase agreement, with the Bankruptcy Court. On March 5, 2004, the Bankruptcy Court confirmed the proposed plans.
Under the terms of the investment and purchase agreement on March 10, 2004, DHC acquired 100% of Covanta's equity in consideration for approximately $30 million (net of $175,000 discussed above). As part of the investment and purchase agreement, DHC arranged for a new $118 million replacement letter of credit facility for Covanta, secured by a second lien on Covanta's domestic assets. This financing was provided by SZ Investments, L.L.C., a DHC shareholder ("SZ Investments"), Third Avenue Trust, on behalf of Third Avenue Value Fund Series, a DHC shareholder ("Third Avenue") and D. E. Shaw Laminar Portfolios, L.L.C., a creditor of Covanta and a DHC shareholder ("Laminar"). In addition, in connection with a note purchase agreement described below, Laminar arranged for a $10 million revolving loan facility for Covanta's international operations that DHC acquired, secured by Covanta's international assets.
A preliminary estimate of the purchase price to be recognized by DHC in its financial statements ranges from $46 million to $51 million which includes the cash purchase price of $30 million, an expense estimate of approximately $6 million for professional fees and other costs incurred in connection with the acquisition, and an estimated fair value ranging from $10 million to $15 million for DHC's commitment to sell up to 3 million shares of its Common Stock at $1.53 per share to certain creditors of Covanta, subject to certain limitations. The final purchase cost will be determined as DHC obtains additional information.
FINANCING THE COVANTA ACQUISITION
DHC obtained the financing necessary for the Covanta acquisition pursuant to a note purchase agreement dated December 2, 2003, from SZ Investments, Third Avenue and Laminar (collectively, the "Bridge Lenders"). Pursuant to the note purchase agreement, the Bridge Lenders provided DHC with $40 million of bridge financing in exchange for notes issued by DHC. In the event that DHC is unable to repay all or a portion of the notes pursuant to a previously announced rights offering of DHC Common Stock, par value $0.10 per share ("Common Stock"), then the notes are convertible without action by the Bridge Lenders into shares of Common Stock at a price of $1.53 per share subject to certain agreed upon limitations necessitated by DHC's NOLs. These notes have a scheduled maturity date of January 2, 2005 and an extended maturity date of July 15, 2005, and bear interest at a rate of 12% per annum through July 15, 2004 and 16% per annum thereafter. In the event of a default or the failure to pay a note on its maturity, the interest rate under the note increases by 2%. DHC used $30 million of the proceeds from the notes to post an escrow deposit prior to the closing of the transactions contemplated by the investment and purchase agreement. At closing, the purchase price deposit (net of the $175,000 discussed above) was used as DHC's purchase price for Covanta's equity interests. DHC has been and will use the remainder of the proceeds to pay transaction expenses and for
general corporate purposes. In consideration for the $40 million of bridge financing and the agreement by the Bridge Lenders to arrange or provide for the $118 million second lien credit facility and for Laminar to arrange or provide for the $10 million international revolving credit facility, DHC issued to the Bridge Lenders an aggregate of 5,120,853 shares of Common Stock. Upon closing of the Covanta acquisition, certain contractual restrictions upon such shares terminated. At the time that DHC entered into the note purchase agreement, agreed to issue the notes convertible into shares of Common Stock and issued the equity compensation to the Bridge Lenders, the closing price of the Common Stock on the American Stock Exchange on the day prior to the announcement of the Covanta acquisition was $1.40 per share, which was below the $1.53 per share conversion price of the notes.
In addition, under the note purchase agreement Laminar has agreed to convert an amount of notes to acquire up to an additional 8.75 million shares of the Common Stock at $1.53 per share based upon the levels of public participation in the rights offering. Further, DHC has agreed, in connection with the note purchase agreement, to sell up to an additional 3 million shares of Common Stock at $1.53 per share to certain creditors of Covanta based upon the levels of public participation in the rights offering and subject to change of ownership and other limitations.
As part of DHC's negotiations with Laminar and their becoming a 5% shareholder, pursuant to a letter agreement dated December 2, 2003, Laminar has agreed to restrictions on the transferability of the shares of Common Stock that Laminar holds or will acquire. Further in accordance with the transfer restrictions contained in Article Five of DHC's charter restricting the resale of Common Stock by 5% stockholders, DHC has agreed with Laminar to provide it with limited rights to resell the Common Stock that it holds. Finally, DHC has agreed with the Bridge Lenders to file a registration statement with the SEC to register the shares of Common Stock issued to them under the note purchase agreement not later than the earlier of June 30, 2004 and ten days after closing of the rights offering. Samuel Zell, Chairman of the Board of Directors and Chief Executive Officer of DHC, Philip G. Tinkler, Chief Financial Officer of DHC and William Pate, a director of DHC, are affiliated with SZ Investments. Martin Whitman and David Barse, directors of DHC, are affiliated with Third Avenue. The note purchase agreement and other transactions involving the Bridge Lenders were negotiated, reviewed and approved by a special committee of the DHC Board of Directors composed solely of disinterested directors and advised by independent legal and financial advisors.
DESCRIPTION OF BUSINESSES
Set forth below is a description of DHC's business operations as of December 31, 2003, as presented in the Consolidated Financial Statements included in this report. As of December 31, 2003, DHC was engaged in two primary businesses: the holding company business and the Insurance Services business. The holding company business and the Insurance Services business each have one business segment. Each of these businesses and business segments are described below.
Additional information about DHC's business segments is included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 21 of the Notes to Consolidated Financial Statements.
THE HOLDING COMPANY BUSINESS
Nature of Holding Company Operations
DHC is a holding company whose principal operations consist of subsidiaries in the insurance industry in the western United States, primarily California. DHC also has equity interests in companies engaged in the marine transportation and services industry.
DHC holds all of the voting stock of Danielson Indemnity Company ("DIND"). DIND owns 100 percent of the common stock of NAICC, DHC's principal operating insurance subsidiary, which owns 100 percent of the common stock of Valor Insurance Company, Incorporated a Montana domiciled specialty insurance company ("Valor"), Danielson Insurance Company and Danielson National Insurance Company (DIND, National American Insurance Company of California and its subsidiaries being collectively referred to hereinafter as "NAICC").
Tax Loss Carryforward
At the close of 2003, DHC had consolidated NOLs of approximately $652 million for federal income tax purposes. This estimate was based upon federal consolidated income tax losses for the periods through December 31, 2002 and an estimate of the 2003 taxable results. Some or all of the carryforward may be available to offset, for federal income tax purposes, the future taxable income, if any, of DHC, its wholly owned subsidiaries and the Mission trusts described in more detail in Note 13 of the Notes to Consolidated Financial Statements. The Internal Revenue Service ("IRS") has not audited any of DHC's tax returns for any of the years during the carryforward period including those returns for the years in which the losses giving rise to the NOL carryforward were reported. The NOLs are currently fully reserved, for valuation purposes, on DHC's Consolidated Financial Statements.
DHC's NOLs will expire, if not used, in the following approximate amounts in the following years (dollars in thousands):
AMOUNT OF
CARRYFORWARD
YEAR EXPIRING
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2004........................................................ $ 69,947
2005........................................................ 106,225
2006........................................................ 92,355
2007........................................................ 89,790
2008........................................................ 31,688
2009........................................................ 39,689
2010........................................................ 23,600
2011........................................................ 19,755
2012........................................................ 38,255
2019........................................................ 33,635
2022........................................................ 26,931
2023........................................................ 80,002
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$651,872
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DHC's ability to utilize its NOLs would be substantially reduced if DHC were to undergo an "ownership change" within the meaning of Section 382(g)(1) of the Internal Revenue Code. DHC will be treated as having had an "ownership change" if there is more than a 50% increase in stock ownership during a three year "testing period" by "5% stockholders". In an effort to reduce the risk of an ownership change, DHC has imposed restrictions on the ability of holders of five percent or more of the Common Stock, as well as the ability of others to become five percent stockholders as a result of transfers of Common Stock. The transfer restrictions were implemented in 1990, and DHC expects that they will remain in force as long as the NOLs are available to DHC. Notwithstanding such transfer restrictions, there could be circumstances under which an issuance by DHC of a significant number of new shares of Common Stock or other new class of equity security having certain characteristics (for example, the right to vote or convert into Common Stock) might result in an ownership change under the Internal Revenue Code.
THE INSURANCE SERVICES BUSINESS
Nature of Insurance Operations
NAICC manages its business across four principal lines of business; (1) private passenger automobile; (2) commercial automobile; (3) workers' compensation; and (4) property and casualty. As of December 31, 2003, NAICC was engaged in writing exclusively non-standard private passenger automobile primarily in California. Insurers admitted in California are required to obtain approval from the California Department of Insurance of rates and/or forms prior to being used. Many of the other states, in which NAICC does business,
have similar requirements. Rates and policy forms are developed by NAICC and filed with the regulators in each of the relevant states, depending upon each state's requirements. NAICC relies upon its own as well as industry experience in establishing rates.
Private Passenger Automobile
NAICC began writing non-standard private passenger automobile insurance in California in July 1993, in Idaho, Oregon and Washington in April 1998, and in Arizona and Nevada in 1999. Policyholder selection is governed by underwriting guidelines established by NAICC. Non-standard risks are those segments of the driving public which generally are not considered "preferred" business, such as drivers with a record of prior accidents or driving violations, drivers involved in particular occupations or driving certain types of vehicles, or those who have been non-renewed or declined by another insurance company. Generally, non-standard premium rates are higher than standard premium rates and policy limits are lower than typical policy limits. Management believes that it is able to achieve underwriting success through refinement of various risk profiles, thereby dividing the non-standard market into more defined segments which can be adequately priced. Additionally, traditional lower limits lend themselves to quicker claims processing allowing management to respond more quickly to changing loss trends and revise underlying underwriting and rate filings.
Net written premiums were $18.1 million, $25.4 million, and $19.4 million in 2003, 2002 and 2001, respectively, for the non-standard private passenger automobile program. Net written premiums for non-standard private passenger automobile in California were $18.0 million, $25.2 million and $11.9 million for 2003, 2002 and 2001, respectively. The primary reason for the decrease in private passenger automobile premiums in 2003 is the result of underwriting restrictions placed on the California non-standard automobile program in February 2002.
Private passenger automobile policy limits vary by state. In California and Arizona, non-standard policies primarily provide maximum coverage up to $15,000 per person, $30,000 per accident for liability and bodily injury and $10,000 per accident for property damage. In Oregon, and Washington, non-standard policies provide minimum coverage of $25,000 per person, $50,000 per accident for liability and bodily injury and $10,000 per accident for property damage, and can provide coverage to a maximum of $250,000 per person, $500,000 per accident for liability and bodily injury and $25,000 per accident for property damage. In general, preferred policies provide coverage to a maximum of $250,000 per person, $500,000 per accident for liability and bodily injury and $25,000 per accident for property damage.
In 2001, NAICC ceded 10 percent of its California non-standard private passenger automobile business to a major reinsurance company under a quota share reinsurance agreement. Effective January 1, 2002, the treaty was not renewed. NAICC's Oregon and Washington non-standard automobile, California preferred automobile business, and its commercial automobile business is reinsured on an excess of loss basis, where the company retains the first $250,000 of insured losses. Although the non-California business was placed in run-off in 2002 the non-standard California business had increased due to the fact that approximately half the carriers exited the state in 2001 providing NAICC greater market share but at the expense of underwriting results. As policies have been renewed they have been renewed at significantly higher rates.
NAICC does not write any business through managing general agents. Its California non-standard private passenger automobile, representing 59.1% of 2003 net written premiums, was produced through one general agent as compared to 40.6% in 2002 for the same general agent. In 1998, NAICC commenced writing preferred risks in California through a different general agent and has since placed that segment in run-off. Arizona, Idaho, Oregon, and Washington business was written directly through appointed independent agents.
Commercial Automobile
NAICC began writing non-standard commercial automobile insurance in 1995 through independent agents. The majority of automobiles owned or used by businesses are insured under policies that provide other coverage for the business, such as commercial multi-peril insurance. Businesses which are unable to insure a specific driver and businesses having vehicles not qualifying for commercial multi-peril insurance are typical NAICC commercial automobile policyholders. Examples of these risks include drivers with more than one
moving violation, one and two vehicle accounts, and specialty haulers, such as sand and gravel, farm vehicles and certain short haul common carriers. The typical NAICC commercial automobile policy covers fleets of four or fewer vehicles. NAICC does not insure interstate trucking, trucks hauling logs, gasoline or similar higher hazard operations. The current average annual premium of the policies in force is approximately $4,865.
Net written premiums for commercial automobile insurance were $11.9 million, $19.5 million and $38.4 million in 2003, 2002 and 2001, respectively. The decrease in commercial automobile premiums in 2003 was attributable to NAICC's decision to exit this line of business. The decision to exit the market was primarily driven by the unprofitable historical underwriting results and relatively high net retentions for this line of business. No new commercial automobile policies were issued after July 2003 and no policies were renewed after September 2003. The decrease in commercial automobile premiums during 2002 was attributable to management's decision in September 2001 to curtail marketing efforts in this line of business.
The maximum non-standard commercial automobile policy limit provided by NAICC is $1 million for bodily injury and property damage combined as a single limit of liability for each occurrence. NAICC retains the first $250,000 of bodily injury and property damage combined as a single limit of liability for each occurrence.
Workers' Compensation
NAICC began writing workers' compensation insurance in 1987. Through January 2002, NAICC and its subsidiary Valor wrote workers' compensation insurance primarily in California and Montana. NAICC previously wrote workers' compensation insurance in California and four other western states. Workers' compensation insurance policies provide coverage for statutory benefits which employers are required to pay to employees who are injured in the course of employment including, among other things, temporary or permanent disability benefits, death benefits, medical and hospital expenses and expenses for vocational rehabilitation. Policies were issued having a term of no more than one year. In response to 2001 market developments affecting California workers' compensation, including worsening loss experience, NAICC decided to exit the workers' compensation line of business. The last California workers' compensation policy was issued in July 2001 and the last policy issued outside of California was issued in January 2002. Net written premiums for workers' compensation were $0.3 million, $7.6 million and $21.7 million in 2003, 2002 and 2001, respectively. The decrease in 2003 and 2002 reflects the decision to exit the workers' compensation line as discussed above. Net written premiums for Valor workers' compensation were $0.3 million, $6.6 million and $11.1 million in 2003, 2002 and 2001, respectively. Valor began non-renewing all policies in December 2001 and was placed into run-off effective January 2002.
NAICC retains the first $200,000 of each workers' compensation loss and has purchased reinsurance for up to $49.8 million in excess of its retention, the first $9.5 million of which has been placed with three major reinsurance companies with the remaining $40.3 million provided by 16 other companies. In April 2000, NAICC entered into a workers' compensation excess of loss reinsurance agreement with SCOR Re Insurance Company that provided coverage commencing at losses of $200,000. In May 2001, NAICC entered into a workers' compensation excess of loss reinsurance agreement with PMA Re Insurance Company that provided 50% coverage commencing at losses of $200,000.
Property and Casualty
As of December 31, 1985, NAICC through a series of assumption agreements assumed the assets and liabilities of the Stuyvesant Insurance Company ("Stuyvesant") for policies issued prior to 1978, along with then other affiliated H.F. Ahmanson insurance subsidiaries (collectively referred as "H.F. Ahmanson"). NAICC was subsequently acquired by KCP Holding Company ("KCP") on September 19, 1986. On July 29, 1988, Mission American Insurance Company ("MAIC") pursuant to an assumption agreement transferred all of its assets and liabilities (accident years 1985 through 1988) to NAICC in exchange for 62.76% of KCP's total common stock. MAIC was part of the Mission Insurance Group, Inc., which subsequently emerged from bankruptcy on August 16, 1990 as DHC. On December 31, 1991, DHC acquired the remaining outstanding
shares of KCP not then indirectly owned by DHC by MAIC. NAICC for the years 1987 to 1995 wrote a commercial multi peril program for artisan contractors, and separately, a homeowners program from 1998 to 2001 by the same general agent that wrote the companies California preferred automobile program. NAICC continues to discharge claims arising under its own insurance policies and contracts and those issued by MAIC, Stuyvesant and other H.F. Ahmanson former insurance subsidiaries.
The property and casualty claims are categorized into the following: (1) direct excess and primary policies; (2) workers' compensation; (3) reinsurance assumed on an excess of loss basis; and (4) reinsurance assumed on pool business primarily from the London marketplace. Nearly all remaining claims on policies, issued by companies other than by NAICC, are of an asbestos and environmental ("A&E") nature. As of December 31, 2003, there remained 50 direct excess and primary claims, of which 15 were related to policies issued by Stuyvesant, 10 by H.F. Ahmanson entities, 12 by MAIC and 13 by NAICC. These claims generally have policy limits up to $1,000,000, with reinsurance generally above $50,000. The NAICC issued policies are approaching the 10-year statute of limitations baring future claims accepted. As of December 31, 2003, there were 55 open workers' compensation claims, the majority of which were issued by MAIC with no reinsurance coverage. The assumed reinsurance contracts have relatively low participation, generally less than $25,000, and estimates of unpaid losses have been based on information provided by the primary insurance companies. At December 31, 2003, there were 387 open claims related to excess of loss assumed reinsurance. As of December 31, 2003 and 2002, NAICC's net unpaid losses and loss of adjustment expenses relating to A&E claims were approximately $8.3 million and $7.3 million, respectively. In the most current three years of development there has been an influx of newly reported A&E cases on an excess of loss basis related to the Stuyvesant issued policies that are beginning to pierce the limits in which NAICC participates. New cases reported in 2003, 2002 and 2001 on the assumed excess of loss of business increased 19%, 15% and 7%, respectively; however, the incurred losses, related to assumed excess of loss of business was less than $0.3 million for the last three years. Approximately 40% of the aggregate assumed pool business has been reinsured, all with AM Best rated A or better carriers. Management has been successful in commuting with several cedants and pools with respect to the assumed liabilities and continues to look for such opportunities in the future.
Marketing
NAICC currently markets its non-standard private passenger automobile insurance in California only by using one general agent that uses over 600 sub-agents to obtain applications for policies. The general agent processed 16,002, 43,013 and 31,796 applications in 2003, 2002 and 2001, binding 96.1%, 96.3% and 96.5% to policies, respectively. NAICC previously wrote non-standard private passenger automobile insurance directly through 128 appointed independent agents in Arizona, Idaho, Nevada, Oregon and Washington. During 2001 it was decided to cease writing new policies for non-standard private passenger automobile outside of California. The number of appointed independent agents was reduced accordingly. NAICC, which began a preferred private passenger automobile program in California in February 1998, marketed through a second general agent, but discontinued that program in 2001. However, certain renewals on this program were continued into 2003 by statutory requirement. Although the California Automobile Assigned Risk Plan provides for state mandated minimum levels of automobile liability coverage to be provided by insurance companies on an allocation basis to drivers whose driving records, or other relevant characteristics, make it difficult for them to obtain insurance coverage in the voluntary market, NAICC does not expect to receive a material number of assignments arising from this program. Consequently, NAICC does not believe that the assignments will have a material adverse effect on its profitability.
As a result of the decision to end the commercial automobile program, NAICC closed its remaining sales offices in September 2003. NAICC had maintained sales offices located in Long Beach, California, Phoenix, Arizona and Napa, California, with each office employing a single marketing representative. In 2001, based on the decision to exit other lines of business, NAICC closed its Fresno, California and Portland, Oregon offices and reduced its marketing personnel in both the Long Beach and Napa, California offices. All remaining functions of policyholder service, renewal underwriting, policy issuance, premium collection and record retention are performed centrally at NAICC's home office in Long Beach, California. During 2001, NAICC
marketed its non-standard commercial automobile insurance through approximately 700 independent agents located in Arizona, California, Idaho, Nevada, Oregon, Utah and Washington. At the end of 2003, NAICC reduced its appointed agents to approximately 30 compared to 180 at the end of 2002.
Prior to 2002, NAICC wrote workers' compensation business primarily in the states of California, Oregon, Arizona, Idaho and Montana through more than 800 independent agents. In July 2001, NAICC ceased writing policies in California, Arizona, and Nevada. NAICC stopped writing Oregon and Idaho polices in December 2001. Valor marketed workers' compensation insurance to Montana employers. All business was produced and serviced through its home office in Billings, Montana. Valor wrote workers' compensation for employers of a wide range of hazard classifications, from banks to construction businesses, and targeted the larger employers in the state of Montana. Valor began non-renewing its policies in December 2001 and the company was placed into run-off effective January 2002.
Claims
All automobile claims are handled by employees of NAICC at its home office in Long Beach, California. Claims are reported by agents, insureds and claimants directly to NAICC. Claims involving suspected fraud are referred to an in-house special investigation unit ("SIU") which manages a detailed investigation of these claims using outside investigative firms. When evidence of fraudulent activity is identified, the SIU works with the various state departments of insurance, the National Insurance Crime Bureau and local law enforcement agencies in handling the claims.
Workers' compensation claims are received, reviewed, and processed by NAICC employees located in claims service offices in Long Beach. In 2002, all of Valor's pending claims were transferred to four third party administrators ("TPA"), and in March 2003, all claims were consolidated to one TPA. Most of NAICC's policyholders are not of sufficient size or type to make a specialized managed care approach to medical cost containment more cost effective. Due to the small number of remaining workers' compensation claims, claims involving suspected fraud are referred to a third party adjuster specializing in such cases.
Property and casualty claims are also received, reviewed, and processed by NAICC employees located in Long Beach. Additionally, DHC uses external consultants and attorneys to aid in determining the extent, obligation and accuracy of claims originating from Stuyvesant policies issued prior to 1978.
Losses and Loss Adjustment Expenses
NAICC's net unpaid losses and loss adjustment expenses ("LAE") represent the estimated indemnity cost and loss adjustment expenses necessary to cover the ultimate net cost of investigating and settling claims.
Such estimates are based upon estimates for reported losses, historical company experience of losses reported by reinsured companies for insurance assumed, and actuarial estimates based upon historical company and industry experience for development of reported and unreported claims (incurred but not reported). Any changes in estimates of ultimate liability are reflected in current operating results. Inflation is assumed, along with other factors, in estimating future claim costs and related liabilities. NAICC does not discount any of its loss reserves.
The California legislature in response to rising workers' compensation costs and a lack of available market, passed Assembly Bill No. 227 ("AB 227") and Senate Bill No. 228 ("SB 228") on September 12, 2003, both of which were signed by the Governor. Both bills contain many reforms designed to reduce the cost of workers' compensation claims. Several of the provisions apply to medical services provided after the effective date of January 1, 2004, including services on injuries that occurred prior to the effective date. As a result, the reforms are expected to have a retroactive impact and therefore affect pre-established reserve levels. The six major provisions that could have a retroactive impact on NAICC's reserves are:
- Changes to the Official Medical Fee Schedule Values for Physician Services
- Changes to the Official Medical Fee Schedule for Inpatient Services
- Pharmaceutical Fee Schedule
- Outpatient Surgery Center Fee Schedule
- Repeal of the Primary Treating Physician Presumption for Pre-2003 Injuries
- Other Medical Treatment Utilization
The California Workers' Compensation Insurance Rating Bureau ("WCIRB") has
attempted to estimate the potential savings on pre-2004 injuries due to AB 227
and SB 228. NAICC with the assistance of external actuarial services applied the
WCIRB projections along with NAICC specific-data to calculate potential gross
savings on medical reserves of $2.0 million, of which the outpatient fee
schedule and repeal of the treating physician presumptions had the largest
impact. The effect of these bills in the long-term is somewhat uncertain due to
the unknown effects it will have on all parties behaviors that contribute to the
cost of the system. Additionally, new legislation, litigation and judicial
interpretation may be introduced that could weaken the effect of AB 227 and SB
228. Based upon the aforementioned actuarial projection, NAICC reduced its
estimate of ultimate liabilities on worker' compensation claims by approximately
$1.0 million as of December 31, 2003 or approximately 13.5% of its California
medical net loss and allocated LAE ("ALAE") reserves.
The ultimate cost of claims is difficult to predict for several reasons. Claims may not be reported until many years after they are incurred. Changes in the rate of inflation and uncertainty in the legal environment may also create forecasting complications. Court decisions may dramatically increase liability in the time between the dates on which a claim is reported and its resolution. For example, punitive damages awards have grown in frequency and magnitude. Courts have imposed increasing obligations on insurance companies to defend policyholders. As a result, the frequency and severity of claims have grown rapidly and unpredictably.
The unpaid loss and LAE, related to environmental cleanup, has been established considering facts then currently known and the then current state of the law and coverage litigation. Liabilities are estimated for known claims (including the cost of related litigation) when sufficient information has been developed to indicate the involvement of a specific contract of insurance or reinsurance and management can reasonably estimate its liability. Estimates for unknown claims and development on reported claims are included in NAICC's unpaid loss and LAE. The liability for development of reported claims has been based on the estimates of the range of potential losses for reported claims in the aggregate. Estimates of liabilities are reviewed and updated continually and there is the potential that NAICC's ultimate liabilities could be materially in excess of amounts that are currently recorded.
Management believes that the provisions for unpaid losses and LAE are adequate to cover the net cost of losses and loss expenses incurred to date; however, such liability is necessarily based on estimates and there can be no assurance that the ultimate liability will not exceed such estimates.
The following table provides a reconciliation of NAICC's unpaid losses and LAE (in thousands):
YEARS ENDED DECEMBER 31,
------------------------------
2003 2002 2001
-------- -------- --------
Net unpaid losses and LAE at beginning of year....... $ 79,192 $ 88,012 $ 79,389
Incurred losses, net, related to:
Current years...................................... 23,199 49,474 68,848
Prior years........................................ 13,485 10,407 7,646
-------- -------- --------
TOTAL NET INCURRED......................... 36,684 59,881 76,494
-------- -------- --------
Paid losses, net, related to:
Current year....................................... (10,133) (22,871) (28,632)
Prior years........................................ (40,601) (45,830) (39,239)
-------- -------- --------
TOTAL NET PAID............................. (50,734) (68,701) (67,871)
-------- -------- --------
Net unpaid losses and LAE at December 31............. 65,142 79,192 88,012
Plus: Reinsurance recoverable on unpaid losses,
net................................................ 18,238 22,057 17,733
-------- -------- --------
Gross unpaid losses and LAE at December 31........... $ 83,380 $101,249 $105,745
======== ======== ========
|
The net losses and LAE incurred during 2003 related to prior years and were
attributable to recognition of unfavorable development in the following:
commercial automobile of $5.5 million for accident years 2000 through 2002;
workers' compensation of $5.5 million of which $3.9 million was attributable to
Valor; and property and casualty of $1.5 million, most of which was attributable
to unallocated LAE reserves. All of the commercial automobile programs were
placed in run-off during 2003. The net losses and LAE incurred during 2002
related to prior years and were attributable to adverse development on both the
California workers' compensation line totaling $3.5 million, certain private
passenger automobile programs totaling $4.7 million, and commercial automobile
totaling $2.0 million. The losses and LAE incurred during 2001 related to prior
years and were attributable to adverse development on both the California
workers' compensation line totaling $4.4 million and certain private passenger
automobile programs, primarily outside of California, totaling $1.7 million. All
of the workers' compensation lines and the private passenger automobile programs
that caused higher than expected losses were placed in run-off during 2001.
The following table indicates the manner in which unpaid losses and LAE at the end of a particular year change as time passes. The first line reflects the liability as originally reported, net of reinsurance, at the end of the stated year. Each calendar year-end liability includes the estimated liability for that accident year and all prior accident years comprising that liability. The second section shows the original recorded net liability as of the end of successive years adjusted to reflect facts and circumstance that are later discovered. The next line, cumulative (deficiency) or redundancy, compares the adjusted net liability amount to the net liability amount as originally established and reflects whether the net liability as originally recorded was adequate to cover the estimated cost of claims or redundant. The third section reflects the cumulative amounts related to that liability that was paid, net of reinsurance, as of the end of successive years.
Analysis of Net Losses and LAE Development (dollars in thousands):
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999 2000
-------- -------- -------- -------- -------- ------- ------- --------
Originally reported gross
Unpaid Losses and LAE.... $137,479 $146,330 $137,406 $120,651 $105,947 $95,653 $94,934 $100,030
Originally reported ceded
recoverable............ 18,256 17,705 21,112 23,546 20,185 18,187 15,628 20,641
Originally reported net
Unpaid Losses and LAE.... 119,223 128,625 116,294 97,105 85,762 77,466 79,306 79,389
Net Unpaid Losses and LAE
re-estimated as of:
One Year Later......... 119,607 131,748 126,413 98,045 85,762 79,957 84,560 87,035
Two Years Later........ 123,039 141,602 126,796 97,683 85,684 82,778 88,001 94,570
Three Years Later...... 136,735 141,787 127,621 98,545 87,613 83,778 92,213 100,640
Four Years Later....... 140,076 144,491 129,792 102,053 88,238 87,160 94,895
Five Years Later....... 142,537 146,827 133,985 102,949 89,802 89,476
Six Years Later........ 144,556 151,784 134,992 103,645 91,892
Seven Years Later...... 147,916 152,764 135,629 105,767
Eight Years Later...... 148,523 153,459 137,886
Nine Years Later....... 149,414 155,591
Ten Years Later........ 151,368
-------- -------- -------- -------- -------- ------- ------- --------
Cumulative (deficiency)
redundancy............. (32,145) (26,966) (21,592) (8,662) (6,130) (12,010) (15,589) (21,251)
======== ======== ======== ======== ======== ======= ======= ========
Cumulative net paid
Losses and LAE:
Inception Year.........
One Year Later......... $ 42,364 $ 46,582 $ 46,132 $ 35,696 $ 31,317 $43,090 $51,608 $ 64,599
Two Years Later........ 71,702 80,515 74,543 54,815 43,855 62,577 71,151 86,722
Three Years Later...... 95,525 101,726 90,818 63,290 56,968 74,267 83,225 97,694
Four Years Later....... 110,163 114,424 97,900 74,306 66,015 82,524 88,524
Five Years Later....... 119,474 119,310 108,061 82,568 72,531 86,278
Six Years Later........ 122,296 128,117 115,721 88,424 75,231
Seven Years Later...... 129,378 135,013 121,344 90,776
Eight Years Later...... 134,792 140,146 123,477
Nine Years Later....... 139,091 141,899
Ten Years Later........ 140,395
Reconciliation to gross
re-estimated reserves:
Net reserves
re-estimated......... 151,368 155,591 137,886 105,767 91,892 89,476 94,895 100,640
Re-estimated ceded
recoverable.......... 27,635 25,742 27,913 26,859 27,363 22,287 16,952 23,643
-------- -------- -------- -------- -------- ------- ------- --------
Total gross
re-estimated
reserves............. 179,003 181,333 165,799 132,626 119,255 111,763 111,847 124,283
======== ======== ======== ======== ======== ======= ======= ========
YEARS ENDED DECEMBER 31,
-----------------------------
2001 2002 2003
-------- -------- -------
Originally reported gross
Unpaid Losses and LAE.... $105,745 $101,249 $83,380
Originally reported ceded
recoverable............ 17,733 22,057 18,238
Originally reported net
Unpaid Losses and LAE.... 88,012 79,192 65,142
Net Unpaid Losses and LAE
re-estimated as of:
One Year Later......... 98,419 92,677
Two Years Later........ 109,795
Three Years Later......
Four Years Later.......
Five Years Later.......
Six Years Later........
Seven Years Later......
Eight Years Later......
Nine Years Later.......
Ten Years Later........
-------- -------- -------
Cumulative (deficiency)
redundancy............. (21,783) (13,485)
======== ======== =======
Cumulative net paid
Losses and LAE:
Inception Year......... $ 22,870 $10,261
One Year Later......... $ 74,460 63,343
Two Years Later........ 98,827
Three Years Later......
Four Years Later.......
Five Years Later.......
Six Years Later........
Seven Years Later......
Eight Years Later......
Nine Years Later.......
Ten Years Later........
Reconciliation to gross
re-estimated reserves:
Net reserves
re-estimated......... 109,795 92,677 65,142
Re-estimated ceded
recoverable.......... 31,551 26,522 18,238
-------- -------- -------
Total gross
re-estimated
reserves............. 141,346 119,199 83,380
======== ======== =======
|
See previous table and narrative regarding adverse development by line recorded in 2003, 2002 and 2001 with respect to accident years 2000 to 2002, as well as other accident years affected. The three-year adverse development for the years ended 1996 through 1999 was related to both commercial auto and workers' compensation. The commercial auto was most significantly impacted by case strengthening related to a change in claims administration, coupled with the recognition that development factors of prior years were not as indicative of the business written for those respective years due to changes in risk profile and limits. Workers' compensation was most effected by changes in legislation that occurred in 1995 that took several years to develop, with such development being different than the experience prior to 1995.
The three-year development for years ended 1993 through 1995 was due in part to the strengthening of the unpaid losses and LAE of property and casualty businesses assumed by NAICC in 1985 and workers' compensation written prior to 1991. NAICC recognized additional unpaid losses and LAE incurred with respect to the property and casualty business of nearly $1.0 million for the three-year development period. NAICC has continued to post additional incurred but not reported losses ("IBNR") despite negotiations on several commutations of assumed excess of loss reinsurance contracts that indicated previous estimates of IBNR.
Conditions and trends that have affected the development of these liabilities in the past may not necessarily recur in the future especially considering that those ongoing lines that have experienced the greatest adverse development have been placed in run-off in 2001 and 2003. Reliance on this cumulative history may not be indicative of future performance.
Reinsurance
In its normal course of business, NAICC reinsures a portion of its exposure with other insurance companies so as to effectively limit its maximum loss arising out of any one occurrence. Contracts of reinsurance do not legally discharge the original insurer from its primary liability. Estimated reinsurance receivables arising from these contracts of reinsurance are, in accordance with accounting principles generally accepted in the United States, reported separately as assets.
As of December 31, 2003 General Reinsurance Corporation ("GenRe") was the only reinsurer that comprised more than 10% of NAICC's reinsurance recoverable on paid and unpaid balances. NAICC monitors all reinsurers, by reviewing A.M. Best reports and ratings, information obtained from reinsurance intermediaries and analyzing financial statements. At December 31, 2003 NAICC had reinsurance recoverable on paid and unpaid balances from GenRe of $13.1 million. GenRe has an A.M. Best rating of A++. See Note 6 of the Notes to Consolidated Financial Statements for further information on reinsurance.
NAICC and two of its subsidiaries participate in an inter-company pooling and reinsurance agreement. Under this agreement Danielson Insurance Company ("DICO") and Danielson National Insurance Company ("DNIC") cede 100% of their net liability, defined to include premiums, losses and allocated LAE, to NAICC to be combined with the net liability for policies of NAICC in formation of the "Pool". NAICC simultaneously cedes to DICO and DNIC 10% of the net liability of the Pool. DNIC commenced participation in July 1993 and DICO commenced in January 1994. Additionally, both DICO and DNIC reimburse NAICC for executive services, professional services, and administrative expenses based on designated percentages of net written premiums for each line of business.
GOVERNMENT REGULATION
DHC's Insurance Services business is highly regulated as discussed below.
REGULATION OF INSURANCE SERVICES BUSINESS
Insurance companies are subject to insurance laws and regulations established by the states in which they transact business. The agencies established pursuant to these state laws have broad administrative and supervisory powers relating to the granting and revocation of licenses to transact business, regulation of trade practices, establishment of guaranty associations, licensing of agents, approval of policy forms, premium rate
filing requirements, reserve requirements, the form and content of required regulatory financial statements, capital and surplus requirements and the maximum concentrations of certain classes of investments. Most states also have enacted legislation regulating insurance holding company systems, including acquisitions, extraordinary dividends, the terms of affiliate transactions and other related matters. DHC and its insurance subsidiaries have registered as holding company systems pursuant to such legislation in California and Montana, and routinely report to other jurisdictions. The National Association of Insurance Commissioners (the "Association") has formed committees and appointed advisory groups to study and formulate regulatory proposals on such diverse issues as the use of surplus debentures, accounting for reinsurance transactions and the adoption of risk based capital requirements. It is not possible to predict the impact of future state and federal regulation on the operations of DHC or its Insurance Services business.
Effective January 1, 2001, the Association's codified statutory accounting principles ("SAP") had been adopted by all U.S. insurance companies. The purpose of such codification is to provide a comprehensive basis of accounting and reporting to insurance departments. Although codification is expected to be the foundation of a state's statutory accounting practice, it may be subject to modification by practices prescribed or permitted by a state's insurance commissioner. Therefore, statutory financial statements will continue to be prepared on the basis of accounting practice prescribed or permitted by the insurance department of the state of domicile. DHC has determined that the application of the codification did not have a material impact on the statutory capital of its insurance subsidiaries upon adoption.
Dividends
NAICC is an insurance company domiciled in the State of California and is regulated by the California Department of Insurance for the benefit of policyholders. The California Insurance Code does not permit the payment of an extraordinary shareholder dividend without prior approval from the California Insurance Commissioner. Dividends are considered extraordinary if they exceed the greater of net income or 10% of statutory surplus as of the preceding December 31st. At this time and into the foreseeable future NAICC does not have sufficient accumulated earned surplus to pay further ordinary dividends.
Capital Adequacy and Risk-Based Capital
A model for determining the risk-based capital ("RBC") requirements for property and casualty insurance companies was adopted in December 1993. The model generally assesses DHC's assets at risk and underwriting operations and determines policyholders' surplus levels to support such activity. NAICC has calculated its RBC requirement under the most recent RBC model and, as of December 31, 2003, it had capital in excess of any regulatory action level.
The RBC model sets forth four levels of increasing regulatory intervention:
(1) Company Action Level (200% of an insurer's Authorized Control Level) at
which the insurer must submit to the regulator a plan for increasing such
insurer's capital; (2) Regulatory Action Level (150% of an insurer's Authorized
Control Level), at which the insurer must submit a plan for increasing its
capital to the regulator and the regulator may issue corrective orders; (3)
Authorized Control Level, a multi-step calculation based upon information
derived from an insurer's most recent filed statutory annual statement, at which
the regulator may take action to rehabilitate or liquidate the insurer; and (4)
Mandatory Control Level (70% of an insurer's Authorized Control Level), at which
the regulator must rehabilitate or liquidate the insurer. At December 31, 2003,
the RBC of NAICC was 252% compared to 241% in 2002.
As discussed further in this Report at Item 1, Business - ACL Bankruptcy Considerations, ACL filed for protection under Chapter 11 of the Bankruptcy Code. As a result, it was determined that NAICC's investment in ACL was fully impaired for statutory accounting purposes. At December 31, 2002, NAICC recognized a statutory charge to its surplus of $7.4 million. This charge, when combined with NAICC's underwriting results and investment losses, reduced its statutory surplus level below the Company Action Level of NAICC's RBC calculation. In response, DHC repaid a $4.0 million note due May 2004 to NAICC, and further contributed $4.0 million to NAICC to increase its statutory capital during February 2003. With permission from the California Department of Insurance, these amounts were recorded as admitted assets for
statutory accounting purposes at December 31, 2002. After consideration for the $8.0 million noted above, NAICC's reported capital and surplus as of December 31, 2002 was above the Company Action Level of NAICC's RBC calculation.
In December 2003, DHC contributed $2.0 million to NAICC to increase its statutory capital.
EMPLOYEES
As of December 31, 2003, on a consolidated basis, DHC employed 64 individuals, of whom two worked for DHC at the parent company level, and 62 worked for NAICC.
RISK FACTORS
The following risk factors could have a material adverse effect on DHC's business, financial condition and results of operations.
DHC -- SPECIFIC RISKS
Inability to Use Net Loss Tax Carryforwards
One of DHC's significant assets is its NOLs. In order to utilize the NOLs, DHC must generate taxable income which can offset such carryforwards. The asset is also utilized by income from certain grantor trusts that were established as part of the Mission organization. The NOLs will expire if not used. The NOLs further would be substantially reduced if DHC were to undergo an "ownership change" within the meaning of Section 382(g)(1) of the Internal Revenue Code. DHC will be treated as having had an "ownership change" if there is more than a 50% increase in stock ownership during a three year "testing period" by "5% stockholders".
In order to help DHC preserve the carryforwards, DHC's certificate of incorporation contains stock transfer restrictions designed to reduce the risk of an ownership change. The transfer restrictions were implemented in 1990, and DHC expects that the restrictions will remain in force as long as the NOLs are available. DHC cannot be certain, however, that these restrictions will prevent an ownership change.
As of the close of 2003, DHC had consolidated NOLs of $652 million for federal income tax purposes. The NOLs will expire in various amounts, if not used, between 2004 and 2023. The Internal Revenue Service has not audited any of DHC's tax returns for any of the years during the carryforward period including those returns for the years in which the losses giving rise to the NOLs were reported.
Additionally, management anticipates that should ACL emerge from bankruptcy, while DHC will attempt to manage the tax consequences of that transaction, taxable income could result from ACL debt forgiveness and asset sales and could reduce DHC's NOLs.
Provisions In DHC's Certificate of Incorporation That Limit Ownership And Transferability of DHC Stock May Entrench Current Management and The Current Stockholders.
DHC's certificate of incorporation generally restricts the ability of any 5% holder of DHC Common Stock from disposing or acquiring shares of DHC Common Stock without DHC's consent. DHC's certificate of incorporation also restricts the ability of other holders from becoming 5% stockholders without DHC's consent. DHC may withhold consent if the acquisition or transfer of DHC Common Stock would create an unreasonable risk of an "ownership change." DHC intends to vigorously challenge and pursue by all available means any attempt to violate the restrictions in DHC's certificate of incorporation.
INSURANCE SERVICES -- SPECIFIC RISKS
The Insurance Products Sold by NAICC are Subject to Intense Competition
The insurance products sold by NAICC are subject to intense competition from many competitors, many of whom have substantially greater resources that NAICC. There can be no assurance that NAICC will be
able to successfully compete in these markets and generate sufficient premium volume at attractive prices to be profitable. This risk is enhanced by the reduction in the lines of business NAICC writes as a result of it decision to reduce underwriting operations.
Insurance Regulations
The insurance industry is highly regulated and it is not possible to predict the impact of future state and federal regulations on the operations of NAICC.
If NAICC's Loss Experience Exceeds Its Estimate, Additional Reserves May Be Required
Unpaid loss and LAE are based on estimates of reported losses, historical company experience of losses reported by reinsured companies for reinsurance assumed from such insurers, and historical company experience for unreported claims. Such liability is, by necessity, based on estimates that may change in the near term. There can be no assurance that the ultimate liability will not exceed, or even materially exceed, such estimated amount included herein. If the ultimate liability materially exceeded estimates, then additional reserves could be required to be established by some of DHC's insurance subsidiaries. NAICC and the other insurance subsidiaries cannot provide any assurance that it or they will be able to obtain such additional capital on commercially reasonable terms or at all.
Failure to Satisfy Capital Adequacy and Risk-Based Capital Requirements Would Require NAICC to Obtain Additional Capital
NAICC is subject to certain regulatory RBC requirements. Depending on its RBC, NAICC could be subject to four levels of increasing regulatory intervention ranging from company action to mandatory control. NAICC's capital is also one factor used to determine its ability to distribute or loan funds to DHC. If NAICC has insufficient reserves, as determined under the risk-based capital test, it will need to obtain additional capital to establish additional reserves. NAICC cannot provide any assurance that it will be able to obtain such additional capital on commercially reasonable terms or at all.
ACL BANKRUPTCY -- SPECIFIC RISKS
The Impact of ACL Bankruptcy May Render DHC's Investment Without Value
While the final result of ACL's bankruptcy proceeding is uncertain, DHC may receive little or no value for its investment in ACL upon completion of that proceeding. In addition, as DHC locates additional acquisition opportunities, the loss of DHC's cash investment in ACL may result in the need to obtain more equity capital and/or debt in order to fund future acquisitions. There can be no assurance that such additional capital and/or debt will be available on acceptable terms or at all.
Uncertainties in the Bankruptcy Process May Adversely Affect ACL
ACL's future results are dependent upon successfully obtaining approval, confirmation and implementation of a plan of reorganization. ACL has not yet submitted such a plan to the Bankruptcy Court for approval and cannot make any assurance that it will be able to submit and obtain confirmation of any such plan in a timely manner. Failure to confirm a plan in a timely manner could adversely affect ACL's operating results, as ACL's ability to obtain financing to fund its operations and its relations with its customers may be harmed by protracted bankruptcy proceedings.
ACL may, under certain circumstances, file motions with the Bankruptcy Court to assume or reject executory contracts. An executory contract is one in which the parties have mutual obligations to perform, such as contracts of affreightment, charters, equipment leases and real property leases. Unless otherwise agreed, the assumption of a contract will require ACL to cure or provide for the cure of all prior defaults under the related contract, including all pre-petition liabilities. Unless otherwise agreed, the rejection of a contract is deemed to constitute a breach of the agreement as of the moment immediately preceding the Chapter 11 filing, giving the counter party a right to assert a general unsecured claim for damages arising out of the
breach. Additional liabilities subject to the proceedings may arise in the future as a result of the rejection of executory contracts, including leases, and from the determination of the Bankruptcy Court, or agreement by parties in interest, of allowed claims for contingencies and other disputed amounts. Conversely, the assumption of executory contracts and unexpired leases may convert liabilities shown as subject to compromise to post-petition liabilities. Due to the uncertain nature of many of the potential claims, ACL is unable to project the magnitude of such claims with any degree of certainty.
The Adverse Publicity of ACL's Bankruptcy Could Adversely Affect Its Results of Operations
The potential adverse publicity associated with the Chapter 11 filing and the resulting uncertainty regarding ACL's future prospects may hinder ACL's ongoing business activities and its ability to operate, fund and execute its business plan by:
- impairing relations with existing and potential customers;
- negatively impacting the ability of ACL to attract, retain and compensate key executives and associates and to retain employees generally;
- limiting ACL's ability to obtain trade credit; and
- impairing present and future relationships with vendors and service providers.
Uncertainties in The Bankruptcy Process May Adversely Affect the Value of DHC's Investment in ACL
Currently, it is not possible to predict with certainty the length of time ACL will operate under the protection of Chapter 11, the outcome of the Chapter 11 proceedings in general, or the effect of the proceedings on the business of ACL or on the interests of the various creditors and stakeholders. Under the priority scheme established by the Bankruptcy Code, many post-petition liabilities and pre-petition liabilities need to be satisfied before equity holders can receive any distribution. DHC, directly and indirectly, holds 100% of the equity interests in ACL. The ultimate recovery to DHC, if any, will not be determined until confirmation of a plan of reorganization. There can be no assurance as to what value, if any, will be ascribed to DHC's equity interests in ACL and the other Debtors in the bankruptcy proceedings, and the value of such equity interests could be substantially or totally diluted or cancelled.
Disputes among Creditors Could Prolong the ACL Bankruptcy Process
The unsecured creditors committee appointed in the bankruptcy proceedings has the right to be heard on all matters that come before the Bankruptcy Court. There can be no assurance that the unsecured creditors committee will support ACL's positions in the bankruptcy proceeding or the plan(s) of reorganization once proposed, and disagreements between ACL and the committee could protract the bankruptcy proceedings, could negatively impact ACL's ability to operate during bankruptcy and could delay ACL's emergence from bankruptcy.
The Ongoing Costs of the Bankruptcy Process May Affect ACL's Results of Operations and Cash Flows
ACL has incurred and will continue to incur significant costs associated with the reorganization. The amount of these costs, which are being expensed as incurred, are expected to have a significant adverse affect on its results of operations and cash flows.
ACL May Not Be Able to Reorganize in Chapter 11
Additional risks associated with the reorganization of ACL and its emergence from Chapter 11 include, but are not limited to, adverse developments with respect to ACL's liquidity, poor results of operations limiting ACL's ability to continue as a going concern, and the availability of exit financing to facilitate emergence from Chapter 11 pursuant to a plan of reorganization. In addition, third parties could seek and obtain court approval to: terminate or shorten the exclusivity period for ACL to propose and confirm one or
more plans of reorganization; appoint a Chapter 11 trustee or convert ACL's cases to Chapter 7 cases for the liquidation of its businesses.
ACL May Not Be Able to Repay Its Debt Obligations
As a result of ACL's Chapter 11 filings, events of default under ACL's senior credit facilities, senior notes, payment in kind notes and old senior notes have occurred. However, under Chapter 11, actions by creditors to collect claims on pre-petition debt are stayed or deferred unless specifically ordered by the Bankruptcy Court. If and when ACL emerges from bankruptcy it is likely that it will continue to be highly leveraged with substantial debt service obligations. ACL's senior credit facilities and other indebtedness could be replaced by new credit facilities with substantial, and possibly more restrictive, covenants. Thus, ACL's leveraged position could have a material adverse effect on ACL's business, financial condition, results of operations and cash flows. For example, ACL's substantial leverage position after bankruptcy could:
- limit ACL's ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements;
- increase ACL's vulnerability to general adverse economic and industry conditions;
- require ACL to dedicate a substantial portion of its cash flow from operations to the payment of principal of, and interest on, its indebtedness, thereby reducing the availability of such cash flow to fund working capital, capital expenditures or other general corporate requirements;
- limit ACL's flexibility in planning for, or reacting to, changes in its business and the industry in which it competes; and
- place ACL at a competitive disadvantage compared to its less leveraged competitors.
ACL Assets Sales May Be Below Current Net Book Value
In connection with the development of alternative plans of reorganization under Chapter 11, ACL will evaluate proposals to maximize the value of all ACL's stakeholders, including the sale of certain of its remaining business lines. There can be no assurance that ACL will be able to consummate such asset sales or that any asset sales will be at or greater than the current net book value of such assets.
ACL's Liquidity Is Dependent on A Number of Factors Which Could Adversely Affect Its Ability to Emerge from Bankruptcy
ACL's liquidity generally depends on cash provided by operating activities and access to its debtor in possession credit facility, commonly referred to as the "DIP". The ability of ACL to continue as a going concern, including its ability to meet post-petition obligations, and the continued appropriateness of using the going concern basis for its financial statements are dependent upon, among other things:
- ACL's ability to comply with the covenants of its DIP credit facility;
- the ability of ACL to maintain adequate cash on hand;
- the ability of ACL to continue to generate cash from operations;
- confirmation of a plan of reorganization under the Bankruptcy Code and the terms of such plan;
- ability of ACL to attract, retain and compensate key executives and associates and to retain employees generally; and
- ACL's ability to achieve profitability following such confirmation.
The failure of ACL to operate as a going concern and emerge from bankruptcy would result in the liquidation and sale of ACL's assets which under certain circumstances could result in the imposition of statutory pension obligations against DHC.
AVAILABILITY OF INFORMATION
DHC's Internet site (www.danielsonholding.com) makes available to interested parties DHC's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, and all amendments and exhibits to those reports, all reports filed on Forms 3, 4 and 5 with respect to the Common Stock, as well as all other reports and schedules DHC files electronically with the Securities and Exchange Commission (the "SEC"), as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Interested parties may also find reports, proxy and information statements and other information on issuers that file electronically with the SEC at the SEC's Internet site (www.sec.gov).
ITEM 2. PROPERTIES
NAICC's headquarters is located in a leased office facility near Long Beach, California, pursuant to a five-year lease which is scheduled to expire in 2004. NAICC is in current negotiation with various potential lessors for new office space in the Long Beach metropolitan area. It is anticipated that a new lease will be signed in 2004 for five years at square footage and total rent costs that are substantially less than what it currently maintains and incurs.
See Note 16 of the Notes to Consolidated Financial Statements for additional information on NAICC's leases.
ITEM 3. LEGAL PROCEEDINGS
NAICC is a party to various legal proceedings which are considered routine and incidental to its insurance business and are not expected to be material to the financial condition or results of operations of NAICC.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
DHC held its Annual Meeting of Shareholders on November 5, 2003.
DHC's shareholders voted on the following proposals:
1. To elect eight directors to serve a one-year term that will expire at the next Annual Meeting of Shareholders. The votes cast for each director were as follows:
DIRECTOR FOR AGAINST WITHHELD -------- ----------- ---------- ---------- David M. Barse.................................. 23,549,553 1,194,926 -- Richard L. Huber................................ 24,189,712 554,767 -- Eugene M. Isenberg.............................. 23,864,847 879,632 -- William C. Pate................................. 23,934,320 810,159 -- Joseph P. Sullivan.............................. 23,818,547 925,932 -- Martin J. Whitman............................... 23,609,212 1,135,267 -- Clayton Yeutter................................. 24,177,734 566,745 -- Samuel Zell..................................... 23,621,431 1,123,048 -- |
2. To ratify the appointment of Ernst & Young LLP as the independent auditors of DHC for the year ending December 31, 2003.
For 24,322,205
Against 401,685
Abstentions 20,589
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
DHC Common Stock is listed and traded on the American Stock Exchange (symbol: DHC). On March 10, 2004, there were approximately 1,105 holders of record of Common Stock. On March 10, 2004, the closing price of the Common Stock on the American Stock Exchange was $9.50.
The following table sets forth the high, low and closing stock prices of the Common Stock for the last two years, as reported on the American Stock Exchange Composite Tape.
2003 2002
--------------------- ---------------------
HIGH LOW CLOSE HIGH LOW CLOSE
----- ----- ----- ----- ----- -----
First Quarter................................... $1.55 $0.64 $0.74 $6.85 $3.95 $6.85
Second Quarter.................................. 1.60 0.71 1.60 8.24 4.92 4.92
Third Quarter................................... 1.80 1.27 1.37 5.14 2.97 3.12
Fourth Quarter.................................. 3.25 1.26 2.91 3.28 1.26 1.44
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DHC has not paid dividends on its Common Stock and does not expect to declare or pay any dividends in the foreseeable future.
On December 2, 2003, DHC entered into a note purchase agreement with the Bridge Lenders pursuant to which in consideration for the $40 million of bridge financing in the form of convertible notes and the agreement by the Bridge Lenders to arrange or provide for the $118 million second lien letter of credit facility and for Laminar to arrange or provide for the $10 million international revolving credit facility, DHC issued to the Bridge Lenders an aggregate of 5,120,853 shares of Common Stock. At the time that DHC entered into the note purchase agreement, agreed to issue the notes convertible into shares of Common Stock and issued the equity compensation to the Bridge Lenders, the closing price of the Common Stock on the American Stock Exchange on the day prior to announcement of the Covanta acquisition was $1.40 per share, which was below the $1.53 per share conversion price of the notes.
Pursuant to their terms, the notes are convertible into Common Stock at a price of $1.53 per share without action by the Bridge Lenders if all or any portion of the notes are not repaid pursuant to a rights offering, subject to certain agreed upon limitations necessitated by DHC's NOLs.
In addition, under the note purchase agreement, Laminar has agreed to convert an amount of convertible notes in order to acquire up to an additional 8.75 million shares of the Common Stock at $1.53 per share based upon the levels of public participation in the rights offering.
The Bridge Lenders were all sophisticated investors that conducted due diligence on DHC and were either affiliated with members of, or had the opportunity to ask questions of, management in connection with the drafting and negotiation of the note purchase agreement. The issuance of the Common Stock issued to the Bridge Lenders was exempt from registration pursuant to private offering exemption of Section 4(2) of the Securities Act of 1933, as amended.
ITEM 6. SELECTED FINANCIAL DATA
FISCAL YEARS ENDED
-------------------------------------------------------------------
2003(2) 2002(1) 2001 2000 1999
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
STATEMENT OF OPERATIONS DATA
Operating revenue........... $ 41,123 $ 531,501 $ 92,104 $ 84,331 $ 70,651
Operating expense........... 54,029 528,168 106,365 85,073 69,800
Operating (loss) income..... (12,906) 3,333 (14,261) (742) 851
Other (loss) income......... (54,877) 2,793 -- (1,906) (507)
Interest expense............ 1,424 38,735 -- -- --
(Loss) income before
taxes..................... (69,207) (32,609) (14,261) 1,164 1,358
Income taxes................ 18 346 73 134 103
Net (loss) earnings......... (69,225) (32,955) (14,334) 1,030 1,255
Basic (loss) earnings per
share..................... (2.25) (1.26) (0.74) 0.06 0.08
Diluted (loss) earnings per
share..................... (2.25) (1.26) (0.74) 0.05 0.07
STATEMENT OF FINANCIAL
POSITION DATA:
Cash and cash equivalents... $ 17,952 $ 25,183 $ 17,866 $ 12,545 $ 8,339
Investments................. 71,057 93,746 148,512 147,667 132,157
Properties -- net........... 254 654,575 131 56 60
Total assets................ 162,648 1,032,945 208,871 210,829 194,752
Unpaid losses and LAE....... 83,380 101,249 105,745 100,030 94,934
Debt........................ 40,000 597,246 -- -- --
Shareholders' equity........ 27,791 77,360 74,463 81,330 76,226
Book value per share of
common stock.............. .78 2.51 3.82 4.21 4.13
Shares of common stock
outstanding(2)............ 35,782,644 30,817,297 19,505,952 19,295,954 18,476,265
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(1) In 2002, DHC purchased 100% of ACL, 5.4% of GMS and 50% of Vessel Leasing.
(2) ACL, which was acquired on May 29, 2002, and certain of its subsidiaries, filed a petition on January 31, 2003 with the U.S. Bankruptcy Court for the Southern District of Indiana, New Albany Division to reorganize under Chapter 11 of the U.S. Bankruptcy Code. As a result of this filing, while DHC continues to exercise significant influence over the operating and financial policies of ACL, it no longer maintains control of the activities of ACL. Accordingly, DHC no longer includes ACL and its subsidiaries as consolidated subsidiaries in DHC's financial statements. DHC's investments in these entities are presented using the equity method effective as of the beginning of the year ending December 31, 2003. Other (loss) income above consists of DHC's equity in the net loss of ACL, GMS and Vessel Leasing in 2003.
(3) Does not give effect to currently exercisable options, and, in 2001, 2000 and 1999, warrants to purchase shares of Common Stock.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in the Annual Report on Form 10-K may constitute "forward-looking" statements as defined in Section 27A of the Securities Act of 1933 (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"), the Private Securities Litigation Reform Act of 1995 (the "PSLRA") or in releases made by the SEC, all as may be amended from time to time. Such forward looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of DHC and its subsidiaries, or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements that are not historical fact are forward-looking statements. Forward looking statements can be identified by, among other things, the use of forward-looking language, such as the words "plan", "believe", "expect", "anticipate", "intend", "estimate", "project", "may", "will", "would", "could", "should", "seeks", or "scheduled to", or other similar words, or the negative of these terms or other variations of these terms or comparable language, or by discussion of strategy or intentions. These cautionary statements are being made pursuant to the Securities Act, the Exchange Act and the PSLRA with the intention of obtaining the benefits of the "safe harbor" provisions of such laws. DHC cautions investors that any forward-looking statements made by DHC are not guarantees or indicative of future performance. Important assumptions and other important factors that could cause actual results to differ materially from those forward-looking statements with respect to DHC, include, but are not limited to, the risks and uncertainties affecting the businesses described in Item 1.
Although DHC believes that its plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, actual results could differ materially from a projection or assumption in any of its forward-looking statements. DHC's future financial condition and results of operations, as well as any forward-looking statements, are made only as of the date hereof and DHC does not have or undertake any obligation to update or revise any forward-looking statements whether as a result of new information, subsequent events or otherwise, unless otherwise required by law.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW AND SIGNIFICANT EVENTS
DHC is organized as a holding company with substantially all of its current operations conducted in the insurance services industry. DHC also has investments in companies engaged in the Marine Services industry which, beginning in 2003, are accounted for under the equity method.
However, as a result of the consummation of the Covanta acquisition on March 10, 2004, the future performance of DHC will predominantly reflect the performance of Covanta's operations which are significantly larger than DHC's insurance operations. As a result, the nature of DHC's business, the risks attendant to such business and the trends that it will face will be significantly altered by the acquisition of Covanta. Accordingly, DHC's prior financial performance will not be indicative of its future performance.
In addition to the risks attendant to the operation of the Covanta energy and water businesses in the future and the integration of Covanta and its employees into DHC, the ability of DHC to utilize its NOLs to offset income generated by the Covanta operations will have a material affect on DHC's financial condition and results of operations.
DHC, on a parent-only basis, has continuing expenditures for administrative expenses and derives revenues primarily from investment returns on portfolio securities. Therefore, the analysis of DHC's financial condition is generally done on an operating subsidiary basis. As of December 31, 2003, DHC had approximately $652 million in federal tax NOLs. DHC's strategic and business plan is to acquire businesses that will allow DHC to earn an attractive return on its investments.
In May 2002, DHC acquired a 100% ownership interest in ACL thereby entering into the marine transportation, construction and related service provider businesses. On January 31, 2003, ACL and certain of its subsidiaries and its immediate direct parent entity, ACL Holdings, filed a petition with the U.S. Bankruptcy Court to reorganize under Chapter 11 of the U.S. Bankruptcy Code.
Accordingly, DHC wrote off its remaining investment in ACL at the end of the first quarter of 2003 as an other than temporary asset impairment (see Note 20 of the Notes to Consolidated Financial Statements).
As a result of the bankruptcy filing, while DHC continues to exercise influence over the operating and financial policies of ACL, it no longer maintains control of ACL. Accordingly, for the year ended December 31, 2003, DHC has accounted for its investments in ACL, GMS and Vessel Leasing using the equity method of accounting. Under the equity method of accounting, DHC reports its share of the equity investees' income or loss based on its ownership interest.
As a result of ACL's continued losses and DHC management's belief that it may recover little, if any, of its investment in ACL, DHC wrote off its remaining investment in ACL at the end of the first quarter of 2003 as an other than temporary asset impairment (see Note 20 of the Notes to Consolidated Financial Statements).
Since DHC wrote of its investment in ACL in 2003 and did not have any Marine Services' operations in 2001 and, since neither DHC nor the other Marine Services subsidiaries (GMS and Vessel Leasing) are guarantors of ACL's debt nor are they liable for any of ACL's liabilities, the commentary included in this Item 7 with respect to the financial condition and results of operations of Marine Services is limited. An expanded discussion and analysis would not reflect DHC's current or future operations and, accordingly, would not be meaningful.
INSURANCE OPERATIONS
The only active insurance products currently being sold by DHC's insurance subsidiaries are in the California non-standard personal automobile insurance line. Other than run-off of other lines and insurance that NAICC is statutorily required to offer, NAICC is not actively operating any other lines of insurance business due to unfavorable loss development and capital requirements. NAICC's objective with respect to its remaining business is to underwrite business that is expected to yield an underwriting profit. As of July 7, 2003, NAICC ceased writing new policy applications for commercial automobile insurance and began the process of providing the required statutory notice of its intention not to renew existing policies. NAICC expects that by September 2004 it will have completely exited the commercial automobile marketplace.
TAXES
DHC does not currently pay regular federal income tax due to its NOLs and the recognition of losses from several trusts that assumed various liabilities of certain present and former subsidiaries of DHC. It is expected that DHC's 2003 consolidated federal income tax return will report a cumulative NOL currently estimated at $652 million, which will expire in various amounts, if not used, between 2004 and 2023. Exclusive of the trusts' activities, DHC has generated cumulative taxable losses both historically and during the prior three years. Over the past several years, DHC's insurance operations have been generating losses exclusive of net investment income, net realized gains and the trusts' activities.
RESULTS OF OPERATIONS (2003/2002)
YEAR ENDED DECEMBER 31, 2003 COMPARED WITH YEAR ENDED DECEMBER 27, 2002
Insurance Services Year Ended December 31, 2003 Compared with Year Ended December 31, 2002
The change in net earned premiums during those years is directly related to the change in net written premiums. Net written premiums were $30.4 million and $52.7 million in 2003 and 2002, respectively. Net earned premiums exceeded net written premiums in 2002 due to the decision to cease writing in several lines of business as noted above.
The overall decrease in net written premiums for 2003 over the comparable period in 2002 was attributable to a significant reduction in NAICC's commercial automobile line and the decision made in 2001 to exit both the workers' compensation line of business in all states and private passenger automobile outside of California. Workers' compensation net written premiums decreased by $7.3 million during 2003 over the
comparable period in 2002. The commercial automobile net written premiums decreased from $19.5 million in 2002 to $11.9 million in 2003 due to the decision to exit the line in July 2003. Net written premiums for personal automobile lines decreased by $7.4 million during 2003 primarily due to underwriting restrictions placed on the non-standard California private passenger automobile program and the decline in net written premiums outside of California.
Premium and fees receivable, net of allowances, decreased by $5.4 million or 70%. The decrease in 2003 was attributable to NAICC's decision to significantly reduce underwriting operations by exiting the commercial automobile line and placing underwriting restrictions on the California non-standard private passenger automobile line.
The $1.2 million net decrease in the allowance for premiums and fees receivable during 2003 was primarily attributable to the write-off of $1.4 million of outstanding balances from 2001 and 2002 against the allowance. These write-offs were partially offset by an increase in the allowance of $0.2 million during 2003. NAICC made changes to its commercial auto installment plans for policies written in 2003, which improved overall collection rates. The net increase in the allowance for premiums and fees receivable during 2002 of $0.2 million was attributable to the increase in installment written premiums during 2001 prior to the decision to contract underwriting operations in the commercial automobile line. As a result, NAICC increased both its allowance for premiums and the amount written-off against such allowance during 2002.
Net investment income decreased primarily due to a decrease in the fixed income portfolio basis as well as a reduction in the portfolio yield. Fixed-income invested asset portfolio decreased by $5.6 million in 2003, despite net loss and LAE reserves declining by $8.6 million. The differential was a result of NAICC disposing of substantially all of its equity security holdings in the 4th quarter of 2003 and reinvesting those proceeds, approximately $4.1 million, in fixed income securities. Additionally, NAICC received from DHC $2.0 million in additional paid-in capital at year-end. Due to the decrease in written premiums on business placed in run-off noted above, NAICC also experienced negative underwriting cash flows. As of December 31, 2003 and 2002, the weighted average yield on NAICC's portfolio was 4.9% and 5.9%, respectively. The effective duration of the portfolio at December 31, 2003 was 2.29 years which management believes is appropriate given the relative short-tail nature of the auto programs and projected run-off of all lines of business.
In 2003, NAICC recognized $1.0 million in gains from fixed income securities that were maturing in 2004 as a consequence of a dynamic interest rate environment throughout the year. In 2002, a realized investment gain of $5.2 million was recognized upon conversion of the ACL notes into equity. This gain, was offset by a $5.1 million loss on non-affiliated equity securities and a $0.9 million gain on fixed maturities. Of the $5.1 million loss on equity securities, $1.0 million was recorded for other than temporary declines in fair value. NAICC had a net unrealized loss of $1.4 million on its equity portfolio at the end of December 2002 and a modest net unrealized gain at December 31, 2003.
Net losses and LAE ratios were 102.3% in 2003 and 96.3% in 2002. The increase in the loss and LAE ratio during 2003 was attributable to further recognition of prior accident year reserve development on workers' compensation and commercial automobile insurance. NAICC has historically priced its non- standard private passenger and commercial auto premium at 68% to 69% of its expected loss and allocated loss adjustment expense ("ALAE") costs in order to balance its expense structure and market conditions. In 2003, NAICC believed it had a far more successful underwriting year, posting loss and ALAE ratios of 60.4% and 59.5% for its California non-standard auto and entire commercial auto program. These results were commensurate with industry results for 2003 driven primarily by the hard insurance market. Non-standard private passenger and commercial auto claim frequency was 10.4 and 7.9 vehicles per claim in accident year 2003 compared to 8.8 and 7.7 in 2002, respectively. Severity was favorable for both lines as well in 2003 compared to 2002 by reduction of average cost per claim of 3% and 6% for the personal and commercial auto lines, respectively. Although both these indicators were favorable in 2003, the average premium per vehicle on commercial lines had the most significant effect on the loss and ALAE ratio. The average premium per vehicle on commercial lines increased 17.8% for the 2003 accident year. With respect to the personal automobile insurance, the mix of business moving towards non-owner policies 28% in 2003 versus 10% in 2002
had the most significant impact. Historically non-owner policies yield loss and ALAE ratios 10 to 30 basis points lower than owner policies.
Policy acquisition costs as a percentage of net earned premiums were 22.2% in 2003 and 22.7% in 2002. Policy acquisition costs include expenses which are directly related to premium volume (i.e., commissions, premium taxes and state assessments) as well as certain underwriting expenses which vary with and are directly related to policy issuance. The modest decrease was a result of change in the mix of business and a favorable renegotiation by NAICC of its commission structure with its general agent in the fourth quarter of 2003.
General and administrative expenses increased in 2003 primarily due to recording an additional allowance for uncollectable reinsurance recoverable of $1.3 million and $0.2 million in employee severance expenses related to business contraction. Exclusive of the two items noted above, expenses decreased $0.7 million compared to 2002 due to decreased production and previously implemented cost containment efforts. NAICC continues to examine its expense structure; however, given the decision to reduce net writings and its obligation to run-off several lines of business, a core amount of fixed governance costs is required and consequently its expense ratio will be higher than industry averages until it can increase premium production.
Parent Company Only Investment Income and Administrative Expense -- Year Ended December 31, 2003 Compared with Year Ended December 27, 2002
Investment Income. Total parent company investment income decreased to $1.4 million for the year ended December 31, 2003 as compared to $9.5 million for the year ending December 27, 2002 primarily due to recognition of $8.4 million in gain on ACL bonds owned by DHC that were contributed as part of the purchase price of ACL Holdings recognized during 2002.
Administrative Expense. Parent company administrative expense decreased $0.7 million to $4.2 million for the year ended December 2003 as compared to $4.9 million for the year ended December 2002. The decrease is primarily due to a reduction of facility and payroll related costs. In 2003, DHC entered into a corporate services agreement with Equity Group Investments, L.L.C. ("EGI"). Samuel Zell, the Chairman of the Board, Chief Executive Officer and President of DHC, is also the Chairman of EGI and Philip Tinkler, Chief Financial Officer of DHC, is also an executive officer of EGI. EGI provided financial and administrative services to DHC. Subsequent to the ACL acquisition in 2002, ACL provided similar support services to DHC.
Interest Expense -- Year Ended December 31, 2003 Compared with Year Ended December 27, 2002
Interest expense decreased to $1.4 million for the year ended December 31, 2003 compared to $38.7 million during the year ended December 27, 2002. Interest expense in 2003 was due to the accrual of one month of interest on the bridge financing required for the Covanta acquisition. Interest expense in 2002 was primarily due to ACL's and GMS' interest expense after the acquisition.
Equity in Net Loss of Unconsolidated Marine Services Subsidiaries -- Year Ended December 31, 2003 Compared with Year Ended December 27, 2002
As a result of ACL's bankruptcy filing, while DHC continues to exercise influence over the operating and financial policies of ACL, it no longer maintains control of ACL. Accordingly, for the year ended December 31, 2003, DHC has accounted for its investments in ACL, GMS and Vessel Leasing using the equity method of accounting. Under the equity method of accounting, DHC reports its share of the equity investees' income or loss based on its ownership interest.
As a result of ACL's continued losses and DHC management's belief that it may recover little, if any, of its investment in ACL, DHC wrote off its remaining investment in ACL during the first quarter of 2003. The equity in net loss of unconsolidated Marine Services subsidiaries included a loss from ACL of $47.0 million, an other than temporary impairment of the remaining investment in ACL of $8.2 million, and income from GMS and Vessel Leasing of $0.3 million. The GMS and Vessel Leasing investments are not considered to be impaired. (The Marine Services subsidiaries' operating results in 2002 were consolidated in DHC's operating
results from the date of acquisition, May 29, 2002, through December 27, 2002, but were deconsolidated in 2003 as a result of ACL's bankruptcy.)
RESULTS OF OPERATIONS (2002/2001)
YEAR ENDED DECEMBER 27, 2002 COMPARED WITH YEAR ENDED DECEMBER 31, 2001
Insurance Services Year Ended December 31, 2002 Compared with Year Ended December 31, 2001
The decline in net earned premiums is directly related to the change in net premiums written. Net written premiums were $52.6 million and $80.4 million in 2002 and 2001, respectively. Net earned premiums exceeded net written premiums in 2002 due to the decision to cease writing in several lines of business as noted above.
The overall decrease in net written premiums for 2002 over the comparable period in 2001 is attributable to significant reduction in NAICC's commercial automobile line and the decision made in 2001 to exit both the workers' compensation line of business in all states and private passenger automobile outside of California. Workers' compensation net written premiums decreased by $14.1 million during 2002 over the comparable period in 2001. The commercial automobile net written premiums decreased from $38.4 million in 2001 to $19.5 million in 2002 due to curtailed underwriting activity. Net written premiums for personal automobile lines increased by $5.3 million during 2002 primarily due to premium growth in the non-standard California private passenger automobile programs in excess of the decline in net written premiums outside of California, coupled with non-renewing its 10% quota-share reinsurance agreement on the California business.
Premium and fees receivable, net of allowances, decreased by $7.2 million or 49%. The decrease is attributable to the decision to significantly reduce NAICC's underwriting operations. Prior to that decision, NAICC experienced significant growth in installment premiums related to its commercial automobile program during 2001. NAICC's automobile programs have installment features on policy terms in excess of six months. Premiums from the automobile program that generally offer policy terms less than six months and do not utilize installment plans increased in 2002. The effect of these trends was to magnify the overall decrease in installment premium receivable during 2002.
The increase in the allowance for premiums and fees receivable during 2002 of $0.2 million was attributable to the increase in installment premiums during 2001 prior to the decision to contract underwriting operations in the commercial automobile line. In conjunction with the increase in installment premiums during 2001, NAICC experienced an increase in collection efforts relating to such premiums. As a result, NAICC increased both its allowance for premiums and the amount written-off against such allowance during 2002.
Net investment income was $5.6 million in 2002 compared to $7.6 million in 2001. The net investment income decrease was due primarily to a decrease in the fixed income portfolio. The fixed-income invested asset portfolio decreased by $25.9 million in 2002. Such decrease was attributable to the conversion of $9.2 million of ACL notes into equity. As a result of the decrease in written premiums on business placed in run-off noted above, NAICC also experienced negative underwriting cash flows. As of December 31, 2002 and 2001, the average yield on NAICC's portfolio was 5.9% and 5.8%, respectively. The estimated average duration of the portfolio at December 31, 2002 was 2.7 years compared to 3.2 years at December 31, 2001.
Net realized investment gains were relatively comparable due to the gain recognized on the conversion of ACL bonds to equity. Otherwise the net realized losses of 2002 and gains in 2001 were consistent with the general economic trends for those periods.
The net loss and LAE ratios were 96.3% in 2002 and 93.5% in 2001. The increase in the loss and LAE ratio during 2002 was attributable to higher than expected losses in the California private passenger automobile and commercial automobile programs totaling $2.8 million and $2.0 million, respectively. In addition, NAICC had significant adverse development in the California workers' compensation line and non-California private passenger automobile. Adverse development on prior accident years recognized for workers' compensation in 2002 was $3.6 million. The adverse development for prior accident years related to the private
passenger automobile lines placed in run-off was $2.0 million. Adverse development on prior accident years recognized for workers' compensation in 2001 totaled $4.4 million. The adverse development for prior accident years related to the private passenger automobile lines placed in run-off was $2.4 million.
As a percentage of net earned premiums, policy acquisition expenses were 22.7% in 2002 and 25.4% in 2001. The decrease in the policy acquisition expense ratio in 2002, compared to 2001, was due to a reduction of marketing costs of $1.9 million primarily as the result of the decision in 2001 to exit those lines mentioned above.
General and administrative expenses decreased in 2002 due to previously implemented cost containment efforts. General and administrative expenses in 2001 also included $0.9 million in amortization of goodwill expense. As a percentage of net earned premiums, general and administrative expenses were 9.5% in 2002 and 10.6% in 2001. The decrease in 2002 reflects decreased production in 2002 and the effect of cost saving measures implemented during 2001. The 2001 ratio included an additional $1.2 million of costs associated with the decision to contract NAICC's underwriting operations. Those costs included employee severance payments of approximately $0.5 million and a write-off of goodwill of approximately $0.7 million. These costs added 1.5% to the 2001 ratio.
Marine Services -- Year Ended December 27, 2002 Compared with Year Ended December 28, 2001
ACL follows a 52/53 week fiscal year ending on the last Friday in December of each year.
Marine Services operating revenues and operating expenses in 2002 consisted of ACL, GMS and Vessel Leasing operating revenues and expenses since the date of acquisition (May 29, 2002).
Parent Company Only Investment Income and Administrative Expense -- Year Ended December 27, 2002 Compared with Year Ended December 31, 2001
Investment Income. Total parent company investment income increased to $9.5 million for the year ending December 2002 as compared to $2.0 million for the year ending December 2001 primarily due to recognition of $8.4 million in gain on ACL bonds owned by DHC that were contributed as part of the purchase price of ACL Holdings.
Administrative Expense. Parent company administrative expense increased $2.5 million to $4.9 million for the year ending December 2002, as compared to $2.4 million for the year ending December 2001. The increase was primarily due to expense for stock options, which were modified as of July 24, 2002, one time increases in management compensation related to the resignation of certain DHC management in connection with its acquisition of ACL, higher directors' fees and additional insurance expense. Prior to the acquisition of ACL and shortly thereafter, DHC shared certain personnel and facilities with several affiliated and unaffiliated companies that had certain common directors and officers, and certain expenses were allocated among the various entities. Personnel costs were allocated based upon actual time spent on DHC business. Costs relating to office space and equipment were allocated based upon actual usage. Management believes the methodology used for allocation was appropriate. Total expenses included $1.8 million in 2002 and $1.3 million in 2001 related to expenses allocated to DHC from affiliated entities.
Interest Expense -- Year Ended December 27, 2002 Compared with Year Ended December 31, 2001
Interest expense increased to $38.7 million for the year ended December 27, 2002 compared to no interest expense for the year ended December 31, 2001 primarily due to ACL's and GMS' interest expense after the acquisition.
OUTLOOK
NAICC management expects that the business environment in California
non-standard personal auto to remain favorable. It appears there are fewer
markets to place non-standard risks, which aided NAICC in 2002 to raise rates
and renew 92.1% of its policyholders in 2003. NAICC expects a similar renewal
rate for 2004. NAICC expects the hard market to continue in 2004 as new entrants
are priced reasonably and ongoing
programs are tightening underwriting guidelines while a few are filing rate increases. The decision to exit the commercial auto market will negatively impact NAICC as it loses operating leverage on its general and administrative expenses and will have less earned premium during a relative hard market cycle. With the passage of AB 227 and SB 227, which was intended to serve to contain medical costs for the struggling California workers' compensation market, NAICC is anticipating these measures and future legislation will mitigate the adverse development trend previously recognized. NAICC will continue to aggressively pursue commutations on the Stuyvesant business but as there has been an influx of newly reported A&E claims over the last three years, NAICC's ability to discharge these risks will be more difficult. NAICC is evaluating other strategies to further segregate these liabilities from the active entities that could promote commutations. NAICC has come to rely upon its investment income to mitigate the shortfall on underwriting results, but as it continues to experience negative cash flow due to its operations that are in run-off and 40 year lows in interest rates, NAICC does not expect to receive the same level of investment income, as in 2002 and prior.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the same period. Actual results could differ from those estimates.
NAICC estimates reserves for unpaid losses and LAE based on reported losses and historical experience, including losses reported by other insurance companies for reinsurance assumed, and estimates of expenses for investigating and adjusting all incurred and unadjusted claims. Key assumptions used in the estimation process could have significant effects on the reserve balances. NAICC regularly evaluates their estimates and assumptions based on historical experience adjusted for current economic conditions and trends. Changes in the unpaid losses and LAE can materially effect the statement of operations. Different estimates could have been used in the current period, and changes in the accounting estimates are reasonably likely to occur from period to period based on the economic conditions. Since the loss reserving process is complex and subjective, the ultimate liability may vary significantly from our estimates.
The Insurance Services group has claims for environmental clean up against policies issued prior to 1970. The unpaid loss and LAE related to environmental cleanup has been established considering facts currently known and the current state of the law and coverage litigation.
Due to the factors discussed above and others, the process used in estimating unpaid losses and LAE cannot provide an exact result. DHC's results of operations for each of the past three years have been adversely affected by insurance loss development related to prior years of $13.5 million, $10.4 million and $7.6 million for 2003, 2002 and 2001, respectively.
Statement of Financial Accounting standards No. 123, "Accounting for Stock-Based Compensation," ("SFAS 123") gives companies the choice to account for stock-based compensation using either the fair value method or the intrinsic value method of APB Opinion No. 25, "Accounting for Stock Issued to Employees." DHC has elected to account for its stock option plans using the intrinsic value method for grants to employees and directors. Because all of the options granted to employees and directors under those plans have had an exercise price equal to or greater than the market value of the underlying common stock on the date of grant, only minimal stock-based compensation cost due to modifications has been recognized in the consolidated statements of operations for those options. DHC accounts for its stock options granted to contractors using the fair value method of SFAS 123. Had DHC elected to account for all of its stock option grants using the fair value method of SFAS 123, or if accounting rules change to require accounting different than the intrinsic value method, DHC's results of operations could be significantly affected.
Note 1 in Item 8, Financial Statements -- Significant Accounting Policies,
includes supplemental information, including pro forma net loss and loss per
share, as if stock-based compensation cost for all of the stock option grants
had been determined using the fair value method of SFAS 123. The fair value of
these options was estimated at the date of grant or modification using a
Black-Scholes option pricing model with
assumptions about the dividend yield, risk-free interest rate, expected option life, and expected stock price volatility. These assumptions can be highly subjective. Because stock options have characteristics different from those of traded options, changes in the subjective assumptions can materially affect the fair value of stock options. Using different assumptions, the supplemental information provided in Note 1 of the Notes to the Consolidated Financial Statements, could be significantly different.
See Note 1 of the Notes to the Consolidated Financial Statements for further discussion of DHC's significant accounting policies.
LIQUIDITY AND CAPITAL RESOURCES
DHC is a holding company that conducts substantially all of its operations through its subsidiaries. As such, DHC has limited liquidity and capital resources at the parent company level. As more fully described elsewhere in this filing, DHC's insurance subsidiary is currently unable to distribute or loan funds to DHC. As a result, DHC is dependent on income from its holding company investments, and monetizing its holding company investments to provide liquidity and capital resources. In addition, DHC may be able to raise funds from the equity markets and borrow funds as it deems appropriate to fund operations and potential acquisitions. However, there can be no assurance that such additional equity capital or debt will be available to DHC on acceptable terms or at all.
PARENT COMPANY OPERATIONS
At December 31, 2003, DHC on a parent-only basis, held cash and investments of approximately $41.0 million, including a restricted escrow account of $37.0 million. The escrow was required for the Covanta acquisition. Upon closing of the Covanta acquisition on March 8, 2004, this escrow was released and disbursed, $30.0 million in consideration of the purchase of Covanta and the remaining $7.0 million was released to DHC to pay corporate expenses and acquisition costs. Unpaid acquisition costs are currently estimated at approximately $6.6 million. Additionally, a balance of $1.0 million is due to DHC from Covanta to reimburse DHC's acquisition related expenses.
On a parent-only basis, at December 31, 2003, DHC owed $40 million plus accrued interest of $0.4 million on a bridge financing agreement relating to the Covanta acquisition. This debt accrues interest at 12% through July 15, 2004 and 16% thereafter and has a scheduled maturity date of January 2, 2005. DHC plans to repay this obligation with proceeds from the rights offering. Under the terms of the note purchase agreement, DHC is obligated to file a registration statement with the SEC to register the rights offering not later than May 24, 2004, 75 days following the closing of the Covanta acquisition. If DHC does not repay all of the outstanding debt through the rights offering proceeds, the remaining balance will be converted into Common Stock, subject to certain limitations. Additionally, Laminar has agreed, under the note purchase agreement, to convert an amount of their notes to acquire up to 8.75 million shares of Common Stock at $1.53 per share, based on public participation in the rights offering. DHC has also agreed to sell up to 3 million shares of Common Stock to certain creditors of Covanta for $1.53 per share, based on public participation in the rights offering and subject to other limitations.
Assuming full public participation in the rights offering and repayment of the bridge financing at June 30, 2004, following are the expected inflows and outflows relating to the rights offering, sale of shares to Covanta creditors and subsequent repayment of bridge financing:
(IN MILLIONS)
---------------------
Expected Proceeds from Rights Offering...................... $41.2
Repayment of Bridge Financing:
Principal................................................. 40.0
Less Conversion of Laminar Shares......................... (13.4)
Accrued Interest at June 30, 2004......................... 2.8 (29.4)
-----
Sale of 3.0 million shares to Covanta creditors............. 4.6
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Net Cash Inflow to DHC.................................... $16.4
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There can be no assurances as to the extent of the public participation in the planned rights offering. Management believes that even with less than full public participation, DHC will have sufficient capital resources to meet short-term and long-term liquidity needs.
DHC's sources of funds are its investments as well as dividends, if any, received from its insurance subsidiary. Various state insurance requirements restrict the amounts that may be transferred to DHC in the form of dividends or loans from its insurance subsidiaries without prior regulatory approval. Currently, NAICC cannot pay dividends or make loans to DHC.
For the year ended December 2003, cash provided by parent-only operating activities was $0.1 million. For the years ended December 2002 and 2001, cash used in parent-only operating activities was $4.8 million and $0.9 million, respectively. Cash used in operations is primarily attributable to wages and benefit costs, professional fees, directors' fees, insurance and other working capital requirements of the holding company's business. The increase in cash used in 2002 as compared to 2001 is due to additional insurance premium payments, one time increases in management compensation related to the resignation of certain DHC management in connection with its acquisition of ACL and higher director's fees.
Net cash used in investing activities was $33.8 million for the year ended December 31, 2003 and was primarily comprised of a deposit of $37.0 million to the escrow required for the Covanta acquisition, contribution of $6.0 million to NAICC's statutory capital, repayment of a loan in the amount of $6.0 million received from an ACL affiliate and $4.1 million received from the sale of investment securities.
In 2002, DHC paid cash of $42.7 million, including $6.6 million in fees, for the acquisition of ACL, 50% of the common interest of Vessel Leasing and 5.4% of the equity of GMS. This was financed through rights offering proceeds of $42.2 million, the exercise of Common Stock warrants of $9.5 and the exercise of Common Stock options of $1.1 million. As part of the transaction, $6.0 million was advanced to an ACL affiliate. This was subsequently repaid in February of 2003.
Net cash used in investing activities was $6.9 million for the year ended December 31, 2001 and was comprised principally of activity in investment securities.
Net cash provided by financing activities was $36.0 million for the year ended December 31, 2003 and was comprised of $40.0 million of borrowings under the bridge financing agreement related to the Covanta acquisition less $4.0 million of repayments paid to NAICC. DHC borrowed $4.0 million from NAICC in 2001 at an interest rate of 6%. The loan was scheduled to be repaid in 2004, but was repaid early, in February 2003.
INSURANCE SERVICES
DHC's insurance subsidiaries require both readily liquid assets and adequate capital to meet ongoing obligations to policyholders and claimants, as well as to pay ordinary operating expenses. NAICC meets both its short-term and long-term liquidity requirements through operating cash flows that include premium
receipts, investment income and reinsurance recoveries. To the extent operating cash flows do not provide sufficient cash flow, NAICC relies on the sale of invested assets. NAICC's investment policy guidelines require that all net policyholder liabilities be matched by a comparable amount of investment grade assets. Management believes that NAICC has sufficient available resources to meet its present capital needs.
Cash used in insurance operations was $23.2 million, $23.8 million and $3.9 million in 2003, 2002 and 2001, respectively. The trend is consistent with the run-off of several lines of business and their respective run-off patterns, primarily workers' compensation and commercial auto. Such negative cash flow requires the sale of invested assets to meet obligations as they arise. Due to premium growth during the first nine months of 2001, NAICC was able to meet its short-term cash needs primarily through premium receipts.
The National Association of Insurance Commissioners provides minimum solvency standards in the form of RBC requirements. The RBC model for property and casualty insurance companies requires that companies are to report their RBC ratios based on their statutory annual statements as filed with the regulatory authorities. NAICC has calculated its RBC requirement under the RBC model and believes that it has sufficient capital for its operations. Further, the NAIC has developed the Insurance Regulatory Information System ("IRIS"). IRIS identifies twelve ratios for property/casualty insurance companies. IRIS specifies ranges of "usual values" for each ratio. Departure from the "usual value" range on four or more ratios may lead to increased regulatory oversight from individual state insurance commissioners. As a result of the losses recognized in 2003 and 2002, NAICC expects that it will fail seven of those regulatory ratios relating to loss development and surplus change. Two of the failures relate strictly to loss development and two relate to surplus changes and operating ratios caused by loss development incurred during 2003. The remaining three ratio failures relate to reduction in writings, overall investment yield and liabilities to liquid assets. The failure of such ratios subjects NAICC to increased regulatory inquiry. Based on the differential between reported surplus and the surplus level requiring further regulatory action, NAICC believes that the failure of those ratios will not have a material adverse impact on the operations of NAICC.
As noted above, ACL filed for protection under Chapter 11 of the Bankruptcy Code. As a result, it was determined for statutory insurance accounting purposes that NAICC's investment in ACL was fully impaired. At December 31, 2002, NAICC recognized a statutory charge to its surplus of $7.4 million. This charge, when combined with NAICC's underwriting results and investment losses reduced its statutory surplus level below the Company Action Level of NAICC's RBC calculation. In response to the above statutory condition, DHC repaid the $4.0 million note due May 2004 to NAICC, and further contributed $4.0 million to NAICC to increase its statutory capital during February 2003. With permission from the California Department of Insurance, these transactions were recorded at December 31, 2002. As a condition to granting permission, the Department required NAICC to obtain permission prior to entering into a loan with an affiliate. After consideration for the $8.0 million noted above, NAICC's reported capital and surplus as of December 31, 2002 was above the Company Action Level of NAICC's RBC calculation. As noted above, DHC also contributed $2.0 million to NAICC to increase its statutory capital in December 2003.
DHC's domestic insurance companies are regulated by the insurance regulatory agencies of the states in which they are authorized to do business. Many aspects of DHC's insurance business are subject to regulation. For example, minimum capitalization must be maintained; certain forms of policies must be approved before they may be offered; reserves must be established in relation to the amounts of earned premiums and losses incurred; and, in some cases, schedules of premium rates must be approved.
In compliance with state insurance laws and regulations, securities with a fair value of approximately $43.4 million, $45.0 million and $45.0 million, respectively, on each at December 31, 2003, 2002 and 2001, respectively, were on deposit with various states or governmental regulatory authorities. In addition, at December 31, 2003, 2002 and 2001, investments with a fair value of $7.2 million, $6.4 million and $6.6 million, respectively, were held in trust or as collateral under the terms of certain reinsurance treaties and letters of credit.
NAICC'S INVESTMENTS
California and Montana insurance laws and regulations regulate the amount and type of NAICC's investments. NAICC's investment portfolio is comprised primarily of fixed maturities and is weighted heavily toward investment grade short and medium term securities. See Notes 1 and 10 of the Notes to the Consolidated Financial Statements.
The following table sets forth a summary of NAICC's investment portfolio at December 31, 2003 (dollars in thousands):
AMORTIZED
COST FAIR VALUE
--------- ----------
INVESTMENTS BY INVESTMENT BY GRADE:
Fixed maturities:
U.S. Government/Agency.................................... $22,887 $23,208
Mortgage-backed........................................... 15,598 15,448
Corporate (AAA to A)...................................... 29,806 30,370
Corporate (BBB)........................................... 1,096 1,142
------- -------
Total fixed maturities................................. 69,387 70,168
Equity Securities........................................... 367 401
------- -------
Total............................................. $69,754 $70,569
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Letters of Credit
NAICC pledges assets and posts letters of credit for the benefit of other insurance companies they do business with in the event that NAICC is not able to pay their reinsurers. NAICC had pledged assets of $7.2 million and had letters of credit outstanding of $2.8 million at December 31, 2003.
Contractual Obligations and Commercial Commitment Summary
A summary of DHC's contractual commitments under debt and lease agreements appears below.
CONTRACTUAL OBLIGATIONS
PAYMENTS DUE BY YEAR
---------------------------------------------------------
LESS THAN ONE TO FOUR TO AFTER FIVE
TOTAL ONE YEAR THREE YEARS FIVE YEARS YEARS
----- --------- ----------- ---------- ----------
(DOLLARS IN MILLIONS)
Parent Only:
Bridge Financing (Relating to Acquisition of
Covanta).................................. $40.0 $ -- $40.0 $-- $--
Insurance Services:
Operating Lease Obligations................. 2.0 1.0 1.0 -- --
----- ---- ----- --- ---
Total Contractual Cash Obligations........ $42.0 $1.0 $41.0 $-- $--
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RELATED PARTY TRANSACTIONS
Samuel Zell, the Chairman of the Board, Chief Executive Officer and President of DHC, is the Chairman of Equity Group Investments, L.L.C. ("EGI"). Commencing April 15, 2003, EGI provides administrative services for DHC. These services include financial, tax, accounting, SEC filings and related administrative costs. DHC paid EGI $0.2 million for these services in 2003. ACL was paid a fee of $0.1 million in 2003 for providing these services prior to April 15, 2003.
Prior to and shortly after the acquisition of ACL, DHC shared certain personnel and facilities with several affiliated and unaffiliated companies who have certain common directors and officers, and certain expenses were allocated among the various entities. Personnel costs were allocated based upon actual time spent on DHC business. Costs relating to office space and equipment were allocated based upon actual usage. Management believes the methodology used for allocation is appropriate. Total expenses allocated to DHC from affiliated entities were $1.8 million and $1.3 million for the years ended December 2002 and 2001, respectively.
As described in Note 2 of the Notes to the Consolidated Financial Statements, SZ Investments, Third Avenue and Laminar provided the bridge financing required for the Covanta acquisition. See Note 2 for terms and conditions relating to this debt. Interest expense on this financing amounted to $0.4 million in 2003.
In connection with the DHC Recapitalization of ACL described in Note 3 of the Notes to the Consolidated Financial Statements, DHC provided SZ Investments unlimited demand registration rights with respect to the ACL Senior Notes and ACL PIK Notes held by HY I Investments, L.L.C. ("HYI"), an affiliate of SZ Investments. Mr. Zell and Mr. Tinkler, DHC's Chief Financial Officer, are affiliated with SZ Investments and HYI. HYI is a holder of approximately 42% of ACL's Senior Notes and PIK Notes. Mr. Pate, a member of DHC's Board of Directors, is affiliated with SZ Investments and HYI and is an executive officer of EGI. A special committee of DHC's Board of Directors composed solely of disinterested directors oversees DHC's investment in ACL and related Chapter 11 bankruptcy proceedings.
On April 14, 1999, DHC entered into a non-exclusive investment advisory agreement with EGI pursuant to which EGI agreed to provide, at the request of DHC, certain investment banking services to DHC in connection with potential transactions. For these services, in 2002, DHC paid a fee of $0.1 million to EGI. The agreement provided that, in the event that a transaction was consummated for which the Acquisition Committee of DHC's Board of Directors determined that EGI provided material services, DHC would pay to EGI a fee in the amount of 1% of the aggregate consideration in connection with such transaction (including indebtedness assumed or outstanding). As a result of services provided to DHC during the DHC Recapitalization of ACL, DHC and EGI agreed that the fee for EGI's services was $3.0 million. DHC also agreed to reimburse, upon request, EGI's out-of-pocket expenses related to services provided under the investment advisory agreement. For providing a standby commitment to purchase any DHC shares that were unsubscribed in the rights offering conducted by DHC as part of its acquisition of ACL, DHC paid SZ Investments a fee of $1.0 million. Messrs. Zell and Pate were members of the Acquisition Committee at the time of the DHC Recapitalization of ACL, along with Messrs. Whitman and Barse, all of whom are Directors of DHC. On December 1, 2003, DHC and EGI terminated this agreement.
COVANTA ACQUISITION
NOTE PURCHASE AGREEMENT
DHC obtained the financing necessary for the Covanta acquisition pursuant to a note purchase agreement dated December 2, 2003, from the Bridge Lenders. Pursuant to the note purchase agreement, the Bridge Lenders provided DHC with $40.0 million of bridge financing in exchange for notes convertible under certain circumstances into shares of Common Stock at a price of $1.53 per share. These notes have a scheduled maturity date of January 2, 2005 and an extended maturity date of July 15, 2005, and bear interest at a rate of 12% per annum through July 15, 2004 and 16% per annum thereafter. In the event of a default or the failure to pay a convertible note on its maturity, the interest rate under the note increases by 2%.
In the event, that the issuance of shares of Common Stock under the notes trigger certain ownership change limitations, as defined by the Internal Revenue Code of 1986, the terms of the convertible notes may be modified. In the event of a non-ownership change rollover event (as defined in the note purchase agreement), the notes will bear interest at 18% per annum, compounded quarterly on the last day of each calendar quarter. In the event of an ownership change rollover event (as defined in the note purchase agreement), amounts in excess $8.0 million shall be subject to the non-ownership change rollover terms, unless prepaid in full in cash. In the first year in which notes are outstanding under the ownership change rollover terms, interest will be 12% per annum. Thereafter, interest on the notes will be 14.5% per annum, calculated quarterly and payable in arrears on the last day of each calendar quarter.
DHC used $30.0 million of the proceeds from the notes to post an escrow deposit prior to the closing of the transactions contemplated by the investment and purchase agreement. DHC amended the investment and purchase agreement as of February 23, 2004 to reduce the purchase price by $175,000 and remove $175,000 from the purchase price escrow account so that DHC could acquire an equity interest in Covanta Lake, Inc., a wholly-owned indirect subsidiary of Covanta in a transaction separate and distinct from the acquisition of Covanta out of bankruptcy. The purchase of the equity interests of Covanta was completed on March 10, 2004, at which time the escrowed purchase price funds were delivered to Covanta and used as DHC's purchase price for Covanta's equity interests. DHC has used and will use the proceeds from the sales of the bridge notes to pay transaction expenses and for general corporate purposes. In this regard, DHC has agreed to pay up to $0.9 million to the Bridge Lenders as reimbursement for expenses incurred by them in connection with the note purchase agreement.
In consideration for the $40.0 million of bridge financing, the agreement by the Bridge Lenders to arrange or provide for the second lien letter of credit facility and for Laminar to arrange or provide for the Covanta Power International Holding revolving credit facility, DHC issued to the Bridge Lenders an aggregate of 5,120,853 shares of Common Stock. The Bridge Lenders are bound to participate fully in the rights offering in respect of the rights accruing pursuant to these shares of Common Stock.
DHC expects to refinance the notes through a previously announced rights offering. If DHC does not refinance all of the outstanding notes, the remainder of the notes would be convertible, without action on the part of the Bridge Lenders, into shares of Common Stock at the rights offering price of $1.53 per share, subject to agreed upon limitations necessitated by DHC's NOLs.
In addition, under the note purchase agreement, Laminar has agreed to convert an amount of convertible notes to acquire up to an additional 8.75 million shares of Common Stock at $1.53 per share based upon the levels of public participation in this rights offering. Further, as discussed below, DHC has agreed, in connection with the note purchase agreement, to sell up to an additional 3 million shares of Common Stock at $1.53 per share to certain creditors of Covanta based upon the levels of public participation in this rights offering and subject to change of ownership and other limitations.
The note purchase agreement provides for DHC to comply with certain covenants including, among others:
- that DHC shall comply with all applicable laws, regulations, orders and other requirements, and timely pay all taxes, pending the repayment or conversion of the outstanding convertible notes;
- that DHC shall preserve its corporate existence and all rights and franchises material to its business, pending the repayment or conversion of the outstanding convertible notes; and
- that DHC shall pay each of the Bridge Lenders a cash extension fee in the event that any of the notes are subject to ownership change rollover terms.
The note purchase agreement further restricts, without a certain specified percentage of consents being obtained from the Bridge Lenders, DHC's ability to, among others:
- pay any dividends on or repurchase any of DHC's outstanding securities, other than pursuant to employee benefit plans in the ordinary course of DHC's business, including the payment of dividends using Common Stock, other than pursuant to the planned rights offering;
- purchase or sell any material amount of assets, enter into a merger transaction, liquidate or dissolve;
- incur any debt for borrowed money in an aggregate principal amount in excess of $250,000, or incur liens on DHC property;
- amend DHC's organizational documents; and
- enter into any material transactions with affiliates.
All unpaid principal of and accrued interest on the convertible notes shall become immediately due and payable in cash, in the event that DHC, any of DHC's significant subsidiaries, or Covanta, commence or have commenced against DHC/them:
- any voluntary proceeding under any provision relating to bankruptcy, insolvency, reorganization, liquidation, or otherwise to the relief of debtors or the readjustment of indebtedness;
- any general assignment for the benefit of creditors or a composition or similar arrangement with such creditors; or
- the appointment of a receiver, trustee or similar judicial officer or agent to take charge of or liquidate any of its property or assets.
A required majority of the Bridge Lenders shall have the right to declare all or any portion of the unpaid principal of and accrued interest on the notes immediately due and payable, subject to certain cure periods, in the event:
- DHC accelerates any its indebtedness due to a default for borrowed money in excess of $5 million;
- a judgment or judgments are rendered against DHC that involves an amount in excess of $5 million, to the extent not covered by insurance;
- any of DHC's representations or warranties or certain of DHC's covenants contained in the note purchase agreement were untrue or incorrect in any material respect as of the date of the note purchase agreement or other specified date therein; or
- a change of control occurs, unless caused solely by the Bridge Lenders.
DHC TAX SHARING AGREEMENT
DHC and Covanta entered into a tax sharing agreement dated as of March 10, 2004, which determines Covanta's tax obligations with respect other members of DHC's consolidated group for taxable years ending after the date of the tax sharing agreement. The tax sharing agreement provides that up to $571 million of NOLs are available to offset the future taxable income of Covanta, subject to specified adjustments. If Covanta's actual tax liability for any taxable year is higher than the liability to us determined under the tax sharing agreement, DHC will have an obligation to indemnify Covanta for any such excess.
LAMINAR LETTER AGREEMENT
Pursuant to a letter agreement dated December 2, 2003, Laminar has agreed to transfer restrictions on the shares of Common Stock that Laminar holds or will acquire. In accordance with the transfer restrictions contained in Article Fifth of DHC's charter restricting the resale of Common Stock by 5% stockholders, DHC has agreed with Laminar that their ability to sell Common Stock will be limited for a period of three years to the following amounts:
- up to 10% of DHC's outstanding shares for a period of one year following March 10, 2004;
- up to an additional 5% of DHC's outstanding shares, or an aggregate of 15% of DHC's outstanding shares, during the period beginning one year following March 10, 2004 and ending two years following March 10, 2004;
- up to an additional 5% of DHC's outstanding shares, or an aggregate of 20% of DHC's outstanding shares, during the period beginning two years following March 10, 2004 and ending three years following March 10, 2004; and
- no restrictions thereafter other than restrictions included in DHC's certificate of incorporation.
In connection with this letter agreement, a special committee of disinterested members of DHC's Board of Directors has determined that sales of Common Stock in accordance to the foregoing limitations will not create an unreasonable risk of an ownership change under Article Fifth of DHC's charter, subject to confirmation at the time of such transfers by DHC's tax counsel.
REGISTRATION RIGHTS AGREEMENT
Pursuant to a registration rights agreement dated as of December 2, 2003, DHC has agreed with the Bridge Lenders to file, at DHC's expense, a registration statement with the SEC to register the shares of Common Stock issued to them under the note purchase agreement not later than the earlier of (i) June 30, 2004, and (ii) ten days after closing of this rights offering. The Bridge Lenders were also granted certain "piggy-back" registration rights with respect to such shares of Common Stock.
NEW COVANTA FINANCING
Domestic Facilities
Covanta has entered into two credit facilities to provide letters of credit in support of its domestic operations. Specifically, Covanta has entered into a letter of credit facility, secured by a first priority lien on Covanta's domestic assets, consisting of commitments for the issuance of letters of credit in the aggregate face amount of up to approximately $138 million with respect to Covanta's Detroit facility. This first lien credit facility has a term of five years, requires cash collateral to be posted for issued letters of credit and bears interest at the rate of 3% over the Base Rate (being the higher of (i) the prime rate or (ii) 0.5% in excess of the federal funds effective rate) on issued letters of credit (increasing to 5% over the Base Rate in specified default situations). Covanta also paid a 1% upfront fee (approximately $1.38 million) upon entering into the first lien credit facility, and will pay with respect to each issued letter of credit (i) a fronting fee equal to the greater of $500 and 0.25% per annum of the daily amount available to be drawn under such letter of credit, (ii) a letter of credit fee equal to 2.5% per annum of the daily amount available to be drawn under such letter of credit, and (iii) an annual fee of $1,500.
Additionally, Covanta has entered into a letter of credit facility, secured by a second priority lien on Covanta's domestic assets, consisting of commitments for the issuance of standby letters of credit in the aggregate face amount of up to $118 million. This second lien credit facility also provides for up to $10 million in cash borrowings, on a revolving basis, by Covanta to fund working capital requirements and for general corporate purposes. The amount available for the issuance of standby letters of credit will be reduced by the amount of outstanding loans under the revolving loan component. Among other things, the second lien credit facility provides Covanta with the ability to issue letters of credit as may be required with respect to various domestic waste-to-energy facilities, including a new letter of credit in favor of the Northeast Maryland Waste Disposal Authority in connection with the facility operated by Covanta Montgomery, Inc. This second lien credit facility has a term of five years. The letter of credit component of the second lien credit facility requires cash collateral to be posted for issued letters of credit and bears interest at the rate of 4.5% over the Base Rate on issued letters of credit (increasing to 6.5% over the base rate in specified default situations). The revolving loan component of the second lien credit facility bears interest at either (i) 4.5% over the Base Rate or (ii) 6.5% over a formula Eurodollar rate, the applicable rate to be determined by Covanta (increasing by 2% over the then applicable rate in specified default situations). Covanta also paid an upfront fee of $2.36 million upon entering into the second lien credit agreement, and will pay (i) a commitment fee equal to 0.5% per annum of the daily calculation of available credit, (ii) an annual agency fee of $30,000, and (iii) with respect to each issued letter of credit an amount equal to 6.5% per annum of the daily amount available to be drawn under such letter of credit.
Covanta has also entered into a domestic intercreditor agreement, with the lenders under the domestic credit facilities and the trustee under the indenture for the high yield notes discussed below, that sets forth, among other things, provisions regarding the application of payments made by Covanta among the lenders and certain matters relating to priorities upon the exercise of remedies with respect to the collateral pledged under the loan documents.
Both domestic credit facilities provide for mandatory prepayments of all or a portion of amounts funded by the lenders under letters of credit and the revolving loan upon the occurrence of specified events. These events include certain sales of assets, incurrence of additional indebtedness, availability of annual cash flow, or cash on hand above certain base amounts, and change of control transactions.
The terms of both domestic credit facilities require Covanta to comply with certain covenants including, among others:
- that Covanta shall furnish the lenders with periodic financial, operating and other information;
- that Covanta shall preserve its corporate existence and all rights and franchises material to its business;
- that Covanta shall comply with all applicable laws, rules, regulations and orders, and timely pay all taxes; and
- that Covanta shall obtain ratings of the high yield bonds discussed below from Standard & Poor's Rating Group and/or Moody's Investors Service, Inc.
The domestic credit facilities further restricts, without a certain specified percentage of consents being obtained from the lenders, Covanta's ability to, among others:
- incur indebtedness, or incur liens on its property, subject to specific exceptions;
- pay any dividends on or repurchase any of its outstanding securities, subject to specific exceptions;
- deviate from specified financial ratios and covenants, including those pertaining to consolidated net worth, adjusted EBITDA, cash flow and capital expenditures;
- sell any material amount of assets, enter into a merger transaction, liquidate or dissolve;
- enter into any material transactions with shareholders and affiliates;
- amend its organization documents; and
- engage in a new line of business.
All unpaid principal of and accrued interest on the revolving loan, and an amount equal to 105% of the maximum amount that may at any time be drawn under outstanding letters of credit, shall become immediately due and payable in the event that Covanta or certain of its affiliates (including DHC) become subject to specified events of bankruptcy or insolvency. Such amounts shall also become immediately due and payable, upon action taken by a certain specified percentage of the lenders, in the event that any of the following occurs after the expiration of applicable cure periods:
- a failure by Covanta to pay amounts due under the domestic credit facilities or other debt instruments;
- breaches of representations, warranties and covenants under the domestic credit facilities;
- a judgment or judgments are rendered against Covanta that involve an amount in excess of $5 million, to the extent not covered by insurance;
- any event that has caused a material adverse effect on Covanta;
- a change in control;
- the domestic intercreditor agreement or any security agreement ceases to be in full force and effect;
- certain terminations of material contracts; or
- any securities issuance or equity contribution which is reasonably expected to have a material adverse effect on the availability of net operating losses.
International Facilities
Covanta Power International Holdings, Inc. ("Covanta Power International"), a subsidiary of Covanta, and each of its subsidiaries, including certain domestic entities holding the equity interests in Covanta's foreign operations, which holds the assets and operations of Covanta's international independent power production business, entered into two credit facilities: a new revolving credit facility secured by a first priority lien on substantially all of Covanta Power International's assets, junior only to duly perfected and unavoidable prior liens, consisting of commitments for cash borrowings of up to $10 million for purposes of supporting the international independent power production business, and a term loan facility of up to $95 million secured by a second priority lien on substantially all of Covanta Power International's assets, junior only to duly perfected and unavoidable prior liens, including the lien with respect to the new Covanta Power International revolving credit facility.
The Covanta Power International revolving credit facility has a maturity
date of three years following execution and bears interest at the rate of either
(i) 7% over the Base Rate or (ii) 8% over a formula Eurodollar rate, the
applicable rate to be determined by Covanta Power International (increasing by
2% over the then applicable rate in specified default situations). Covanta Power
International also paid a 2% upfront fee ($200,000) upon entering into the
international revolving credit facility, and will pay (i) a commitment fee equal
to 0.5% per annum of the daily calculation of available credit, and (ii) an
annual agency fee of $30,000.
The Covanta Power International term loan is in the original aggregate principal amount of $90 million, subject to adjustment, with a maturity date of three years following execution, and bears interest at 10.5%, 6.0% of such interest to be paid in cash and the remaining 4.5% to be paid in cash to the extent available and otherwise payable by adding it to the outstanding principal balance. The interest rate increases to 12.5% in specified default situations.
Covanta Power International has also entered into the international intercreditor agreement with the lenders under the Covanta Power International revolving credit facility and the Covanta Power International term loan and with Covanta, that sets forth, among other things, provisions regarding the application of payments made by Covanta Power International among the respective lenders and Covanta and matters relating to the exercise of remedies with respect to the collateral pledged under the loan documents, and pursuant to which Covanta will be entitled to reimbursements of operating expenses made on behalf of the Covanta Power International and payments made with respect to various parent guarantees being retained on behalf of Covanta Power International.
The mandatory prepayment provisions, affirmative covenants, negative covenants and events of default under the two international credit facilities are similar to those found in the two domestic credit facilities.
Reorganization Plan Notes
The material terms of the reorganization plan notes are as follows:
New High Yield Secured Notes
Covanta has issued new high yield secured notes at a discount in an aggregate principal amount of $205 million accreting 1.7% annually to an aggregate principal amount of $230 million upon maturity seven years after Covanta's emergence from bankruptcy. Interest will be paid semi-annually in arrears on the principal amount of the outstanding high yield secured notes at a rate of 8.25% per annum. The high yield secured notes will be secured by a third priority lien on Covanta's domestic assets. In addition, all or part of the high yield notes are pre-payable by Covanta at par of 100% of the accreted value during the first two years and at a premium starting at 104.625% of par and decreasing during the remainder of the term of the high yield notes. There are no mandatory sinking fund provisions. Upon the occurrence of a change of control event
and certain sales of assets, Covanta is obligated to offer to repurchase all or any part of the high yield notes at 101% of par on the accreted value.
The indenture, dated as of March 10, 2004, relating to the high yield notes requires Covanta to comply with certain covenants, including among others:
- restrictions on the payment of dividends, the repurchase of stock, the incurrence of indebtedness and liens and the repayment of subordinated debt, unless certain specified financial and other conditions are met;
- restrictions on the sale of certain material amounts of assets or securities, unless certain specified conditions are met;
- restrictions on material transactions with affiliates;
- limitations on engaging in new lines of business; and
- preserving its corporate existence and its material rights and franchises.
The high yield notes shall become immediately due and payable in the event that Covanta or certain of its affiliates become subject to specified events of bankruptcy or insolvency, and shall become immediately due and payable, upon action taken by the trustee under the indenture or holders of a certain specified percentage of principal under outstanding high yield notes, in the event that any of the following occurs after expiration of applicable cure periods:
- a failure by Covanta to pay amounts due under the high yield notes or certain other debt instruments;
- a judgment or judgments are rendered against Covanta that involve an amount in excess of $10 million, to the extent not covered by insurance; and
- a failure by Covanta to comply with its obligations under the indenture
Unsecured Indenture and Notes Covanta has authorized the issuance of up to $50 million in principal of unsecured global notes to certain creditors of Covanta under an indenture with a maturity date of eight years after Covanta's emergence from bankruptcy. Interest will be payable semi-annually at a rate of 7.5%. Annual amortization payments of approximately $3.9 million, paid at the end of the year, will be paid beginning in year two, with the balance due on maturity. The unsecured notes are subordinated in right of payment to all senior indebtedness including, the first lien letter of credit facility, the second lien letter of credit facility, the new high yield secured notes, and any other indebtedness of Covanta with a principal amount of up to $50 million that is designated by its express terms to be senior to the unsecured notes. The unsecured notes will otherwise rank equally with, or be senior to, all other indebtedness of Covanta. There are no mandatory sinking fund provisions and Covanta may redeem the unsecured notes at any time without penalty or premium. Upon the occurrence of a change of control event and certain sales of assets, Covanta is obligated to offer to repurchase all or any part of the unsecured notes at 101% of par on the accreted value.
The indenture, dated as of March 10, 2004, relating to the unsecured notes requires Covanta to comply with certain covenants, including among others:
- restrictions on the payment of dividends, the repurchase of stock, the incurrence of indebtedness and liens and the repayment of subordinated debt, unless certain specified financial and other conditions are met;
- restrictions on the sale of certain material amounts of assets or securities, unless certain specified conditions are met;
- restrictions on material transactions with affiliates; and
- preserving its corporate existence and its material rights and franchises.
The unsecured yield notes shall become immediately due and payable in the event that Covanta or certain of its affiliates become subject to specified events of bankruptcy or insolvency, and shall become
immediately due and payable, upon action taken by the trustee under the indenture or holders of a certain specified percentage or principal under outstanding unsecured notes, in the event that any of the following occurs after expiration of applicable cure periods:
- a failure by Covanta to pay amounts due under the high yield notes or certain other debt instruments; and
- a failure by Covanta to comply with its obligations under the indenture.
CHANGES IN ACCOUNTING STANDARDS
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" ("SFAS 150"). SFAS 150 requires that certain financial instruments, which under previous guidance were accounted for as equity, must now be accounted for as liabilities. The financial instruments affected include mandatorily redeemable stock, certain financial instruments that require or may require the issuer to buy back some of its shares in exchange for cash or other assets, and certain obligations that can be settled with shares of stock. SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003, otherwise it is effective July 1, 2003, the beginning of the first interim period after June 15, 2003. The provisions of this statement did not have an impact on DHC's financial statements in 2003.
In January 2003, the FASB issued FASB Interpretation 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51 (FIN 46). In December 2003, the FASB modified FIN 46 to make certain technical corrections and address certain implementation issues that had arisen, including deferral of certain provisions to 2004. FIN 46 provides a new framework for identifying variable interest entities ("VIEs") and determining when a company should include the assets, liabilities, noncontrolling interests and results of activities of a VIE in its consolidated financial statements. FIN 46 was effective immediately for VIEs created after January 31, 2003. The provisions of this statement did not have an impact on DHC's financial statements in 2003. DHC does not expect FIN46 will have a significant impact on its financial statements in 2004.
In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS 146"), which addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs incurred in a Restructuring)" ("Issue 94-3"). The principal difference between SFAS 146 and Issue 94-3 relates to SFAS 146's requirements for recognition of a liability for a cost associated with an exit or disposal activity. SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit cost as generally defined in Issue 94-3 was recognized at the date of an entity's commitment to an exit plan. Severance pay under SFAS 146, in many cases, would be recognized over time rather than up front. Additionally, under SFAS 146, if the benefit arrangement requires employees to render future service beyond a "minimum retention period," a liability should be recognized as employees render service over the future service period even if the benefit formula used to calculate an employee's termination benefit is based on length of service. The provisions of SFAS 146, which was adopted in 2003, did not have an impact on DHC's financial statements in 2003.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INSURANCE SERVICES
RISK RELATED TO THE INVESTMENT PORTFOLIO
NAICC's objectives in managing its investment portfolio are to maximize
investment income and investment returns while minimizing overall credit risk.
Investment strategies are developed based on many factors including underwriting
results, overall tax position, regulatory requirements, and fluctuations in
interest rates. Investment decisions are made by management, in consultation
with independent investment advisors, and approved by the Board of Directors.
Market risk represents the potential for loss due to adverse changes in the fair
value of securities. The market risks related to NAICC's fixed maturity
portfolio are primarily credit
risk, interest rate risk, reinvestment risk and prepayment risk. The market risk related to NAICC's equity portfolio is price risk.
FIXED MATURITIES
Interest rate risk is the price sensitivity of fixed maturities to changes in interest rate. Management views these potential changes in price within the overall context of asset and liability matching. Management estimates the payout patterns of NAICC's liabilities, primarily loss reserves, to determine their duration. Management sets duration targets for the fixed income portfolio after consideration of the duration of NAICC's liabilities that it believes mitigates the overall interest rate risk. NAICC's exposure to interest rate risk is mitigated by the relative short-term nature of its insurance and other liabilities. The effective duration of the portfolio at December 31, 2003 and 2002 was 2.3 years and 2.7 years, respectively. Management believes its portfolio duration is appropriate given the relative short-tail nature of the automobile programs and projected run-off of all lines of business. A hypothetical 100 basis point increase in market rates would cause an approximate 2.3% decrease in the fair value of the portfolio while a hypothetical 100 basis point decrease would cause an approximate 2.3% increase in fair value. Credit risk is the price sensitivity of fixed maturities to changes in the credit quality of such investment. NAICC's exposure to credit risk is mitigated by its investments in high quality fixed income alternatives.
Fixed maturities of NAICC include Mortgage-Backed Securities ("MBS") representing 22.0% and 33.6% of total fixed maturities at December 31, 2003 and December 31, 2002, respectively. All MBS held by NAICC are issued by the Federal National Mortgage Association ("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC"), which are both rated AAA by Moody's Investors Services. Both FNMA and FHLMC are corporations that were created by Acts of Congress. FNMA and FHLMC guarantee the principal balance of their securities. FNMA guarantees timely payment of principal and interest.
One of the risks associated with MBS is the timing of principal payments on the mortgages underlying the securities. The principal an investor receives depends upon amortization schedules and the termination pattern (resulting from prepayments or defaults) of the individual mortgages included in the underlying pool of mortgages. The principal is guaranteed but the yield and cash flow can vary depending on the timing of the repayment of the principal balance. The degree to which a security is susceptible to changes in yield is influenced by the difference between its amortized cost and par, the relative sensitivity to repayment of the underlying mortgages backing the securities in a changing interest rate environment, and the repayment priority of the securities in its overall securitization structure. NAICC attempts to limit repayment risk by purchasing MBS whose cost is below or does not significantly exceed par, and by primarily purchasing structured securities with repayment protection which provides more certain cash flow to the investor such as MBS with sinking fund schedules known as Planned Amortization Classes ("PAC") and Targeted Amortization Classes ("TAC"). The structures of PAC's and TAC's attempt to increase the certainty of the timing of prepayment and thereby minimize the prepayment and interest rate risk. In 2003, NAICC recognized $1.0 million in gain on sales of fixed maturities.
MBS, as well as callable bonds, have a greater sensitivity to market value declines in a rising interest rate environment than to market value increases in a declining interest rate environment. This is primarily due to the ability and the incentive of the payor to prepay the principal or the issuer to call the bond in a declining interest rate scenario. NAICC realized significant increases in its prepayments of principal during 2003 and 2002. The prepayments mitigated the need to sell securities to meet operating cash requirements as noted above. Generally, this trend will lower the portfolio yield in future years in a declining interest environment.
MBS instruments are described in tabular format below:
MORTGAGE-BACKED SECURITIES
2003 2002
------------------------------ ------------------------------
AMORTIZED PAR PERCENT AMORTIZED PAR PERCENT
COST VALUE OF TOTAL COST VALUE OF TOTAL
--------- ------- -------- --------- ------- --------
(DOLLARS IN THOUSANDS)
Sequential.................. $11,757 $11,487 75% $ 9,345 $ 9,380 34%
PAC/TAC..................... 3,841 3,810 25% 17,982 17,835 66%
------- ------- --- ------- ------- ---
Total.................. $15,598 $15,297 100% $27,327 $27,215 100%
======= ======= === ======= ======= ===
|
The following table provides information about NAICC's fixed maturity investments at December 31, 2003 that are sensitive to changes in interest rates. The table presents expected cash flows of principal amounts and related weighted average interest rate by expected maturity dates. The expected maturity date for other than MBS is the earlier of call date or maturity date or for MBS is based on expected payment patterns. Actual cash flows could differ from expected amounts considering the weighting of NAICC's portfolio towards MBS. As interest rates at December 31, 2003 are at 40-year lows, NAICC is subject to reinvestment risk as approximately 32% of its fixed maturity portfolio will be received in the following year. Absent changing its credit risk profile, it is unlikely that NAICC could reinvest proceeds at yields similar to those recognized in 2003.
FIXED MATURITIES
EXPECTED CASH FLOWS OF PRINCIPAL AMOUNTS
2004 2005 2006 2007 2008 THEREAFTER TOTAL
------- ------ ------ ------ ------ ---------- -------
(DOLLARS IN THOUSANDS)
U.S. Government/Agency.................. $ 7,428 $4,900 $2,601 $ 150 $3,190 $ 4,618 $22,887
Average interest rate................. 4.56% 4.91% 4.08% 7.21% 3.05% 5.41%
Mortgage-Backed......................... 2,350 1,748 1,030 1,563 1,083 7,824 15,598
Average interest rate................. 5.59% 5.05% 4.53% 4.63% 4.60% 4.18%
Corporate (AAA to A).................... 12,175 3,350 2,550 3,375 7,150 1,207 29,807
Average interest rate................. 6.13% 6.05% 5.38% 4.24% 6.54% 6.04%
Corporate (BBB to B).................... -- -- 33 1,000 16 47 1,096
Average interest rate................. -- -- 5.75% 7.75% 6.15%
------- ------ ------ ------ ------ ------- -------
Total.......................... $21,953 $9,998 $6,214 $6,088 11,439 $13,696 $69,388
======= ====== ====== ====== ====== ======= =======
|
EQUITY SECURITIES
During 2001, NAICC reduced its equity portfolio by liquidating almost all of its position in foreign securities. The proceeds from the sale of these securities were used to increase NAICC's fixed maturity portfolio by purchasing $9.2 million of ACL Senior Notes. In May 2002, the ACL Senior Notes, with a fair value of $14.5 million, were converted into equity of ACLines LLC as part of the DHC Recapitalization of ACL announced in January 2002 and consummated on May 29, 2002 (as described in Note 3 of the Notes to Consolidated Financial Statements). On January 31, 2003, ACL filed for protection under Chapter 11 of the Bankruptcy Code.
During 2002, NAICC increased its equity portfolio. At December 31, 2002, NAICC had $6.6 million invested in its equity portfolio.
In the fourth quarter of 2003, NAICC sold nearly all of its equity investments capitalizing on the general stock market recovery and specifically the technology sector. In 2003, $0.04 million was recognized as net realized gains from equity investments.
ECONOMIC CONDITIONS
The operating results of a property and casualty insurer are influenced by a variety of factors including general economic conditions, competition, regulation of insurance rates, weather, and frequency and severity of losses. The California non-standard personal auto market in which NAICC operates has experienced a recovery of rate adequacy coupled with decreased competition.
The competition, rate regulation and loss experience in the California automobile markets are currently such that, despite the difficulties in these lines during 2002, NAICC was successful in writing in the state profitably for 2003. During 2002, NAICC recognized an increase in the frequency of losses for its non-standard private passenger automobile line, and also higher than expected adverse loss experience prior accident years in its commercial automobile line. During 2001, the competition, rate regulation and loss experience in the non-California automobile markets were such that NAICC was not able to write in those states profitably, and as a result, exited those markets.
The California workers' compensation market, where NAICC had historically written a significant amount of its premium, continues to be very price competitive. Workers' compensation premium volume in 2001, prior to the decision to exit the market, decreased slightly as competitors began to raise rates during 2001. Despite those rate increases, NAICC believed that competitors continued to price policies at rates below a level necessary to achieve an underwriting profit. Coupled with an industry-wide increase in adverse loss experience, NAICC believes that its decision to exit the workers' compensation line was warranted under these economic conditions.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
DANIELSON HOLDING CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
FISCAL YEARS ENDED
------------------------------------------
DECEMBER 31, DECEMBER 27, DECEMBER 31,
2003 2002 2001
------------ ------------ ------------
INSURANCE SERVICES:
OPERATING REVENUES:
Gross Earned Premiums................................... $ 38,805 $ 66,958 $ 90,767
Ceded Earned Premiums................................... (2,954) (4,794) (8,913)
-------- -------- --------
Net Earned Premiums................................... 35,851 62,164 81,854
Net Investment Income................................... 3,999 5,603 7,580
Net Realized Investment Gains........................... 990 1,007 1,277
Other Income Applicable to Insurance Operations......... 283 623 1,393
-------- -------- --------
Total Insurance Services' Operating Revenues.......... 41,123 69,397 92,104
-------- -------- --------
OPERATING EXPENSES:
Gross Losses and Loss Adjustment Expenses............... 39,666 70,282 78,295
Ceded Losses and Loss Adjustment Expenses............... (2,982) (10,401) (1,801)
-------- -------- --------
Net Losses and Loss Adjustment Expenses............... 36,684 59,881 76,494
Policy Acquisition Expenses............................. 7,947 14,115 20,795
General and Administrative.............................. 6,664 5,893 8,664
-------- -------- --------
Total Insurance Services' Operating Expenses.......... 51,295 79,889 105,953
-------- -------- --------
Operating Loss from Insurance Services................ (10,172) (10,492) (13,849)
-------- -------- --------
MARINE SERVICES:
OPERATING REVENUES:
Marine Revenues......................................... -- 455,499 --
Marine Revenues -- Related Party........................ -- 6,605 --
-------- -------- --------
-- 462,104 --
-------- -------- --------
OPERATING EXPENSES:
Materials, Supplies and Other........................... -- 195,794 --
Rent.................................................... -- 32,847 --
Labor and Fringe Benefits............................... -- 108,132 --
Fuel.................................................... -- 49,954 --
Depreciation and Amortization........................... -- 41,785 --
Taxes, Other than Income................................ -- 15,934 --
-------- -------- --------
Total Marine Services' Operating Expenses............. -- 444,446 --
-------- -------- --------
Operating Income from Marine Services................. -- 17,658 --
-------- -------- --------
PARENT COMPANY:
Net Investment Income................................... 344 640 1,717
Net Realized Investment Gains........................... 1,090 438 281
Investment Income Related to ACL Debt................... -- 8,402 --
Administrative Expenses................................. (4,168) (4,911) (2,410)
-------- -------- --------
Operating (Loss) Income from Parent Company........... (2,734) 4,569 (412)
-------- -------- --------
Operating (Loss) Income............................... (12,906) 11,735 (14,261)
OTHER EXPENSES:
Interest Expense........................................ 1,424 38,735 --
Equity in Net Loss of Unconsolidated Marine Services
Subsidiaries.......................................... 54,877 -- --
Other, Net.............................................. -- 5,609 --
-------- -------- --------
Total Other Expenses.................................. 56,301 44,344 --
-------- -------- --------
Loss before Provision for Income Taxes...................... (69,207) (32,609) (14,261)
Income Tax Provision........................................ 18 346 73
-------- -------- --------
Net Loss.................................................... $(69,225) $(32,955) $(14,334)
======== ======== ========
BASIC AND DILUTED LOSS PER SHARE OF COMMON STOCK............ $ (2.25) $ (1.26) $ (0.74)
======== ======== ========
|
The accompanying notes are an integral part of the consolidated financial statements.
DANIELSON HOLDING CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(DOLLARS IN THOUSANDS)
DECEMBER 31, DECEMBER 27,
2003 2002
------------ ------------
ASSETS
PARENT COMPANY'S AND INSURANCE SERVICES' ASSETS:
Cash and Cash Equivalents................................. $ 17,952 $ 9,939
Restricted Cash, Covanta Escrow........................... 37,026 --
Investments:
Fixed Maturities, Available for Sale at Fair Value
(Cost: $69,840 and $83,399)........................... 70,656 88,499
Equity Securities, Available for Sale at Fair Value
(Cost: $367 and $6,620)............................... 401 5,247
Accrued Investment Income................................. 966 1,143
Premium and Consulting Receivables, Net of Allowances of
$462 and $1,623........................................ 2,261 7,638
Reinsurance Recoverable on Paid Losses, Net of Allowances
of $1,898 and $780..................................... 1,448 3,124
Reinsurance Recoverable on Unpaid Losses, Net of
Allowances of $237 and $206............................ 18,238 22,057
Ceded Unearned Premiums................................... 508 1,091
Properties, Net........................................... 254 382
Investments in Unconsolidated Marine Services
Subsidiaries........................................... 4,425 --
Deferred Financing Costs (Net of Amortization of
$1,024)................................................ 6,145 --
Other Assets.............................................. 2,368 3,988
-------- ----------
Total Parent Company's and Insurance Services'
Assets.............................................. 162,648 143,108
-------- ----------
PREVIOUSLY CONSOLIDATED MARINE SERVICES SUBSIDIARIES'
ASSETS:
CURRENT ASSETS
Cash and Cash Equivalents.............................. -- 15,244
Restricted Cash........................................ -- 6,328
Accounts Receivable.................................... -- 50,783
Accounts Receivable -- Related Parties................. -- 7,521
Materials and Supplies................................. -- 34,774
Other Current Assets................................... -- 27,571
-------- ----------
Total Current Assets................................. -- 142,221
PROPERTIES -- Net......................................... -- 654,193
PENSION ASSETS............................................ -- 20,806
INVESTMENT IN UABL........................................ -- 47,677
OTHER ASSETS.............................................. -- 24,940
-------- ----------
Total Previously Consolidated Marine Services
Subsidiaries' Assets................................ -- 889,837
-------- ----------
Total Assets......................................... $162,648 $1,032,945
======== ==========
|
The accompanying notes are an integral part of the consolidated financial statements.
DANIELSON HOLDING CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION -- (CONTINUED)
(DOLLARS IN THOUSANDS)
DECEMBER 31, DECEMBER 27,
2003 2002
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
PARENT COMPANY'S AND INSURANCE SERVICES' LIABILITIES:
Unpaid Losses and Loss Adjustment Expenses................ $ 83,380 $ 101,249
Unearned Premiums......................................... 4,595 10,622
Interest Payable.......................................... 400 --
Parent Company Debt Payable to Related Parties............ 40,000 --
Bank Overdraft............................................ 1,436 --
Other Liabilities......................................... 5,046 3,874
-------- ----------
Total Parent Company's and Insurance Services'
Liabilities........................................... 134,857 115,745
-------- ----------
PREVIOUSLY CONSOLIDATED MARINE SERVICES SUBSIDIARIES'
LIABILITIES:
CURRENT LIABILITIES
Accounts Payable....................................... -- 36,437
Accrued Payroll and Fringe Benefits.................... -- 16,686
Deferred Revenue....................................... -- 10,835
Accrued Claims and Insurance Premiums.................. -- 26,695
Accrued Interest....................................... -- 16,761
Short-Term Debt........................................ -- 43,873
Current Portion of Long-Term Debt...................... -- 588,778
Other Current Liabilities.............................. -- 38,768
-------- ----------
Total Current Liabilities............................ -- 778,833
LONG-TERM DEBT............................................ -- 8,468
PENSION LIABILITY......................................... -- 15,072
OTHER LONG-TERM LIABILITIES............................... -- 37,467
-------- ----------
Total Previously Consolidated Marine Services
Subsidiaries' Liabilities........................... -- 839,840
-------- ----------
Total Liabilities.................................... 134,857 955,585
-------- ----------
STOCKHOLDERS' EQUITY:
Preferred Stock ($0.10 par value; authorized 10,000,000
shares; none issued and outstanding)................... -- --
Common Stock ($0.10 par value; authorized 150,000,000
shares; issued 35,793,440 shares and 30,828,093 shares;
outstanding 35,782,644 shares and 30,817,297 shares)... 3,579 3,083
Additional Paid-in Capital................................ 123,446 117,148
Unearned Compensation..................................... (289) (1,132)
Accumulated Other Comprehensive Loss...................... (445) (12,464)
Accumulated Deficit....................................... (98,434) (29,209)
Treasury Stock (Cost of 10,796 shares).................... (66) (66)
-------- ----------
Total Stockholders' Equity........................... 27,791 77,360
-------- ----------
Total Liabilities and Stockholders' Equity........... $162,648 $1,032,945
======== ==========
|
The accompanying notes are an integral part of the consolidated financial statements.
DANIELSON HOLDING CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
FISCAL YEARS ENDED
------------------------------------------
DECEMBER 31, DECEMBER 27, DECEMBER 31,
2003 2002 2001
------------ ------------ ------------
OPERATING ACTIVITIES
Net Loss.................................................. $(69,225) $(32,955) $(14,334)
Adjustments to Reconcile Net Loss to Net Cash (Used in)
Provided by Operating Activities:
Gain Related to ACL Debt Contributed in Acquisition of
ACL................................................... -- (13,614) --
Net Realized Investment (Gains) Losses.................. (2,080) 2,799 (1,558)
Depreciation and Amortization........................... 375 42,359 1,460
Amortization of Deferred Financing Costs................ 1,024 -- --
Interest Accretion and Amortization..................... -- 4,184 --
Stock Option and Unearned Compensation Expense.......... 521 920 57
Other Operating Activities.............................. (156) 6,037 96
Equity in Net Loss of Unconsolidated Marine Services
Subsidiaries.......................................... 54,877 -- --
Change in Operating Assets and Liabilities:
Accounts Receivable................................... -- (13,743) --
Materials and Supplies................................ -- 1,910 --
Other Assets.......................................... 1,784 6,178 1,151
Accrued Interest...................................... -- 15,378 --
Accrued Investment Income............................. 242 336 233
Premium and Consulting Receivables.................... 5,377 7,238 679
Reinsurance Recoverable on Paid Losses................ 1,676 (983) 1,878
Reinsurance Recoverable on Unpaid Losses.............. 3,819 (4,323) 2,908
Ceded Unearned Premiums............................... 583 986 --
Unpaid Losses and Loss Adjustment Expenses............ (17,869) (4,496) 5,715
Unearned Premiums..................................... (6,027) (10,496) (2,090)
Interest Payable...................................... 400 -- --
Other Liabilities..................................... 1,508 (7,667) (931)
-------- -------- --------
Net Cash (Used in) Provided by Operating
Activities...................................... (23,171) 48 (4,736)
-------- -------- --------
INVESTING ACTIVITIES
Property Additions........................................ (96) (18,152) (259)
Proceeds from Property Dispositions....................... -- 3,116 45
Collection of Notes Receivable from Previously
Consolidated Affiliate.................................. 6,035 -- --
Distribution Received from Unconsolidated Marine Services
Subsidiary.............................................. 58 -- --
Purchase of ACL, GMS, and Vessel Leasing.................. -- (42,665) --
Cash acquired from Marine Services' Companies............. -- 21,839 --
Net Change in Restricted Cash............................. -- 236 --
Increase in Restricted Cash, Covanta Escrow............... (37,026) -- --
Proceeds from the Sale of Investment Securities........... 10,768 2,904 32,204
Matured or Called Investment Securities................... 47,598 33,043 29,599
Purchase of Investment Securities......................... (36,624) (19,378) (52,162)
Other Investing Activities................................ (979) (906) --
-------- -------- --------
Net Cash (Used in) Provided by Investing
Activities...................................... (10,266) (19,963) 9,427
-------- -------- --------
FINANCING ACTIVITIES
Cash Received for Restricted Stock........................ 14 -- --
Borrowings under Note Purchase Agreement.................. 40,000 -- --
Short-Term Borrowings, Net................................ -- 7,000 --
Long-Term Debt Issued..................................... -- 3,206 --
Long-Term Debt Repaid..................................... -- (31,502) --
Bank Overdrafts........................................... 1,436 (1,785) --
Debt Costs................................................ -- (1,035) --
Proceeds from Rights Offering, Net of Expenses............ -- 42,228 --
Proceeds from Exercise of Warrants for Common Stock....... -- 9,500 --
Proceeds from Exercise of Options for Common Stock........ -- 1,088 630
Other Financing Activities................................ -- (1,468) --
-------- -------- --------
Net Cash Provided by Financing Activities......... 41,450 27,232 630
-------- -------- --------
Net Increase in Cash and Cash Equivalents......... 8,013 7,317 5,321
Cash and Cash Equivalents at Beginning of Year.............. 25,183 17,866 12,545
Deconsolidation of ACL, GMS, and Vessel Leasing............. (15,244) -- --
-------- -------- --------
9,939 17,866 12,545
-------- -------- --------
Cash and Cash Equivalents at End of Year.......... $ 17,952 $ 25,183 $ 17,866
======== ======== ========
|
The accompanying notes are an integral part of the consolidated financial statements.
DANIELSON HOLDING CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
ACCUMULATED RETAINED
COMMON STOCK ADDITIONAL OTHER EARNINGS
------------------- PAID-IN UNEARNED COMPREHENSIVE ACCUMULATED
SHARES AMOUNT CAPITAL COMPENSATION (LOSS) INCOME (DEFICIT)
---------- ------ ---------- ------------ ------------- -----------
Balance December 31, 2000.......... 19,306,694 $1,931 $ 62,449 $ -- $ (1,064) $ 18,080
Exercise of Options to Purchase
Common Stock................. 210,000 21 609
Stock Option Compensation
Expense...................... 57
Treasury Stock Repurchased
During the Period............
Comprehensive Loss:
Net Loss....................... (14,334)
Net Unrealized Gain on
Available for Sale
Securities................... 6,780
-------- --------
Total Comprehensive Income
(Loss)................... 6,780 (14,334)
---------- ------ -------- ------- -------- --------
Balance December 31, 2001.......... 19,516,694 1,952 63,115 -- 5,716 3,746
Exercise of Options to Purchase
Common Stock................. 264,582 26 1,061
Exercise of Warrants to
Purchase Common Stock........ 2,002,558 200 9,300
Common Stock Issued Pursuant to
Rights Offering, Net of
Expenses..................... 8,705,219 871 41,357
Restricted Common Stock Issued
to ACL Management............ 339,040 34 1,661 (1,695)
Stock Option Compensation
Expense...................... 920
Adjustment of Unearned
Compensation for Terminated
Employees.................... (266) 266
Amortization of Unearned
Compensation................. 297
Treasury Stock Repurchased
During the Period............
Comprehensive Loss:
Net Loss....................... (32,955)
Net Unrealized Loss on
Available for Sale
Securities................... (1,989)
Net Gain on Fuel Swaps
Designated as Cash Flow
Hedging Instruments.......... 68
Net Loss on Interest Rate Swaps
Designated as Cash Flow
Hedging Instruments.......... (355)
Foreign Currency Translation... 453
Minimum Pension Liability
Adjustment -- Marine
Services..................... (15,485)
Minimum Pension Liability
Adjustment -- Insurance
Services..................... (872)
-------- --------
Total Comprehensive Loss... (18,180) (32,955)
---------- ------ -------- ------- -------- --------
Balance at December 27, 2002....... 30,828,093 3,083 117,148 (1,132) (12,464) (29,209)
Common Stock Issued Pursuant to
Note Purchase Agreement.......... 5,120,853 512 6,657
Stock Option Compensation
Expense.......................... 137
Amortization of Unearned
Compensation..................... 384
Adjustment of Unearned Compensation
for Terminated Employees......... (155,506) (16) (496) 459
Comprehensive Loss:
Net Loss....................... (69,225)
Minimum Pension Liability
Adjustment -- Insurance
Services..................... (426)
Net Unrealized Loss on
Available for Sale
Securities................... (2,877)
Net Reclassification Adjustment
for Amount Included in Equity
in Net Loss of Unconsolidated
Marine Services
Subsidiaries................. 15,322
-------- --------
Total Comprehensive Income
(Loss)................... 12,019 (69,225)
---------- ------ -------- ------- -------- --------
Balance at December 31, 2003....... 35,793,440 $3,579 $123,446 $ (289) $ (445) $(98,434)
========== ====== ======== ======= ======== ========
TREASURY STOCK
---------------
SHARES AMOUNT TOTAL
------ ------ --------
Balance December 31, 2000.......... 10,740 $(66) $ 81,330
Exercise of Options to Purchase
Common Stock................. 630
Stock Option Compensation
Expense...................... 57
Treasury Stock Repurchased
During the Period............ 2 -- --
Comprehensive Loss:
Net Loss....................... (14,334)
Net Unrealized Gain on
Available for Sale
Securities................... 6,780
--------
Total Comprehensive Income
(Loss)................... (7,554)
------ ---- --------
Balance December 31, 2001.......... 10,742 (66) 74,463
Exercise of Options to Purchase
Common Stock................. 1,087
Exercise of Warrants to
Purchase Common Stock........ 9,500
Common Stock Issued Pursuant to
Rights Offering, Net of
Expenses..................... 42,228
Restricted Common Stock Issued
to ACL Management............ --
Stock Option Compensation
Expense...................... 920
Adjustment of Unearned
Compensation for Terminated
Employees.................... --
Amortization of Unearned
Compensation................. 297
Treasury Stock Repurchased
During the Period............ 54 -- --
Comprehensive Loss:
Net Loss....................... (32,955)
Net Unrealized Loss on
Available for Sale
Securities................... (1,989)
Net Gain on Fuel Swaps
Designated as Cash Flow
Hedging Instruments.......... 68
Net Loss on Interest Rate Swaps
Designated as Cash Flow
Hedging Instruments.......... (355)
Foreign Currency Translation... 453
Minimum Pension Liability
Adjustment -- Marine
Services..................... (15,485)
Minimum Pension Liability
Adjustment -- Insurance
Services..................... (872)
--------
Total Comprehensive Loss... (51,135)
------ ---- --------
Balance at December 27, 2002....... 10,796 (66) 77,360
Common Stock Issued Pursuant to
Note Purchase Agreement.......... 7,169
Stock Option Compensation
Expense.......................... 137
Amortization of Unearned
Compensation..................... 384
Adjustment of Unearned Compensation
for Terminated Employees......... (53)
Comprehensive Loss:
Net Loss....................... (69,225)
Minimum Pension Liability
Adjustment -- Insurance
Services..................... (426)
Net Unrealized Loss on
Available for Sale
Securities................... (2,877)
Net Reclassification Adjustment
for Amount Included in Equity
in Net Loss of Unconsolidated
Marine Services
Subsidiaries................. 15,322
--------
Total Comprehensive Income
(Loss)................... (57,206)
------ ---- --------
Balance at December 31, 2003....... 10,796 $(66) $ 27,791
====== ==== ========
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The accompanying notes are an integral part of the consolidated financial statements.
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Danielson Holding Corporation ("DHC") is a holding company whose subsidiaries consist principally of insurance operations in the western United States, primarily California, and American Commercial Lines LLC ("ACL"), an integrated marine transportation and service company. ACL provides barge transportation and ancillary services throughout the inland United States and Gulf Intracoastal Waterway Systems, which include the Mississippi, Ohio and Illinois Rivers and their tributaries and the Intracoastal canals that parallel the Gulf Coast. In addition, ACL provides barge transportation services on the Orinoco River in Venezuela and the Parana/Paraguay River System serving Argentina, Brazil, Paraguay, Uruguay and Bolivia. ACL, through its subsidiary Jeffboat LLC, also provides marine construction and repair services.
DHC holds all of the voting stock of DHC Indemnity Company ("DIND"). DIND owns 100 % of the common stock of National American Insurance Company of California, DHC's principal operating insurance subsidiary, which owns 100% of the common stock of Valor Insurance Company, Incorporated ("Valor") (National American Insurance Company of California and its subsidiaries being collectively referred to as "NAICC").
The operations of NAICC are in property and casualty insurance. NAICC writes non-standard private passenger and commercial automobile insurance in the western United States, primarily California. NAICC writes approximately 92% of its insurance in California. For the years ended December 2003, 2002 and 2001, 55%, 45% and 16%, respectively, of total direct written premiums were produced through two general agents of NAICC. In 2001, NAICC, which formerly wrote workers' compensation insurance, decided to exit the workers' compensation business in all states. In 2003, NAICC ceased writing new commercial automobile insurance and expects that by September 2004 it will have completely exited the commercial automobile insurance market.
ACL, which was acquired on May 29, 2002, and certain of its subsidiaries, filed a petition on January 31, 2003 with the U.S. Bankruptcy Court for the Southern District of Indiana, New Albany Division to reorganize under Chapter 11 of the U.S. Bankruptcy Code. As a result of this filing, while DHC continues to exercise significant influence over the operating and financial policies of ACL, it no longer maintains control of the activities of ACL. Accordingly, DHC no longer includes ACL and its subsidiaries as consolidated subsidiaries in DHC's financial statements. DHC's investments in these entities are presented using the equity method effective as of the beginning of the year ending December 31, 2003. DHC has direct ownership interest in two 50% owned subsidiaries of ACL. It owns 5.4% of the remaining 50% interest in Global Materials Services, LLC ("GMS") and the remaining 50% interest in Vessel Leasing, LLC ("Vessel Leasing"). These direct ownership interests are also reported using the equity method of accounting since DHC has the ability to exercise significant influence over the operating and financial policies of these companies. Under the equity method of accounting, DHC reports its share of ACL's, GMS's, and Vessel Leasing's ("Investees") income and loss for the period based on its ownership interest. DHC, GMS and Vessel Leasing are not guarantors of ACL's debt nor are they liable for any of ACL's liabilities. Accordingly, under the equity method of accounting, DHC does not recognize ACL's losses in excess of the investment in ACL.
DHC's insurance subsidiaries are referenced to herein as "Insurance Services". ACL, GMS and Vessel Leasing are together referenced to herein as "Marine Services".
In 2003, DHC changed the presentation of the parent company's accounts included in the consolidated statement of financial position from a classified to an unclassified basis. The change in classification is deemed to be more meaningful as DHC's Insurance Services' assets and liabilities have been consistently reported on an unclassified basis. Previously reported amounts have been reclassified to conform to the current classifications.
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements reflect the results of operations, cash flows and financial position of DHC and its majority-owned and controlled subsidiaries as a single entity. All significant intercompany accounts and transactions have been eliminated. Investments in companies that are not majority-owned or controlled are accounted for under the equity method.
FISCAL YEAR
In 2002, DHC conformed its previous calendar year-end reporting basis to ACL's fiscal year-end reporting basis. Effective with the fiscal year beginning December 28, 2002, DHC is again reporting on a calendar year-end basis to conform with DIND and its consolidated subsidiaries' who have been consolidated in the accompanying consolidated financial statements using its calendar year-end reporting period in all periods presented. The transition period activity included in the consolidated financial statements for 2003 is immaterial.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include short-term investments with a maturity of less than three months when purchased. DHC, from time to time, has cash in banks in excess of federally insured limits. Cash and cash equivalents are stated at cost, which approximates fair value.
INVESTMENTS
Debt and equity securities can be classified in one of the three categories: trading, available-for-sale, or held-to-maturity. Securities that are classified as "trading" can be classified as bought and held principally to sell in the near term. Securities which are classified as "held-to-maturity" are securities which DHC has the ability and intent to hold until maturity. All other securities, which are not classified as either trading or held- to-maturity, are classified as "available-for-sale." DHC currently classifies all of its debt and equity securities as available-for-sale.
Fixed maturities classified as available-for-sale are recorded at fair value. Premiums and discounts of fixed maturity securities are amortized or accreted based on the effective interest method. Amortization and accretion of premiums and discounts on collateralized mortgage obligations are adjusted for principal paydowns and changes in expected maturities. Net unrealized gains or losses on fixed maturities classified as available-for-sale are excluded from earnings and are reported as a separate component of accumulated other comprehensive income (loss) in stockholders' equity until realized.
Equity securities are stated at fair value, and any increase or decrease from cost is reported as accumulated other comprehensive income (loss) in stockholders' equity as unrealized gain or loss until realized.
Any decline in the market value of any available-for-sale security or held-to-maturity security below cost which is deemed to be "other than temporary" is written down to fair value, resulting in losses that are included in realized investment gains and losses. A new cost basis is established for such security. Dividend
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and interest income is recognized when earned. Investment gains or losses realized on the sale of securities are determined using the specific identification method.
DEFERRED POLICY ACQUISITION COSTS
Insurance Services' deferred policy acquisition costs, consisting principally of commissions and premium taxes paid at the time of issuance of the insurance policy, are deferred and amortized over the period during which the related insurance premiums are earned. Deferred policy acquisition costs are limited to the estimated future profit, based on the anticipated losses and loss adjustment expenses ("LAE") (based on historical experience), maintenance costs, policyholder dividends, and anticipated investment income. Deferred policy acquisition costs of $833 at December 2003 and $1,612 at December 2002 are included with other assets under Parent Company and Insurance Services. The amortization of deferred acquisition costs charged to operations in 2003, 2002 and 2001 was $6,610, $11,437 and $16,174, respectively.
DEFERRED FINANCING COSTS
DHC recorded $7,169 of deferred financing costs in connection with the note purchase agreement described in Note 2. These costs are being amortized over the expected period that the bridge financing will be outstanding. Amortization for 2003 was $1,024 and is included in interest expense on the consolidated statement of operations.
UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES
Unpaid losses and LAE are based on estimates of reported losses and historical experience for incurred but unreported claims, including losses reported by other insurance companies for reinsurance assumed, and estimates of expenses for investigating and adjusting all incurred and unadjusted claims. Management believes that the provisions for unpaid losses and LAE are adequate to cover the cost of losses and LAE incurred to date. However, such liability is, by necessity, based upon estimates, which may change in the near term, and there can be no assurance that the ultimate liability will not exceed, or even materially exceed, such estimates. The loss and LAE is continually monitored and reviewed, and as settlements are made or reserves adjusted, differences are included in current operations.
REINSURANCE
In the normal course of business, Insurance Services seeks to reduce the loss that may arise from catastrophes or other events which cause unfavorable underwriting results by reinsuring certain levels of risk in various areas of exposure with other insurance enterprises or reinsurers.
Insurance Services accounts for its reinsurance contracts which provide indemnification by reducing earned premiums for the amounts ceded to the reinsurer and establishing recoverable amounts for paid and unpaid losses and LAE ceded to the reinsurer. Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured policy. Contracts that do not result in the reasonable possibility that the reinsurer may realize a significant loss from the insurance risk generally do not meet conditions for reinsurance accounting and are accounted for as deposits. For the fiscal years 2003 and 2002, Insurance Services had no reinsurance contracts which were accounted for as deposits.
EARNED PREMIUMS
Insurance Services' earned premium income is recognized ratably over the contract period of an insurance policy. A liability is established for unearned insurance premiums that represent the portion of premium received which is applicable to the remaining portion of the unexpired terms of the related policies.
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Reinsurance premiums are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts.
NAICC establishes an allowance for premium receivables and reinsurance recoverables through a charge to general and administrative expenses based on historical experience. After all collection efforts have been exhausted, NAICC reduces the allowance for balances that have been deemed uncollectible.
STOCK-BASED COMPENSATION COSTS
Stock-based compensation cost is measured using the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees" ("APB 25"), and related interpretations for directors and employees. The fair value based method of accounting prescribed by Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," ("SFAS 123"), is used to measure stock-based compensation for contractors.
In December 2002, the Financial Accounting Standards Board ("FASB") issued SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure," ("SFAS 148"), which provides alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, the statement amends the disclosure requirements of SFAS 123 to require prominent disclosures about the method of accounting for stock-based employee compensation and the effect of the method used on reported financial results and requires such disclosures in interim financial information. DHC continues to account for stock-based employee compensation under APB 25 for directors and employees, but has adopted the new disclosure requirements of SFAS 148.
The following table illustrates the pro forma effect on net loss and loss per share as if the fair value recognition provisions of SFAS 123 had been applied to all stock-based compensation awards.
2003 2002 2001
-------- -------- --------
Net Loss as Reported................................. $(69,225) $(32,955) $(14,334)
Pro forma Compensation Expense....................... (970) (2,274) (636)
Less:
Stock Option Expense Recorded...................... 137 920 57
-------- -------- --------
Pro forma Net Loss................................... $(70,058) $(34,309) $(14,913)
======== ======== ========
Basic and Diluted Loss Per Share:
As Reported........................................ $ (2.25) $ (1.26) $ (0.74)
Pro forma.......................................... (2.28) (1.31) (0.76)
|
Additional information related to DHC's stock option plan is detailed in Note 15.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and the respective tax basis thereof. Deferred tax assets and liabilities are measured using enacted tax rates which are expected to apply to taxable income in the years in which those temporary differences are anticipated to be recovered or settled, and are limited, through a valuation allowance, to the amount estimated to be realizable.
PER SHARE DATA
Per share data is based on the weighted average number of shares of common stock of DHC, par value $0.10 per share ("Common Stock"), outstanding during the relevant period. Basic earnings per share are
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
calculated using only the average number of outstanding shares of Common Stock. Such average shares were 30,783,216, 26,258,499, and 19,465,104 for the years 2003, 2002 and 2001, respectively. Diluted earnings per share computations, as calculated under the treasury stock method, include the average number of shares of additional outstanding Common Stock issuable for stock options and warrants, whether or not currently exercisable. Diluted earnings per share for all periods presented do not include average shares related to stock options and warrants because their effect is anti-dilutive.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current year presentation.
OTHER SIGNIFICANT ACCOUNTING POLICIES OF MARINE SERVICES
The following are other significant accounting policies of the previously consolidated Marine Services subsidiaries.
Accounts Receivable
Accounts Receivable consist of the following as of December 27, 2002:
Accounts Receivable......................................... $53,129
Allowance for Doubtful Accounts............................. (2,346)
-------
$50,783
=======
|
Allowances for doubtful accounts are based upon the expected collectibility of accounts.
Materials and Supplies
Materials and Supplies are carried at the lower of cost (average) or market and consist of the following as of December 27, 2002:
Raw Materials............................................... $ 3,818
Work in Progress............................................ 15,577
Parts and Supplies.......................................... 15,379
-------
$34,774
=======
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Properties
Properties are at cost and consist of the following as of December 27, 2002:
Land........................................................ $ 15,370
Buildings and Improvements.................................. 45,777
Equipment................................................... 649,572
--------
710,719
Less Accumulated Depreciation............................... 56,526
--------
$654,193
========
|
Provisions for depreciation of properties are based on the estimated useful service lives computed on the straight-line method. Buildings and Improvements are depreciated from 15 to 45 years. Equipment is depreciated from 5 to 42 years. Leasehold improvements are amortized on a straight-line basis over the
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
estimated useful lives of the assets or over the term of the leases, whichever is shorter. Marine Services depreciation expense was $40,591 in 2002.
Properties and other long-lived assets are reviewed for impairment whenever events or business conditions indicate the carrying amount of such assets may not be fully recoverable. Initial assessments of recoverability are based on estimates of undiscounted future net cash flows associated with an asset or a group of assets. Where impairment is indicated, the assets are evaluated for sale or other disposition, and their carrying amount is reduced to fair value based on discounted net cash flows or other estimates of fair value. There were no long-lived asset impairment losses in 2002.
Investment in UABL
ACL accounts for its 50% ownership in UABL Limited and UABL Limited Terminals Ltd. (collectively, "UABL"), companies with operations in South America, by the equity method. Marine Services' share of UABL's losses included in other income, net on the consolidated statement of operations was $1,130 for 2002.
Revenue Recognition
Marine Services' barge transportation revenue is recognized proportionately as shipments move from origin to destination. Terminal, repair and other revenue is recognized as services are provided. Marine construction revenue and related expense is primarily recognized on the completed-contract method, due to the short-term nature of contracts.
Debt Cost Amortization
Marine Services amortizes debt costs over the term of the debt. Amortization expense was $1,150 in 2002.
Debt Discount Amortization
On May 29, 2002, ACL issued new debt which was recorded at fair value. The difference between the principal amount of the notes and the fair value (discount) is being amortized using the effective interest method over the life of the notes. The amortization of the discount was $2,882 in 2002 and is included in interest expense on the consolidated statement of operations.
RECENTLY ISSUED ACCOUNTING STANDARDS
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" ("SFAS 150"). SFAS 150 requires that certain financial instruments, which under previous guidance were accounted for as equity, must now be accounted for as liabilities. The financial instruments affected include mandatorily redeemable stock, certain financial instruments that require or may require the issuer to buy back some of its shares in exchange for cash or other assets, and certain obligations that can be settled with shares of stock. SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003, otherwise it is effective July 1, 2003, the beginning of the first interim period after June 15, 2003. The provisions of this statement did not have an impact on DHC's financial statements in 2003.
In January 2003, the FASB issued FASB Interpretation 46, "Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51" ("FIN 46"). In
December 2003, the FASB modified FIN 46 to make certain technical corrections
and address certain implementation issues that had arisen, including deferral of
certain provisions to 2004. FIN 46 provides a new framework for identifying
variable interest entities ("VIEs") and determining when a company should
include the assets, liabilities, noncontrolling interests and results of
activities of a VIE in its consolidated financial statements. FIN 46 was
effective immediately for
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
VIEs created after January 31, 2003. The provisions of this statement did not have an impact on DHC's financial statements in 2003. DHC does not expect FIN 46 will have a significant impact on its financial statements in 2004.
In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS 146"), which addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs incurred in a Restructuring)" ("Issue 94-3"). The principal difference between SFAS 146 and Issue 94-3 relates to SFAS 146's requirements for recognition of a liability for a cost associated with an exit or disposal activity. SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit cost as generally defined in Issue 94-3 was recognized at the date of an entity's commitment to an exit plan. Severance pay under SFAS 146, in many cases, would be recognized over time rather than up front. Additionally, under SFAS 146, if the benefit arrangement requires employees to render future service beyond a "minimum retention period," a liability should be recognized as employees render service over the future service period even if the benefit formula used to calculate an employee's termination benefit is based on length of service. The provisions of SFAS 146, which was adopted in 2003, did not have an impact on DHC's financial statements in 2003.
NOTE 2. COVANTA ACQUISITION AND FINANCING AGREEMENTS
On December 2, 2003, DHC executed a definitive investment and purchase agreement to acquire the energy and water businesses of Covanta Energy Corporation ("Covanta") in connection with Covanta's emergence from Chapter 11 proceedings in bankruptcy. The primary components of the transaction are: (1) the purchase by DHC of 100% of the equity of Covanta in consideration for a cash purchase price of $30,000, and (2) agreement as to new revolving credit and letter of credit facilities for Covanta's domestic and international operations, provided by some of the existing Covanta lenders and a group of additional lenders organized by DHC. DHC amended this Agreement with Covanta as of February 23, 2004 to reduce the purchase price and release $175 from an escrow account so that DHC could acquire an equity interest in Covanta Lake, Inc., a wholly-owned indirect subsidiary of Covanta, in a transaction separate and distinct from the acquisition of Covanta out of bankruptcy.
As required by the investment and purchase agreement, Covanta filed a new, alternative proposed plan of reorganization, a new, alternative proposed plan of liquidation for specified non-core businesses, and an accompanying draft disclosure statement, each reflecting the transactions contemplated under the investment and purchase agreement, with the Bankruptcy Court.
Under the terms of the investment and purchase agreement, DHC will acquire 100% of Covanta's equity in consideration for $30,000 in cash. Other assets as of December 31, 2003 include deferred acquisition costs of $979 incurred primarily for legal and consulting fees directly related to the Covanta acquisition, net of a $3,000 reimbursement of such costs from Covanta in December 2003. As part of the investment and purchase agreement, DHC arranged for a new $118,000 replacement letter of credit facility for Covanta, secured by a second lien on Covanta's domestic assets. This financing is to be provided by SZ Investments, L.L.C., a DHC shareholder ("SZ Investments"), Third Avenue Trust, on behalf of Third Avenue Value Fund Series, a DHC shareholder ("Third Avenue") and D. E. Shaw Laminar Portfolios, L.L.C., a creditor of Covanta and a DHC shareholder ("Laminar"). In addition, in connection with a note purchase agreement described below, Laminar also will arrange for a $10,000 revolving loan facility for Covanta's international operations that DHC will acquire, secured by Covanta's international assets.
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FINANCING THE COVANTA ACQUISITION
DHC obtained the financing necessary for the Covanta acquisition pursuant to a note purchase agreement dated December 2, 2003, from SZ Investments, Third Avenue and Laminar (collectively, the "Bridge Lenders"). Pursuant to the note purchase agreement, the Bridge Lenders have provided DHC with $40,000 of bridge financing in exchange for notes convertible into shares of Common Stock, par value $0.10 per share ("Common Stock") at a price of $1.53 per share. These notes have a scheduled maturity date of January 2, 2005 and an extended maturity date of July 15, 2005, and bear interest at a rate of 12% per annum through July 15, 2004 and 16% per annum thereafter. In the event of a default or the failure to pay a note on its maturity, the interest rate under the note increases by 2%. DHC used $30,000 of the proceeds from the notes to post an escrow deposit prior to the closing of the transactions contemplated by the investment and purchase agreement. Upon closing, it is intended that the deposit will be used as DHC's purchase price for Covanta's equity interests. DHC will use the remainder of the proceeds to pay unreimbursed transaction expenses and for general corporate purposes. In consideration for the $40,000 of bridge financing and the agreement by the Bridge Lenders to arrange or provide for the $118,000 second lien credit facility and for Laminar to arrange or provide for the $10,000 international revolving credit facility, DHC issued to the Bridge Lenders an aggregate of 5,120,853 shares of Common Stock. At the time that DHC entered into the note purchase agreement, agreed to issue the notes convertible into shares of Common Stock and issued the equity compensation to the Bridge Lenders, the closing price of Common Stock on the day prior to the announcement of the Covanta acquisition was $1.40 on the American Stock Exchange, which was below the $1.53 per share conversion price of the notes.
DHC expects to refinance the notes pursuant to a rights offering. If DHC does not refinance all of the outstanding notes, the remainder of the notes would be convertible into shares of Common Stock, without action by the Bridge Lenders, at the rights offering price of $1.53 per share, subject to certain agreed upon limitations necessitated by DHC's NOL's.
In addition, under the note purchase agreement, Laminar has agreed to convert an amount of notes to acquire up to an additional 8.75 million shares of the Common Stock at $1.53 per share based upon the levels of public participation in the rights offering. Further, DHC has agreed, in connection with the note purchase agreement, to sell up to an additional 3 million shares of Common Stock at $1.53 per share to certain creditors of Covanta based upon the levels of public participation in the rights offering and subject to change of ownership and other limitations.
As part of DHC's negotiations with Laminar and their becoming a 5% shareholder, pursuant to a letter agreement dated December 2, 2003, Laminar has agreed to transfer restrictions on the shares of Common Stock that Laminar holds or will acquire. Further, in accordance with the transfer restrictions contained in Article Five of DHC's charter restricting the resale of Common Stock by 5% stockholders, DHC has agreed with Laminar to provide it with limited rights to resell the Common Stock that it holds. Finally, DHC has agreed with the Bridge Lenders to file a registration statement with the SEC to register the shares of Common Stock issued to them under the note purchase agreement not later than the earlier of June 30, 2004 and ten days after closing of the rights offering. Samuel Zell, Chairman of the Board of Directors and Chief Executive Officer of DHC, Philip G. Tinkler, Chief Financial Officer of DHC and William Pate, a director of DHC, are affiliated with SZ Investments. Martin Whitman and David Barse, directors of DHC, are affiliated with Third Avenue. The note purchase agreement and other transactions involving the Bridge Lenders were negotiated, reviewed and approved by a special committee of DHC's Board of Directors composed solely of disinterested directors and advised by independent legal and financial advisors.
NOTE 3. ACL ACQUISITION
On May 29, 2002, DHC completed an acquisition (the "DHC Recapitalization")
of American Commercial Lines Holdings LLC ("ACL Holdings"), the parent company
of ACL. Holders of ACL
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Holdings' preferred units, exchanged all of their preferred units, other than the preferred units held by the management unitholders, for $7,000 in cash from DHC. DHC contributed to ACL Holdings $58,493, principal amount of ACL's 10.25% senior notes due June 30, 2008 (the "Old Senior Notes"), plus the interest obligations thereon, if any, and $25,000 in cash in exchange for newly issued common units of ACL Holdings. All common units held by the common unitholders, other than the consenting common unitholders, were cancelled and extinguished. Members of ACL's management abandoned to ACL Holdings all preferred units of ACL Holdings held by them for no consideration and all those preferred units were deemed cancelled.
The fair value of the consideration given by DHC includes the $7,000 in cash paid to preferred unitholders, cash of $25,000, the Old Senior Notes and accrued interest having an estimated fair value of $43,650 contributed to ACL Holdings and $6,606 in costs directly associated with the acquisition.
On May 29, 2002, DHC also purchased a 50% equity interest in Vessel Leasing for $2,769 and a 5.4% equity interest in GMS for $1,290. Vessel Leasing leases barges to ACL's barge transportation operations and GMS owns and operates terminal and warehouse facilities.
The acquired companies operating results are included in DHC's consolidated statement of operations from the date of the DHC Recapitalization, May 29, 2002. A condensed consolidated balance sheet disclosing the amounts assigned to assets and liabilities of the acquired companies at the date of the acquisition follows:
ASSETS:
Current Assets............................................ $167,015
Property -- Net........................................... 662,141
Pension Assets............................................ 21,392
Other Assets.............................................. 74,584
--------
Total Assets...................................... 925,132
========
LIABILITIES:
Current Liabilities....................................... 197,796
Long-term Debt............................................ 612,958
Other Long-term Liabilities............................... 28,063
--------
Total Liabilities................................. 838,817
--------
Net Cost of Acquisitions.................................... $ 86,315
========
|
Following are the pro forma unaudited results of operations for the years ended December 27, 2002 and December 31, 2001, assuming consummation of the acquisitions and recapitalization of ACL Holdings as of January 1, 2001:
2002 2001
-------- --------
Revenue..................................................... $837,472 $886,229
Loss From Operations Before Cumulative Effect of Accounting
Change.................................................... $(83,930) $(25,652)
Per share of common stock -- Basic and Fully Diluted........ $ (2.73) $ (0.84)
Net Loss.................................................... $(83,930) $(24,257)
Per share of common stock -- Basic and Fully Diluted........ $ (2.73) $ (0.80)
|
NOTE 4. ACL CHAPTER 11 FILING
During 2002 and 2003, ACL experienced a decline in barging rates, reduced shipping volumes and excess barging capacity during a period of slow economic growth. Due to these factors, ACL's revenues and earnings
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
did not meet expectations and ACL's liquidity was significantly impaired. Debt covenant violations occurred and, as a result, ACL was unable to meet its financial obligations as they became due. On January 31, 2003 (the "Petition Date"), ACL filed a petition with the U.S. Bankruptcy Court for the Southern District of Indiana, New Albany Division (the "Bankruptcy Court") to reorganize under Chapter 11 of the U.S. Bankruptcy Code (the "Bankruptcy Code" or "Chapter 11") under case number 03-90305. Included in the filing are ACL, ACL's direct parent (American Commercial Lines Holdings LLC), American Commercial Barge Line LLC, Jeffboat LLC, Louisiana Dock Company LLC and ten other U.S. subsidiaries of ACL (collectively with ACL, the "Debtors") under case numbers 03-90306 through 03-90319. These cases are jointly administered for procedural purposes before the Bankruptcy Court under case number 03-90305. The Chapter 11 petitions do not cover any of ACL's foreign subsidiaries or certain of its U.S. subsidiaries.
ACL and the other Debtors are continuing to operate their businesses as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. As debtors-in-possession, the Debtors may not engage in transactions outside of the ordinary course of business without approval, after hearing, of the Bankruptcy Court. As part of the Chapter 11 cases, the Debtors intend to develop and propose for confirmation pursuant to Chapter 11, a plan of reorganization that will restructure the operations and liabilities of the Debtors to the extent necessary to result in the continuing viability of ACL. A filing date for such a plan has not been determined; however, the Debtors have the exclusive right to file a plan of reorganization at any time on or before March 28, 2004. If the exclusive filing period were to expire, other parties, such as ACL creditors, would have the right to propose alternative plans of reorganization. During the pendency of these Chapter 11 cases, the Debtors have routinely requested extension of the exclusivity period. Such extensions have been granted with the support of the Debtors' creditors. The Debtors intend to file for an additional extension of the exclusivity period beyond the current March 28, 2004 date, as may be necessary.
The Debtors' direct and indirect foreign subsidiaries and foreign joint venture entities did not file petitions under Chapter 11 of the Bankruptcy Code and are not debtors-in-possession. DHC, GMS and Vessel Leasing also did not file petitions under Chapter 11 of the Bankruptcy Code and are not debtors-in-possession.
The Debtors have entered into a Revolving Credit and Guaranty Agreement ("DIP Credit Facility") that provides up to $75,000 of financing during ACL's Chapter 11 proceeding. As of December 26, 2003, participating bank commitments under the DIP Credit Facility total $75,000, consisting of a $50,000 term loan and a $25,000 revolving credit facility. Of this amount, the Debtors have fully drawn the $50,000 term loan, which was used to retire ACL's Pre-Petition Receivables Facility and which continues to be used to fund the Debtors' day-to-day cash needs. The Debtors have made no draws against the revolving credit facility. Total amounts drawn under the DIP Credit Facility are limited by a borrowing base (as defined in the DIP Credit Facility). The borrowing base limit was $56,000 as of December 26, 2003 and is updated weekly. The DIP Credit Facility is secured by the same and additional assets that collateralized ACL's Senior Credit Facilities and Pre-Petition Receivables Facility, and bears interest, at ACL's option, at London Inter Bank Offered Rates ("LIBOR or LIBOR Rates") plus four percent or an Alternate Base Rate (as defined in the DIP Credit Facility) plus three percent. There are also certain interest rates in the event of a default under the facility.
The obligations of the Debtors under the DIP Credit Facility, by court order, have super-priority administrative claim status as provided under the Bankruptcy Code. Under the Bankruptcy Code, a super-priority claim is senior to secured and unsecured pre-petition claims and all administrative expenses incurred in the Chapter 11 case. In addition, with certain exceptions (including a carve-out for unpaid professional fees and disbursements), the DIP Credit Facility obligations are secured by (1) a first-priority lien on all unencumbered pre- and post-petition property of the Debtors, (2) a first-priority priming lien on all property of the Debtors that is encumbered by the existing liens securing the Debtors' pre-petition secured lenders and (3) a junior lien on all other property of the Debtors that is encumbered by the pre-petition liens.
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The DIP Credit Facility also contains certain restrictive covenants that, among other things, restrict the Debtors' ability to incur additional indebtedness or guarantee the obligations of others. ACL is also required to maintain minimum cumulative EBITDA, as defined in the DIP Credit Facility, limit its capital expenditures to defined levels and restrict advances to certain subsidiaries.
The DIP Credit Facility will terminate and the borrowings there under will be due and payable upon the earliest of (i) July 31, 2004 (with borrowings repayable on August 2, 2004), (ii) the date of the substantial consummation of a plan of reorganization that is confirmed pursuant to an order by the Bankruptcy Court, or (iii) the acceleration of the term loans or the revolving credit loans made by any of the banks who are a party to the DIP Credit Facility and the termination of the total commitment under the DIP Credit Facility pursuant to the DIP Credit Facility.
As a result of the Chapter 11 filings, certain events of default under ACL's Senior Credit Facilities, Senior Notes, PIK Notes and Old Senior Notes have occurred, the effects of which are stayed pursuant to certain provisions of the Bankruptcy Code.
Under Chapter 11, actions by creditors to collect claims in existence at the filing date are stayed or deferred absent specific Bankruptcy Court authorization to pay such pre-petition claims while the Debtors continue to manage their businesses as debtors-in-possession and act to develop a plan of reorganization for the purpose of emerging from these proceedings. The Debtors have received approval from the Bankruptcy Court to pay or otherwise honor certain of its pre-petition obligations, including but not limited to employee wages and certain employee benefits, certain critical vendor payments, certain insurance and claim obligations and certain tax obligations as a plan of reorganization is developed. A claims bar date of December 5, 2003 was established for all other pre-petition creditors to file a claim against the estate of the various debtors. The Debtors are currently in the process of reviewing the claims that were filed against the Debtors. The ultimate amount of claims allowed by the Court against the Debtors could be significantly different than the amount of the liabilities recorded by the Debtors.
The amount of the claims to be filed against the Debtors by their creditors could be significantly different than the amount of the liabilities recorded by the Debtors. The Debtors also have numerous executory contracts and other agreements that could be assumed or rejected during the Chapter 11 proceedings. Parties affected by these rejections may file claims with the Bankruptcy Court in accordance with the reorganization process. Under these Chapter 11 proceedings, the rights of and ultimate payments to pre-petition creditors, rejection damage claimants and ACL's equity investor may be substantially altered. This could result in claims being liquidated in the Chapter 11 proceedings at less (possible substantially less) than 100% of their face value, and the membership interests of ACL's equity investor being diluted or cancelled. The Debtors have not yet proposed a plan of reorganization. The Debtors' pre-petition creditors and ACL's equity investor will each have a vote in the plan of reorganization.
The Chapter 11 process presents inherent material uncertainty; it is not possible to determine the additional amount of claims that may arise or ultimately be filed, or predict the length of time that the Debtors will continue to operate under the protection of Chapter 11, the outcome of the Chapter 11 proceedings in general, whether the Debtors will continue to operate in their present organizational structure, or the effects of the proceedings on the business of ACL, the other Debtors and its non-filing subsidiaries and affiliates, or on the interests of the various creditors and equity holder. The ultimate recovery, if any, by creditors and DHC will not be determined until confirmation of a plan or plans of reorganization. No assurance can be given as to what value, if any, will be ascribed in the bankruptcy proceedings to each of these constituencies. While it cannot be presently determined, DHC believes it will receive little or no value with respect to its equity interest in ACL Holdings or ACL. Accordingly, DHC wrote off its remaining investment in ACL at the end of the first quarter of 2003 as an other than temporary asset impairment (see Note 20).
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. DEBT
DHC's debt as of December 31, 2003 consists of $40,000 in bridge financing relating to the acquisition of Covanta. Pursuant to the note purchase agreement, the Bridge Lenders provided DHC with bridge financing in exchange for notes convertible under certain circumstances into shares of Common Stock at a price of $1.53 per share. These notes have a scheduled maturity date of January 2, 2005 and an extended maturity date of July 15, 2005, and bear interest at a rate of 12% per annum through July 15, 2004 and 16% per annum thereafter. In the event of a default or the failure to pay a convertible note on its maturity, the interest rate under the convertible note increases by 2%.
Under the note purchase agreement, Laminar has agreed to convert an amount of convertible notes to acquire up to an additional 8.75 million shares of DHC common stock at $1.53 per share based upon the levels of public participation in a planned rights offering. DHC expects to repay the other notes through the rights offering. If DHC does not refinance all of the other outstanding notes, the remainder of the notes would be convertible, without action on the part of the Bridge Lenders, into shares of Common Stock at the rights offering price of $1.53 per share, subject to agreed upon limitations necessitated by DHC's NOLs.
In the event, that the issuance of shares of Common Stock under the convertible notes trigger certain ownership change limitations, as defined by the Internal Revenue Code of 1986, the terms of the convertible notes may be modified. In the event of a non-ownership change rollover event (as defined in the agreement), the notes will bear interest at 18% per annum, compounded quarterly on the last day of each calendar quarter. In the event of an ownership change rollover event (as defined in the agreement), amounts in excess $8.0 million shall be subject to the non-ownership change rollover terms, unless prepaid in full in cash. In the first year in which convertible notes are outstanding under the ownership change rollover terms, interest will be 12% per annum. Thereafter, interest on the notes will be 14.5% per annum, calculated quarterly and payable in arrears on the last day of each calendar quarter.
The note purchase agreement restricts DHC's ability to, among other covenants and restrictions: purchase or sell any material amount of assets, enter into a merger transaction, liquidate or dissolve; incur any debt for borrowed money in an aggregate principal amount in excess of $250, or incur liens on DHC property; and enter into any material transactions with affiliates.
Marine Services' debt as of December 27, 2002 was as follows:
ACL: Revolving Credit Facility................................. $41,000 Tranche A Term Loan....................................... 43,119 Tranche B Term Loan....................................... 124,141 Tranche C Term Loan....................................... 146,069 New Senior Notes.......................................... 128,491 Senior Subordinated Notes (PIK Notes)..................... 68,797 Old Senior Notes.......................................... 4,946 Other Notes............................................... 317 Vessel Leasing: Bonds guaranteed by the Maritime Administration........... 37,740 GMS: Revolving Credit Facility................................. 2,873 GMS Bank Note............................................. 33,652 Illinois Development Finance Authority.................... 5,325 Other Notes............................................... 794 |
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
GMSV:
IFC Note.................................................. 2,850
Other Notes............................................... 1,005
-------
641,119
Less short-term debt........................................ 43,873
Less, current portion long-term debt........................ 588,778
-------
Long-term debt.............................................. $ 8,468
=======
|
As part of the DHC Recapitalization, ACL's debt was restructured. ACL's existing credit facility was amended and restated as of April 11, 2002 (the amended and restated credit facilities are hereafter referred to as the "Senior Credit Facilities") to, among other things, modify financial and restrictive covenants thereunder, prepay $25,000 of term loans thereunder from the $25,000 in cash contributed by DHC and convert $50,000 of revolving credit loans thereunder into a new tranche of term loans having an interest rate and other terms substantially similar to the revolving credit loans under ACL's old senior credit facility.
ACL also completed an exchange offer (the "Exchange Offer") for Old Senior Notes, pursuant to which $284,500 or approximately 96.4%, of the principal amount of the Old Senior Notes were tendered, with the $58,493 principal amount of the Old Senior Notes contributed by DHC to ACL Holdings being deemed tendered in the Exchange Offer. Holders of Old Senior Notes, who tendered their Old Senior Notes pursuant to the Exchange Offer, received approximately $134,700 aggregate principal amount of new 11.25% senior notes ("New Senior Notes") and approximately $112,900 aggregate principal amount of new 12% pay-in-kind senior subordinated notes ("PIK Notes"). Following the consummation of the Exchange Offer, a holder of $4,000 aggregate principal amount of the Old Senior Notes exchanged such notes and accrued interest for approximately $2,400 of New Senior Notes and approximately $2,000 of PIK notes as permitted by the indentures governing the notes, following which $6,500 of the Old Senior Notes remained outstanding.
ACL's debt was adjusted to fair value as of the date of the DHC Recapitalization. The difference between the principal amount of the debt and its fair value is being accreted as interest expense over the term of the debt under the effective interest method.
ACL's revolving credit facility (the "Revolving Credit Facility"), which provides for revolving loans and letters of credit not to exceed the aggregate principal amount of $50,000, matures June 30, 2005, but each loan must be repaid within one year. The Revolving Credit Facility bears interest at a rate equal to LIBOR plus a margin based on ACL's performance. The interest rate as of December 27, 2002 ranged from 5.8125% to 6.0625%.
Tranche A of the Term Loans matures June 30, 2005. Tranche B of the Term
Loans matures June 30, 2006. Tranche C of the Term Loans matures June 30, 2007.
The Term Loans bear interest at a rate equal to LIBOR plus a margin based on
ACL's performance. The annual interest rates as of December 27, 2002 were:
Tranche A -6.0%, Tranche B -6.25% and Tranche C -6.5%.
The New Senior Notes are due January 1, 2008 and bear interest at an annual rate of 11.25%, payable semi-annually. The PIK Notes are due July 1, 2008 and bear interest at an annual rate of 12%. ACL has the option of issuing new PIK Notes in lieu of paying cash interest on such notes each June 30 and December 31 until maturity. After 2 years from issuance, interest accretes at 13.5% per annum if ACL elects to not pay the interest due in cash. The interest rate remains 12% if the interest is paid in cash. The Old Senior Notes are due June 30, 2008 and bear interest at an annual rate of 10.25%.
In connection with the Exchange Offer, ACL completed a consent solicitation of the holders of the Old Senior Notes, which resulted in the elimination or amendment of substantially all the restrictive covenants contained in the indenture governing the Old Senior Notes, the subordination of the subsidiary guarantees of
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the Old Senior Notes to the subsidiary guarantees of the Senior Credit Facilities, the New Senior Notes and the PIK Notes and the waiver of any and all defaults under the indenture governing the Old Senior Notes through the effective date of the Exchange Offer, May 29, 2002.
The Senior Credit Facilities and the indentures governing the New Senior Notes and the PIK Notes (the "Indentures") contain a number of covenants with specified financial ratios and tests including, with respect to the Senior Credit Facilities, maximum leverage ratios, rent adjusted maximum leverage ratios and interest coverage ratios. Compliance with financial ratios is measured at the end of each quarter. The Indentures also contain certain cross default provisions. ACL's ability to meet the financial ratios is affected by adverse weather conditions, seasonality and other risk factors inherent in its business. The Senior Credit Facilities also contain mandatory prepayments of the Term Loans with net proceeds from certain asset sales, equity issuances, incurrence of indebtedness and sale and leaseback transactions, as well as excess cash flow, as defined in the Senior Credit Facilities.
In late 2002, ACL obtained an amendment (the "Amendment") of certain covenants under the Senior Credit Facilities, relating to third quarter and fourth quarter 2002 covenants and a waiver of any past violations thereof. Absent the Amendment, ACL would not have been in compliance with the leverage or interest coverage ratios contained in its Senior Credit Facilities as of December 27, 2002. At the end of the first quarter of 2003, the covenant ratios revert to levels in effect before the Amendment. Although management had been working on operating and financial plans to comply with its debt covenants in 2003 and thereafter, ACL was unable to complete an out-of-court restructuring and management believed it was probable that ACL would not be in compliance with the Senior Credit Facilities covenants at the end of the first quarter 2003, absent another amendment to the Senior Credit Facilities. Accordingly, all of ACL's long-term debt was classified as current debt as of December 27, 2002.
As of December 27, 2002, there were $37,740 outstanding in bonds (the "MARAD Bonds") issued by Vessel Leasing, which bear interest at fixed rates of 5.65% and 6.14% (Tranche 1 and 2) and LIBOR plus .4% (Tranche 3). All three tranches mature in 2016. The MARAD Bonds are guaranteed by the U.S. Maritime Administration. Neither DHC nor ACL guarantees payment of the MARAD Bonds.
As of December 27, 2002, GMS had bank term loans outstanding of $33,652. These loans bear interest at a rate equal to LIBOR plus a margin of 4.0% and mature on May 1, 2005. GMS also had Illinois Development Finance Authority Bonds outstanding in the amount of $5,325. These bonds bear interest at a variable rate based on a municipal swap plus a margin of 4.5% index and mature January 1, 2010. GMS was in violation of certain bank loan covenants as of December 27, 2002. Accordingly, GMS' long-term bank debt has been reclassified as current debt as of December 27, 2002.
As of December 27, 2002, GMSV had $2,850 in loans outstanding from the International Finance Corporation which bear interest at LIBOR plus a margin of 4.75% and mature May 2007. ACL currently guarantees the outstanding loan amounts. (GMSV is a group of companies in which DHC has a 57% ownership through its ownership of ACL and GMS.)
DHC does not guarantee the debt of ACL, Vessel Leasing, GMS or GMSV.
NOTE 6. REINSURANCE
Reinsurance is the transfer of risk, by contract, from one insurance company to another for consideration (premium). Reinsurance contracts do not relieve Insurance Services from its obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to Insurance Services; consequently, allowances are established for amounts deemed uncollectible. Insurance Services evaluates the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities, or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvencies.
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NAICC has reinsurance under both excess of loss and quota share treaties. NAICC cedes reinsurance on an excess of loss basis for workers' compensation risks in excess of $500 prior to April 2000 and $200 thereafter. Beginning in May 2001, NAICC retained 50% of the loss between $200 and $500. For risks other than workers' compensation, NAICC cedes reinsurance on an excess of loss basis risks in excess of $250. Since January 1, 1999 the private passenger automobile quota share ceded percentage was 10% and effective January 1, 2002 the quota share treaty was terminated. The effect of reinsurance on written premiums and earned premiums reflected in DHC's consolidated financial statements is as follows:
2003 2002 2001
------- ------- -------
Direct written premium.................................. $32,733 $56,462 $88,716
Ceded written premium................................... (2,325) (3,807) (8,361)
------- ------- -------
Net written premium..................................... $30,408 $52,655 $80,355
======= ======= =======
Direct earned premium................................... $38,805 $66,958 $90,767
Ceded earned premium.................................... (2,954) (4,794) (8,913)
------- ------- -------
Net earned premium...................................... $35,851 $62,164 $81,854
======= ======= =======
|
The effect of ceded reinsurance on loss and LAE incurred was a decrease of $2,982, $10,401 and $1,801 for the years ended December 2003, 2002 and 2001, respectively.
As of the year ended December 2003, General Reinsurance Corporation
("GenRe") was the only reinsurer that comprised more than 10 percent of NAICC's
reinsurance recoverable on paid and unpaid claims. NAICC monitors all
reinsurers, by reviewing A.M. Best reports and ratings, information obtained
from reinsurance intermediaries and analyzing financial statements. As of
December 31, 2003, NAICC had reinsurance recoverable on paid and unpaid balances
of $13,100 from GenRe. As of the year ended December 2002, GenRe and Mitsui
Sumitomo Insurance Company Ltd. (Mitsui") were the only reinsurers that
comprised more than 10 percent of NAICC's reinsurance recoverable on paid and
unpaid claims of $13,000 and $2,700, respectively. Both GenRe and Mitsui have an
A.M. Best rating of A+ or better.
NOTE 7. UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES
The following table summarizes the activity in Insurance Services' liability for unpaid losses and LAE during the three most recent years:
2003 2002 2001
-------- -------- --------
Net unpaid losses and LAE at beginning of year....... $ 79,192 $ 88,012 $ 79,389
Incurred, net, related to:
Current year....................................... 23,199 49,474 68,848
Prior years........................................ 13,485 10,407 7,646
-------- -------- --------
Total net incurred................................... 36,684 59,881 76,494
Paid, net, related to:
Current year....................................... (10,133) (22,871) (28,632)
Prior years........................................ (40,601) (45,830) (39,239)
-------- -------- --------
Total net paid....................................... (50,734) (68,701) (67,871)
-------- -------- --------
Net unpaid losses and LAE at end of year............. 65,142 79,192 88,012
Plus: Reinsurance recoverable on unpaid losses....... 18,238 22,057 17,733
-------- -------- --------
Gross unpaid losses and LAE at end of year........... $ 83,380 $101,249 $105,745
======== ======== ========
|
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The net losses and LAE incurred during 2003 related to prior years is attributable to recognition of unfavorable development in: commercial auto of $5,500 for accident years 2000 through 2002, workers' compensation of $5,500 of which $3,900 was attributable to Valor, and property and casualty of $1,500, most of which stems from unallocated LAE reserves. The net losses and LAE incurred during 2002 related to prior years is attributable to adverse development on both the California workers' compensation line totaling $3,500, certain private passenger automobile programs totaling $4,700 and commercial automobile totaling $2,000. The losses and LAE incurred during 2001 related to prior years is attributable to adverse development on both the California workers' compensation line totaling $4,400 and certain private passenger automobile programs, primarily outside of California, totaling $1,700. All of the workers' compensation lines and the private passenger automobile programs that caused higher than expected losses were placed in run-off during 2001.
Insurance Services has claims for environmental cleanup against policies issued prior to 1985 and which are currently in run-off. The principal exposure from these claims arises from direct excess and primary policies of businesses in run-off, the obligations of which were assumed by Insurance Services. These direct excess and primary claims are relatively few in number and have policy limits of between $50 and $1,000, with reinsurance generally above $50. Insurance Services also has environmental claims primarily associated with participations in excess of loss reinsurance contracts assumed by Insurance Services. These reinsurance contracts have relatively low limits, generally less than $25, and estimates of unpaid losses are based on information provided by the primary insurance company.
The unpaid losses and LAE related to environmental cleanup is established considering facts currently known and the current state of the law and coverage litigation. Liabilities are estimated for known claims (including the cost of related litigation) when sufficient information has been developed to indicate the involvement of a specific contract of insurance or reinsurance and management can reasonably estimate its liability. Estimates for unknown claims and development of reported claims are included in Insurance Services' unpaid losses and LAE. The liability for the development of reported claims is based on estimates of the range of potential losses for reported claims in the aggregate. Estimates of liabilities are reviewed and updated continually and there is the potential that Insurance Services' exposure could be materially in excess of amounts which are currently recorded. Management does not expect that liabilities associated with these types of claims will result in a material adverse effect on the future liquidity or financial position of Insurance Services. However, claims such as these are based upon estimates and there can be no assurance that the ultimate liability will not exceed or even materially exceed such estimates. As of the years ended December 2003 and 2002, Insurance Services' net unpaid losses and LAE relating to environmental claims were approximately $8,319 and $7,344, respectively.
NOTE 8. REGULATION, DIVIDEND RESTRICTIONS AND STATUTORY SURPLUS
DHC's insurance subsidiaries are regulated by various states. For regulatory purposes, separate financial statements which are prepared in accordance with statutory accounting principles are filed with these states. Insurance Services prepares it's statutory-basis financial statements in accordance with accounting practices prescribed or permitted by the California Department of Insurance (the "CDI"). Prescribed statutory accounting practices include a variety of publications of the National Association of Insurance Commissioners, as well as state laws, regulations and general administrative rules. Permitted statutory accounting practices encompass all accounting practices not so prescribed (see below for discussion of Insurance Services' permitted practice). The Association has adopted a comprehensive set of accounting principles for qualification as an Other Comprehensive Basis of Accounting which was effective in 2001. Insurance Services has determined that application of these comprehensive accounting principles did not have a material impact on its financial condition upon adoption. As of the years ended December 2003 and 2002, DHC's operating insurance subsidiaries had statutory capital and surplus of $16,011 and $19,473, respectively. The combined statutory net loss for DHC's operating insurance subsidiaries, as reported to the regulatory authorities for the years ended December 2003, 2002 and 2001, was $10,135, $22,500 and $8,800, respectively.
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The CDI completed its examination of the statutory-basis financial statements of NAICC, excluding Valor, for the four years ended December 2002. The report was filed January 9, 2004. No restatement of NAICC's December 31, 2002 statutory financial statements was proposed by CDI as a result of the examination. The CDI did, however, note an increase in statutory unpaid loss and LAE by $4.1 million and a corresponding adjustment to surplus. The adjustment issued by the Department was in response to NAICC's recognition of prior years development in its June 30, 2003 quarterly filing.
A model for determining the risk-based capital ("RBC") requirements for property and casualty insurance companies was adopted in December 1993 and companies are required to report their RBC ratios based on their statutory annual statements. As discussed in Note 4, ACL filed for protection under Chapter 11 of the Bankruptcy Code. As a result, for statutory accounting purposes, it was determined that NAICC's investment in ACL was fully impaired. At December 31, 2002, NAICC recognized a statutory charge to its surplus of $7,400. This charge, when combined with NAICC's underwriting results, reduced its statutory surplus level below the Company action level per NAICC's RBC calculation.
In response to the above statutory condition, in 2003, DHC repaid a $4,000 note due May 2004 to NAICC, and further contributed $4,000 to NAICC to increase its statutory capital. With permission from the CDI, these transactions were recorded at December 31, 2002 in NAICC's statutory-basis annual statement. After consideration for the $8,000 noted above, NAICC's reported statutory-basis capital and surplus as of December 31, 2002 was above the Company action level of the RBC calculation. On December 30, 2003, DHC contributed $2,000 to NAICC to increase its statutory capital.
Insurance companies are subject to insurance laws and regulations established by the states in which they transact business. The governmental agencies established pursuant to these state laws have broad administrative and supervisory powers over insurance company operations. These powers include granting and revoking of licenses to transact business, regulating trade practices, establishing guaranty associations, licensing agents, approving policy forms, filing premium rates on certain business, setting reserve requirements, determining the form and content of required regulatory financial statements, conducting periodic examination of insurers' records, determining the reasonableness and adequacy of capital and surplus, and prescribing the maximum concentrations of certain classes of investments. Most states have also enacted legislation regulating insurance holding company systems, including acquisitions, extraordinary dividends, the terms of affiliate transactions and other related matters. DHC and its insurance subsidiaries have registered as holding company systems pursuant to such legislation in California and routinely report to other jurisdictions.
Under the California Insurance Code, NAICC is prohibited from paying shareholder dividends, other than from accumulated earned surplus, exceeding the greater of net income or ten percent of the preceding year's statutory surplus, without prior approval of the CDI. No dividends were paid in 2003, 2002 or 2001. The overall limit of dividends that can be paid during 2004 is approximately $1,600 as long as there is sufficient accumulated earned surplus to pay such. As of the year ended December 2003, NAICC did not have sufficient accumulated earned surplus, as defined by the CDI, to pay further ordinary dividends.
NOTE 9. ACCOUNTS RECEIVABLE SECURITIZATION
At December 27, 2002 ACL had $39,300 outstanding under its pre-petition accounts receivable securitization facility agreement and had $27,590 of net residual interest in the securitized receivables which is included in Accounts Receivable on the consolidated statement of financial position. The fair value of the net residual interest is measured at the time of the sale and is based on the sale of similar assets. In 2002, ACL received gross proceeds of $20,300 from the sale of receivables and made gross payments of $23,600 under this agreement. As described in Note 4, ACL's Pre-Petition Receivables Facility was retired with proceeds from ACL's DIP Credit Facility.
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10. INVESTMENTS
The cost or amortized cost, unrealized gains, unrealized losses and fair value of DHC's investments as of the year ended December 2003 and 2002, categorized by type of security, were as follows:
2003
---------------------------------------------
COST OR
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAIN LOSS VALUE
--------- ---------- ---------- -------
Fixed Maturities -- Parent Company.......... $ 453 $ 35 $ -- $ 488
Fixed Maturities -- Insurance Services:
U.S. government/Agency.................... 22,887 391 70 23,208
Mortgage-backed........................... 15,598 81 231 15,448
Corporate................................. 30,902 716 106 31,512
------- ------ ---- -------
Total Fixed Maturities -- Insurance
Services.................................. 69,387 1,188 407 70,168
Equity Securities -- Insurance Services..... 367 34 -- 401
------- ------ ---- -------
Total Available-for-sale.................... $70,207 $1,257 $407 $71,057
======= ====== ==== =======
|
2002
---------------------------------------------
COST OR
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAIN LOSS VALUE
--------- ---------- ---------- -------
Fixed Maturities -- Parent Company.......... $ 3,473 $1,645 $ -- $ 5,118
Fixed Maturities -- Insurance Services:
U.S. government/Agency.................... 13,700 826 1 14,525
Mortgage-backed........................... 27,327 830 116 28,041
Corporate................................. 38,899 1,950 34 40,815
------- ------ ------ -------
Total Fixed Maturities -- Insurance
Services.................................. 79,926 3,606 151 83,381
Equity Securities -- Insurance Services..... 6,620 86 1,459 5,247
------- ------ ------ -------
Total Available-for-sale.................... $90,019 $5,337 $1,610 $93,746
======= ====== ====== =======
|
The following table sets forth a summary of NAICC's temporarily impaired investments at December 31, 2003:
FAIR UNREALIZED
DESCRIPTION OF INVESTMENTS VALUE LOSSES
-------------------------- ------- ----------
U.S. Treasury and other direct U.S. Government
obligations............................................... $ 5,418 $ 70
Federal agency MBS.......................................... 12,111 231
Corporate Bonds............................................. 6,143 106
------- ----
Total temporarily impaired investments...................... $23,672 $407
======= ====
|
All of the fixed maturity investments noted above were acquired in 2003 and are investment grade securities rated A or better. The number of U.S. Treasury obligations, Federal agency mortgage backed securities, and corporate bonds temporarily impaired are 3, 10, and 4, respectively. No security has a fair value less than 3% below its amortized cost.
Fixed maturities of DHC include mortgage-backed securities ("MBS") representing 21.9% and 31.7% of the total fixed maturities at years ended December 2003 and 2002, respectively. All MBS held by DHC are issued by the Federal National Mortgage Association ("Fannie Mae") or the Federal Home Loan Mortgage Corporation ("Freddie Mac"), both of which are rated "AAA" by Moody's Investors Services. MBS and callable bonds, in contrast to other bonds, are more sensitive to market value declines in a rising interest rate
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
environment than to market value increases in a declining interest rate environment. This is primarily because of payors' increased incentive and ability to prepay principal and issuers' increased incentive to call bonds in a declining interest rate environment. Management does not believe that the inherent prepayment risk in its portfolio is significant. However, management believes that the potential impact of the interest rate risk on DHC's consolidated financial statements could be significant because of the greater sensitivity of the MBS portfolio to market value declines and the classification of the entire portfolio as available-for-sale. DHC has no MBS concentrations in any geographic region.
The expected maturities of fixed maturity securities, by amortized cost and fair value, as of the year ended December 2003, are shown below. Expected maturities may differ from contractual maturities due to borrowers having the right to call or prepay their obligations with or without call or prepayment penalties. Expected maturities of MBS are estimated based upon the remaining principal balance, the projected cash flows and the anticipated prepayment rates of each security:
AMORTIZED FAIR
COST VALUE
--------- -------
Available-for-sale:
One year or less.......................................... $15,202 $15,363
Over one year to five years............................... 39,021 39,742
Over five years to ten years.............................. 15,215 15,147
More than ten years....................................... 402 404
------- -------
Total Fixed Maturities............................ $69,840 $70,656
======= =======
|
DHC's fixed maturity and equity securities portfolio is classified as "available for sale" and is carried at fair value. Changes in fair value are credited or charged directly to stockholders' equity as unrealized gains or losses, respectively. "Other than temporary" declines in fair value are recorded as realized losses in the statement of operations and the cost basis of the security is reduced.
The following reflects the change in net unrealized (loss) gain on available-for-sale securities included as a separate component of accumulated other comprehensive income (loss) in stockholders' equity:
2003 2002 2001
-------- -------- --------
Fixed Maturities, Net................................ $ (4,284) $ (907) $ 6,461
Equity Securities, Net............................... 1,407 (1,082) 319
-------- -------- --------
Change in Net Unrealized (Loss) Gain on
Investments........................................ $ (2,877) $ (1,989) $ 6,780
======== ======== ========
|
The components of net unrealized (loss) gain on available-for-sale securities for the years ended December 31, 2003, 2002, and 2001 consist of the following:
2003 2002 2001
-------- -------- --------
Net Unrealized Holding (Losses) Gains on Available
for Sale Securities Arising During the Period...... $ (797) $ (1,445) $ 8,338
Reclassification Adjustment for Net Realized Gains on
Available for Sale Securities Included in Net
Loss............................................... (2,080) (544) (1,558)
-------- -------- --------
Net Unrealized (Loss) Gain on Available for Sale
Securities......................................... $ (2,877) $ (1,989) $ 6,780
-------- -------- --------
|
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DHC considers the following factors in determining whether declines in the fair value of securities are "other than temporary":
a. the significance of the decline in fair value compared to the cost basis,
b. the time period during which there has been a significant decline in fair value,
c. whether the unrealized loss is credit-driven or a result of changes in market interest rates,
d. a fundamental analysis of the business prospects and financial condition of the issuer, and
e. DHC's ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery in fair value.
Based upon these factors, securities that have indications of potential impairment are subject to further review. In the third quarter of 2002, DHC determined that two equity securities had declines in fair value that were "other than temporary" and DHC, accordingly, recorded a realized loss of $2,655. These securities were subsequently sold in the fourth quarter of 2002. At year end 2002, DHC determined that one equity security had a decline in fair value that was "other than temporary" and, accordingly, recorded a realized loss of $967. The net unrealized loss of DHC's equity securities was $1,373 at the end of December 2002.
During 2003, three equity securities had declines in fair value that were "other than temporary" and, accordingly, DHC recorded a realized loss of $1,890. All of these securities were sold by December 31, 2003.
Net realized investment gains (losses) for the years ended December were as follows:
2003 2002 2001
------ ------ ------
Parent Company
Fixed Maturities......................................... $1,090 $8,740 $ 281
Equity Securities........................................ -- 100 --
------ ------ ------
Net Realized Investment Gains......................... $1,090 $8,840 $ 281
====== ====== ======
Insurance Services
Fixed Maturities......................................... $ 952 $6,087 $ 65
Equity Services.......................................... 38 (5,080) 1,212
------ ------ ------
Net Realized Investment Gains......................... $ 990 $1,007 $1,277
====== ====== ======
|
Gross realized gains relating to fixed maturities were $968, $14,848 and $370 for the years ended December 2003, 2002 and 2001, respectively. Gross realized losses relating to fixed maturities were $16, $21 and $24 for the years ended December 2003, 2002 and 2001, respectively. Gross realized gains relating to equity securities were $2,043, $100 and $2,427 for the years ended December 2003, 2002 and 2001, respectively. Gross realized losses relating to equity securities were $2,005, $5,080 and $1,215 for the years
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ended December 2003, 2002 and 2001, respectively. Net investment income for the years ended December 2003, 2002 and 2001 was:
2003 2002 2001
------ ------ ------
Parent Company
Fixed Maturities......................................... $ 302 $ 594 $1,608
Short-Term Investments................................... 42 46 109
------ ------ ------
Net Investment Income -- Parent Company............... $ 344 $ 640 $1,717
====== ====== ======
Insurance Services
Fixed Maturities......................................... $3,951 $5,467 $7,116
Short-Term Investments................................... 146 134 193
Dividend Income.......................................... 32 42 154
Other, Net............................................... 44 95 254
------ ------ ------
Total Investment Income............................... 4,173 5,738 7,717
Less: Investment Expense............................ 174 135 137
------ ------ ------
Net Investment Income -- Insurance Services........... $3,999 $5,603 $7,580
====== ====== ======
|
At December 31, 2001, DHC held $58,493 face amount of ACL Senior Notes 10.25%, due June 30, 2008, at a cost of $30,026 and a fair value of $31,952, representing 42.9% of stockholders' equity. These notes were contributed to ACL Holdings in 2002 in connection with the acquisition discussed in Note 3. There were no other investments with a carrying value greater than ten percent of stockholders' equity as of years ended December 2003, 2002 or 2001.
In compliance with state insurance laws and regulations, securities with a fair value of approximately $43,400, $45,000 and $45,000 as of the years ended December 2003, 2002 and 2001, respectively, were on deposit with various states or governmental regulatory authorities. In addition, as of the years ended December 2003, 2002 and 2001, investments with a fair value of $7,200, $6,400 and $6,600, respectively, were held in trust or as collateral under the terms of certain reinsurance treaties and letters of credit. NAICC has letters of credit outstanding of $2,800 as of December 31, 2003.
NOTE 11. REDUCTION OF INSURANCE OPERATIONS
Insurance Services' objective is to underwrite business that is expected to yield an underwriting profit. Insurance Services has made a determination that certain lines of insurance may not be sustainable in the current rate environment. Competitive and regulatory pressures have resulted in a general market for premium rates in these lines that is well below a level necessary in order to achieve a profit, especially in light of increasingly unfavorable loss history. Rather than continue to sustain losses, Insurance Services has exited the workers' compensation line in all states, and the non-standard private passenger automobile program written outside of California in 2001 and began exiting the commercial automobile line in all states in 2003. The last new commercial automobile policy was issued in July 2003 and the last commercial auto policy renewed was September 2003. The last workers compensation policy outside Montana was issued in July 2001 and the last Montana workers compensation policy was issued in January 2002. Costs incurred in 2003 and 2001 associated with this process totaled approximately $224 and $1,250, respectively, and are included in general and administrative expenses. The remaining line of business written by Insurance Services is non-standard private passenger automobile in the State of California.
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. STOCKHOLDERS' EQUITY
During the second quarter of 2002, DHC consummated a rights offering to provide funds for the acquisition of ACL and related entities. 8,705,219 shares of Common Stock were issued at $5 per share pursuant to the rights offering in exchange for $42,228 in net proceeds, net of expenses. Expenses included a $1,000 backstop fee paid to SZ Investments. In addition, 2,002,558 shares were issued pursuant to warrants exercised that were previously held by SZ Investments in connection with the rights offering for proceeds of $9,500 and 264,582 shares were issued pursuant to the exercise of options for proceeds of $1,087.
In connection with the ACL acquisition, 339,040 shares of restricted Common Stock were issued to ACL management. These restricted shares have been valued at fair value at the date of issuance and vest one third annually over a three year period. The full value of these shares is recorded as paid in capital with an offset to unearned compensation in stockholders' equity. As employees render service over the vesting period, compensation expense is recorded and unearned compensation is reduced. During 2003, 155,506 unvested restricted shares were cancelled due to employee terminations. The remaining unearned compensation related to these cancelled shares was reduced with the offset recorded as a reduction to additional paid-in capital.
On December 2, 2003, DHC issued 5,120,853 shares of Common Stock to three existing shareholders in exchange for providing the bridge financing necessary for the acquisition of Covanta. See Note 2 for additional information on the acquisition and bridge financing agreements.
As of December 31, 2003, there were 35,793,440 shares of Common Stock issued of which 35,782,644 were outstanding; the remaining 10,796 shares of Common Stock issued but not outstanding are held as treasury stock. In connection with efforts to preserve DHC's NOLs, DHC has imposed restrictions on the ability of holders of five percent or more of Common Stock to transfer the Common Stock owned by them and to acquire additional Common Stock, as well as the ability of others to become five percent stockholders as a result of transfers of Common Stock.
The following represents shares of Common Stock reserved for future issuance as of December 31, 2003:
2004 rights offering (Note 2)............................... 26,836,983(A)
Required conversion of Laminar debt (Note 2)................ 8,750,000(A)
Stock purchase rights of certain creditors of Covanta (Note
2)........................................................ 3,000,000(A)
Stock options exercisable in 2004 (Note 15)................. 1,993,291
----------
40,580,274
==========
|
Also, as of December 31, 2003, there were 10,000,000 shares of preferred stock authorized, with none issued or outstanding. The preferred stock may be divided into a number of series as defined by the Board of Directors. The Board of Directors is authorized to fix the rights, powers, preferences, privileges and restrictions granted to and imposed upon the preferred stock upon issuance, with prior approval of the stockholders required for any series of preferred stock issued to any holder of 1% or more of the outstanding Common Stock.
A substantial portion of DHC's net assets are restricted. Various state insurance requirements restrict the amounts that may be transferred to DHC in the form of dividends or loans from its Insurance Services
(A) The number of shares is based on the maximum number of shares which could be
issued assuming 100% shareholder participation in the rights offering. The
number of shares for the required conversion of Laminar debt and the stock
purchase rights of certain creditors of Covanta are subject to the level of
public participation in the rights offering (as defined in the agreements),
as well as other limitations regarding the Covanta creditors' stock purchase
rights.
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
subsidiaries without prior regulatory approval. Various debt covenants and regulatory requirements also restrict the amounts that may be transferred to DHC in the form of cash dividends or loans from its Marine Services subsidiaries. DHC's investment in the net assets of its Insurance Services subsidiaries and its Marine Services subsidiaries, GMS and Vessel Leasing, amount to approximately $17,300 and $4,400 at December 31, 2003, respectively.
NOTE 13. INCOME TAXES
DHC files a Federal consolidated income tax return with its subsidiaries. DHC's Federal consolidated income tax return includes the taxable results of certain grantor trusts. These trusts were established by certain state insurance regulators and the courts as part of the 1990 reorganization from which the Mission Insurance Group, Inc. ("Mission") emerged from Federal bankruptcy and various state insolvency court proceedings as DHC. These trusts were created for the purpose of assuming various liabilities of their grantors, certain present and former subsidiaries of DHC (the "Mission Insurance Subsidiaries"). This allowed the state regulators to administer the continuing run-off of Mission's insurance business, while DHC and the Mission Insurance Subsidiaries were released, discharged and dismissed from the proceedings free of any claims and liabilities of any kind, including any obligation to provide further funding to the trusts. The agreements establishing the trusts provide the grantor of each trust with a certain "administrative power" which, as specified in Section 675(4)(c) of the Internal Revenue Code, requires that DHC include the income and deductions of each trust on its consolidated Federal income tax returns.
This was to ensure that DHC's NOLs would remain available to offset any post-restructuring taxable income of the trusts, thereby maximizing the amounts available for distribution to trust claimants. The Insurance Commissioner of the State of California and the Director of the Division of Insurance of the State of Missouri, as the trustees, have sole management authority over the trusts. Neither DHC nor any of its subsidiaries has any power to control or otherwise influence the management of the trusts nor do they have any rights with respect to the selection or replacement of the trustees. At the present time, it is not anticipated that any of the Mission Insurance Subsidiaries will receive any distribution with regard to their residual interests in the existing trusts. Since DHC does not have a controlling financial interest in these trusts, they are not consolidated with DHC for financial statement purposes.
As of the close of 2003, DHC had consolidated NOLs of $651,872 for Federal income tax purposes. The NOLs will expire in various amounts, if not used, between 2004 and 2023. The Internal Revenue Service has not audited any of DHC's tax returns for any of the years during the carryforward period including those returns for the years in which the losses giving rise to the NOLs were reported.
SFAS No. 109 "Accounting for Income Taxes" ("SFAS 109") requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. Pursuant to SFAS 109, DHC makes periodic determinations of whether it is "more likely than not" that all or a portion of the DHC's deferred tax assets will be realized. In making these determinations, DHC considers all of the relevant factors, both positive and negative, which may impact upon its future taxable income including the size and operating results of its subsidiaries, the competitive environment in which these subsidiaries operate and the impact of the grantor trusts. Exclusive of the trusts' activities, DHC has generated cumulative taxable losses on a historical basis. Over the past several years, DHC's subsidiaries and holding company operations have been generating combined losses exclusive of net investment income, net realized gains and the trusts' activities.
Therefore, due to the absence of a reliable taxable income stream, DHC has recorded a valuation allowance for the amount by which its deferred tax assets exceed its deferred tax liabilities and, as a result, DHC has not recorded any liability or asset for deferred taxes.
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DHC's NOLs will expire, if not used, in the following amounts in the following years:
AMOUNT OF
CARRYFORWARD
EXPIRING
------------
2004........................................................ $ 69,947
2005........................................................ 106,225
2006........................................................ 92,355
2007........................................................ 89,790
2008........................................................ 31,688
2009........................................................ 39,689
2010........................................................ 23,600
2011........................................................ 19,755
2012........................................................ 38,255
2019........................................................ 33,635
2022........................................................ 26,931
2023........................................................ 80,002
--------
$651,872
========
|
DHC's ability to utilize its NOLs would be substantially reduced if DHC were to undergo an "ownership change" within the meaning of Section 382(g)(1) of the Internal Revenue Code. DHC will be treated as having had an "ownership change" if there is more than a 50% increase in stock ownership during a three year "testing period" by "5% stockholders". In an effort to reduce the risk of an ownership change, DHC has imposed restrictions on the ability of holders of five percent or more of its Common Stock, as well as the ability of others to become five percent stockholders as a result of transfers of Common Stock. The transfer restrictions were implemented in 1990, and DHC expects that they will remain in force as long as the NOLs are available to DHC. Notwithstanding such transfer restrictions, there could be circumstances under which an issuance by DHC of a significant number of new shares of Common Stock or other new class of equity security having certain characteristics (for example, the right to vote or convert into Common Stock) might result in an ownership change under the Internal Revenue Code.
DHC's provision for income taxes in the consolidated statement of operations consists of certain state and other taxes. Tax filings for these jurisdictions do not consolidate the activity of the trusts referred to above, and reflect preparation on a separate company basis.
The following reflects a reconciliation of income tax expense computed by applying the applicable Federal income tax rate of 34% to loss before provision for income taxes for the years ended December 2003, 2002 and 2001, as compared to the provision for income taxes:
2003 2002 2001
-------- -------- -------
Computed "Expected" Tax Benefit....................... $(23,530) $(11,087) $(4,849)
Change in Valuation Allowance......................... (1,976) (49,105) (50,760)
Grantor Trust Income.................................. 8,500 20,188 17,362
Expiring NOL.......................................... 20,689 39,690 39,038
State and Other Tax Expense........................... 18 346 73
Other, Net............................................ (3,683) 314 (791)
-------- -------- -------
Total Income Tax Expense......................... $ 18 $ 346 $ 73
======== ======== =======
|
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to the deferred tax assets and liabilities as of the years ended December 2003 and 2002, respectively, are presented as follows:
2003 2002
--------- ---------
Deferred Tax Assets:
Loss Reserve Discounting.................................. $ 3,476 $ 3,556
Unearned Premiums......................................... 278 609
Net Operating Loss Carryforwards.......................... 221,659 205,968
Allowance for Doubtful Accounts........................... 677 591
Difference in Tax Basis of Property and Equipment......... -- 199
Other..................................................... 90 502
AMT Credit Carryforward................................... 3,140 3,140
--------- ---------
Total Gross Deferred Tax Asset......................... 229,297 214,575
Less: Valuation Allowance.............................. (211,535) (213,511)
--------- ---------
Total Deferred Tax Asset............................... 17,762 1,064
--------- ---------
Deferred Tax Liabilities:
Unrealized Gains on Available-for-Sale Securities......... 314 --
Unrealized Losses on Available-for-Sale Securities........ -- 379
Deferred Acquisition Costs................................ 283 548
Difference in Tax Basis of Bonds.......................... 107 137
Salvage and Subrogation Discount.......................... 23 --
Losses Taken in Excess of Basis -- ACL.................... 17,035 --
--------- ---------
Total Gross Deferred Tax Liability..................... 17,762 1,064
--------- ---------
Net Deferred Tax Asset................................. $ -- $ --
========= =========
|
NOTE 14. EMPLOYEE BENEFIT PLANS
INSURANCE SERVICES
On January 1, 1988, NAICC established a 401(k) Plan in which all employees of NAICC, and effective April 1, 1993, the Danielson Trust are eligible to participate. Under the 401(k) Plan, employees may elect to contribute up to 20 percent of the eligible compensation to a maximum dollar amount allowed by the IRS. In 2003, NAICC matched 50% of the first 4% of compensation contributed by employees to the 401(k) Plan. In 2002, NAICC suspended its matching contribution to the 401(k) Plan. Prior to January 1, 2002, the Company matched 50 percent of the first six percent of compensation contributed by employees to the 401(k) Plan. In the years ended December 2003 and 2001, NAICC's matching contribution to the 401(k) Plan was satisfied through cash payments totaling $46 and $139, respectively.
On January 1, 1988, Insurance Services adopted a non-contributory defined benefit pension plan (the "Plan") covering substantially all of its employees. Pension benefits are based on an employee's years of service and average final compensation. The funding policy of the Plan is for the employers to contribute the minimum pension costs equivalent to the amount required under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code. Effective December 31, 2001, Insurance Services amended the Plan to cease future service credit for active employees.
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the Plan's funded status as of the years ended December 2003 and 2002, valued at January 1, 2004 and 2003, respectively:
2003 2002
------ ------
Actuarial Present Value of Benefit Obligations
Accumulated and Project Benefit Obligation, including
Vested Benefits of $2,042 for 2003 and $1,710 for
2002................................................... $2,177 $1,822
Plan Assets at Fair Value................................... 1,563 1,579
------ ------
Benefit Obligation in Excess of Plan Assets............... (614) (243)
Unrecognized Net Loss..................................... 1,298 806
Unrecognized Prior Service Cost........................... 14 19
------ ------
Prepaid Pension Cost................................... $ 698 $ 582
====== ======
|
Net pension cost for the years ended December 2003, 2002 and 2001 include the following components:
2003 2002 2001
---- ----- ----
Service Cost................................................ $ -- $ -- $283
Interest Cost............................................... 103 149 112
Expected Return on Plan Assets.............................. (98) (148) (93)
Net Amortization and Deferral............................... 56 30 21
---- ----- ----
Net Pension Cost....................................... $ 61 $ 31 $323
==== ===== ====
|
The following tables provide a reconciliation of the changes in the Plan's benefit obligation and the fair value of plan assets as of the years ended December 2003 and 2002:
2003 2002
------ ------
Reconciliation of Project Benefit Obligation
Benefit Obligation, beginning of year..................... $1,822 $2,188
Interest Cost............................................. 103 149
Actuarial Loss............................................ 689 142
Benefits Paid............................................. (437) (657)
------ ------
Benefit Obligation, end of year........................ $2,177 $1,822
====== ======
|
2003 2002
------ ------
Reconciliation of Plan Assets
Plan Assets, beginning of year............................ $1,579 $2,016
Actual Return on Plan Assets.............................. 244 (31)
Employer Contributions.................................... 177 251
Benefits Paid............................................. (437) (657)
------ ------
Plan Assets, end of year............................... $1,563 $1,579
====== ======
|
The discount rate assumption used to determine benefit obligations at December 31, 2003 and 2002 was 6.25% and 6.75%, respectively.
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The assumptions used to determine net periodic pension cost for the years ended December 31, 2003, 2002 and 2001 are as follows:
2003 2002 2001
---- ---- ----
Discount rate............................................... 6.25% 6.75% 7.00%
Projected long-term rate of return on plan assets........... 7.00 7.00 7.00
Rate of compensation increase............................... -- -- 4.50
|
The overall expected long-term rate of return on plan assets was based on the performance of the Plan during the past five years and on the expected performance of the plan assets over the next five years pursuant to the investment policies and strategies as described below.
The Plan's fair value percentage of plan assets at December 31, 2003 and 2002 by asset category are as follows:
ASSET CATEGORY 2003 2002
-------------- ---- ----
Equity securities........................................... 32% 25%
Debt securities............................................. 14 19
Other....................................................... 54 56
--- ---
Total.................................................. 100% 100%
=== ===
|
The primary emphasis of the management of the Plan's portfolio of assets is to establish sufficient funding for projected retirement benefits. To this end, the primary investment management objective is long-term capital appreciation. A secondary objective is to prevent erosion by inflation.
It is NAICC's intent that the portfolio be fully invested at all times. The allocation between equity securities, debt securities and cash, including any allocation between registered investment funds is left to the discretion of the plan trustee except as required by the plan administrator for pending plan disbursements.
To ensure adequate diversification, no more than 25% of the total market value of Plan assets shall be invested in a single asset other than pooled funds and mutual funds where underlying diversification shall be considered. The portfolio shall satisfy the diversification requirements of ERISA at all times as well as the liquidity requirements of the Plan. NAICC expects to contribute $370 to the Plan in 2004.
MARINE SERVICES
ACL sponsors or participates in defined benefit plans covering both salaried and hourly employees. The plans provide for eligible employees to receive benefits based on years of service and either compensation rates near retirement or at a predetermined multiplier factor. Contributions to the plans are sufficient to meet the minimum funding standards set forth in the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended. Plan assets consist primarily of common stocks, corporate bonds and cash and cash equivalents.
In addition to the defined benefit pension and related plans, ACL has a defined benefit post-retirement health care plan covering most full-time employees. The plan provides medical benefits and is contributory, with retiree contributions adjusted annually, and contains other cost-sharing features such as deductibles and coinsurance. The accounting for the healthcare plan anticipates future cost-sharing changes to the written plan that are consistent with ACL's expressed intent to increase the retiree contribution rate annually.
ACL also sponsors an employee contribution plan ("401(k) plan") covering eligible employee groups. ACL's non-qualified savings plan, for certain members of management, was suspended in 2003 as a result of the Chapter 11 filing. Contributions to such plans are based upon a percentage of employee contributions and were $1,274 in 2002. In 2003, ACL suspended the employer matching of employee contributions in the 401(k) plan.
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of ACL's pension and post-retirement plan components follows:
FOR THE PERIOD ENDED
DECEMBER 27, 2002
---------------------------
PENSION POST-RETIREMENT
--------- ---------------
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation, assumed May 29, 2002................. $ (97,901) $(12,614)
Service cost............................................. (2,451) (279)
Interest cost............................................ (4,095) (524)
Impact of plan changes................................... (1,983) (225)
Liability loss........................................... (7,381) (3,026)
Benefits paid............................................ 3,098 1,407
--------- --------
Benefit obligation, end of year.......................... $(110,713) $(15,304)
========= ========
CHANGE IN PLAN ASSETS:
Fair value of plan assets, acquired May 29, 2002......... $ 117,992 $ --
Actual return on plan assets............................. (10,139) 1,182
Employer contributions................................... 9 225
Benefits paid............................................ (3,098) (1,407)
--------- --------
Fair value of plan assets, end of year................... $ 104,764 $ --
========= ========
FUNDED STATUS:
Funded status............................................ $ (5,949) $(15,304)
Unrecognized net actuarial loss.......................... 23,876 2,991
Unrecognized prior service cost.......................... 1,880 --
Net claims during 4th quarter 2002....................... 4 366
--------- --------
Prepaid (accrued) benefit cost........................... $ 19,811 $(11,947)
========= ========
AMOUNTS RECOGNIZED IN THE CONSOLIDATED STATEMENT OF
FINANCIAL POSITION CONSIST OF:
Prepaid benefit cost at May 29, 2002..................... $ 20,806 $ --
Accrued benefit liability................................ (16,480) (11,947)
Minimum pension liability................................ 15,485 --
--------- --------
Net amount recognized.................................... $ 19,811 $(11,947)
========= ========
|
Components of ACL's net periodic benefit cost for 2002 follows:
PENSION POST-RETIREMENT
------- ---------------
Service cost................................................ $2,451 $279
Interest cost............................................... 4,095 524
Expected return on plan assets.............................. (6,347) --
Amortization of prior service costs......................... 103 --
------ ----
Net periodic benefit cost................................... $ 302 $803
====== ====
|
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The assumptions used to determine ACL's net periodic benefit cost for 2002 are as follows:
PENSION POST-RETIREMENT
------- ---------------
Discount rate............................................... 6.75% 7.25%
Expected return on plan assets.............................. 9.00% --
Rate of compensation increase............................... 4.00% --
|
ACL's post-retirement benefit obligation was determined using the assumption that the health care cost trend rate for retirees was 10.0% for 2002, decreasing gradually to a 5.0% trend rate by 2009 and remaining at that level thereafter.
The following table presents the fair value percentage of ACL's plan assets in each asset category as of December 27, 2002:
ASSET CATEGORY
--------------
Equity Securities........................................... 50.7%
Debt Securities............................................. 44.8
Cash........................................................ 4.5
-----
Total............................................. 100.0%
=====
|
NOTE 15. STOCK OPTION PLAN
1990 STOCK OPTION PLAN
Options under the 1990 Stock Option Plan (the "1990 Plan") of DHC were granted to officers or employees of DHC. On September 16, 1991, the Compensation Committee of the Board of Directors of DHC resolved that it intended to refrain from granting any additional options under the 1990 Plan. The 1990 Plan terminated in 2001. The following table summarizes the options under the 1990 Plan:
2001
------------------
WEIGHTED
AVERAGE
EXERCISE
1990 STOCK OPTION PLAN SHARES PRICE
---------------------- ------- --------
Outstanding at the Beginning of the Year.................... 841,717 $3.10
Exercised................................................... 210,000 3.00
Lapsed...................................................... 631,717 3.14
------- -----
Outstanding at the End of the Year........................ -- $ --
Options Exercisable at Year End........................... --
Options Available for Future Grant........................ --
|
1995 STOCK OPTION PLAN
The 1995 Stock and Incentive Plan (the "1995 Plan") is a qualified plan
which provides for the grant of any or all of the following types of awards:
stock options, including incentive stock options and non-qualified stock
options; stock appreciation rights, whether in tandem with stock options or
freestanding; restricted stock; incentive awards; and performance awards. The
purpose of the 1995 Plan is to enable DHC to provide incentives to increase the
personal financial identification of key personnel with the long-term growth of
DHC and the interests of DHC's stockholders through the ownership and
performance of Common Stock, to enhance DHC's ability to retain key personnel,
and to attract outstanding prospective employees and Directors. The 1995 Plan
became effective as of March 21, 1995.
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In September 2001, DHC's stockholders approved amendments to the 1995 Plan which increased the aggregate number of shares available for option grants from 1,700,000 to 2,540,000 and provides for options to be awarded to independent contractors to enable DHC to attract, retain and give incentives to highly qualified persons who provide valuable services to DHC. No awards may be granted under the 1995 Plan after March 21, 2005. The 1995 Plan will remain in effect until all awards have been satisfied or expired.
With regard to the general terms of stock option awards, under the 1995 Plan, the exercise price for options is determined at the grant date, but cannot be less than the fair market value of a share of Common Stock on such grant date. The contractual life of the options is specified at the grant date. Options granted can vest no earlier than six months from the grant date.
In September, 2001, 140,000 options owned by certain directors of DHC lapsed and were reissued under the 1995 Stock and Incentive Plan, as amended and approved by DHC's Board.
On July 24, 2002, DHC's Board amended the 1995 Stock and Incentive Plan to increase the aggregate number of shares available for grant from 2,540,000 to 4,976,273. The Board reserved 1,936,273 shares for the grant of stock options to management of ACL, of which options for 1,560,000 shares of DHC common stock were granted. The options have an exercise price of $5.00 per share and expire 10 years from the date of grant. One-half of the options time vest over a 4-year period in equal annual installments and one-half of the options vest over a 4-year period in equal annual installments contingent upon the financial performance of ACL and compliance with the terms of its senior bank facility. As the market price of DHC's Common Stock was lower than the exercise price of the options on the date of grant, and the performance targets have not been met, no expense has been recognized in the accompanying financial statements for the options granted to ACL management.
During 2003, options for 829,375 shares of Common Stock were forfeited due to terminations and ACL not achieving the performance targets.
In July 2002, options for 918,084 shares previously granted to employees, directors and contractors of DHC, which would have expired upon the termination of the service of these individuals to DHC on July 24, 2002, were extended 2 years or 2 years beyond the termination of their service in a new capacity, but in no event longer than the original term with vesting accelerated simultaneously with the extension.
On August 7, 2003, DHC granted options for 50,000 shares of Common Stock to an employee of NAICC. The options have an exercise price of $1.45 per share and expire 10 years from the grant date. 20,000 of the options vest on the first and second anniversary of the grant date and the remaining 10,000 options vest on the third anniversary of the grant date. As the market price of the Common Stock was equal to the exercise price of the options on the date of grant, no expense has been recognized in the accompanying financial statements for the options granted in 2003.
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the options under the 1995 Plan:
2003 2002 2001
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
1995 STOCK OPTION PLAN SHARES PRICE SHARES PRICE SHARES PRICE
---------------------- --------- -------- --------- -------- --------- --------
Outstanding at the
Beginning of the
Year................. 3,343,918 $4.89 1,718,500 $4.67 1,246,000 $5.13
Granted................ 50,000 1.45 1,890,000 4.98 472,500 3.45
Exercised.............. -- -- 264,582 4.11 -- --
Forfeited.............. 829,375 5.00 -- -- -- --
--------- ----- --------- ----- --------- -----
Outstanding at the
End of the Year... 2,564,543 $4.79 3,343,918 $4.89 1,718,500 $4.67
Options Exercisable
at Year End....... 1,783,708 $4.84 1,412,254 $4.85 1,228,084 $5.10
Options Available for
Future Grant...... 2,141,048 1,632,355 821,500
|
As of December 31, 2003, options for shares were outstanding in the following price ranges:
SHARES OUTSTANDING
-----------------------------------------------
WEIGHTED AVERAGE SHARES EXERCISABLE
REMAINING ----------------------------
NUMBER OF WEIGHTED AVERAGE CONTRACTUAL LIFE NUMBER OF WEIGHTED AVERAGE
EXERCISE PRICE RANGE SHARES EXERCISE PRICE (YEARS) SHARES EXERCISE PRICE
-------------------- --------- ---------------- ---------------- --------- ----------------
$1.45 - $4.26............ 977,502 $3.63 6.7 821,667 $3.70
$4.94 - $5.78............ 1,284,541 $5.17 7.3 659,541 $5.30
$6.69 - $7.06............ 302,500 $6.91 2.8 302,500 $6.91
--------- ---------
2,564,543 1,783,708
========= =========
|
DHC applies APB 25, and related interpretations in accounting for the stock options granted to directors and employees. Accordingly, compensation costs of $87 and $57 were recognized in 2002 and 2001, respectively, relating to the modification of stock options granted to directors and employees. The fair value based method of accounting prescribed by SFAS No. 123 "Accounting for Stock-Based Compensation" ("SFAS 123"), is used to measure stock-based compensation for contractors. Accordingly, compensation costs of $137 and $833 were recognized in 2003 and 2002, respectively, relating to stock options granted to contractors. Pro forma net income and earnings per share are disclosed in Note 1 as if the fair value based method of accounting for stock-based compensation under SFAS 123 had been applied to all stock options. For pro forma calculation purposes, fair value of the option grants are estimated as of the date of grant using the Black-Scholes option pricing model with the following assumptions: dividend yield of 0% per annum; an expected life of approximately 8 years; expected volatility of 50%-73%; and a risk free interest rate of 4%-6%. The pro forma effect on net loss may not be representative of the effects on income for future years.
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 16. LEASES
Insurance Services has entered into various non-cancelable operating lease arrangements for office space and data processing equipment and services. The terms of the operating leases generally contain renewal options and escalation clauses based on increases in operating expenses and other factors. Rent expense under operating leases was $1,229, $1,387 and $1,446 for the years ended December 2003, 2002 and 2001, respectively. At year end December 2003, future net minimum operating lease rental payment commitments were as follows:
2004........................................................ $ 966
2005........................................................ 530
2006........................................................ 500
------
$1,996
======
|
Marine Services leases buildings, data processing hardware and operating equipment under various operating leases and charter agreements, which expire from 2003 to 2017 and which generally have renewal options at similar terms. Certain vessel leases also contain purchase options at prices approximating the fair value of the leased vessels. Rental expense under continuing obligations was approximately $29,896 in 2002.
NOTE 17. RELATED PARTIES
Samuel Zell, the Chairman of the Board, Chief Executive Officer and President of DHC, is the Chairman of Equity Group Investments, L.L.C. ("EGI"). Commencing April 16, 2003, EGI provides administrative services for DHC. These services include financial, tax, accounting, SEC filings and related administrative costs. DHC paid EGI $170 for these services in 2003. ACL was paid a fee of $52 in 2003 for providing these services prior to April 16, 2003.
Prior to and shortly after the acquisition of ACL, DHC shared certain personnel and facilities with several affiliated and unaffiliated companies who have certain common directors and officers, and certain expenses were allocated among the various entities. Personnel costs were allocated based upon actual time spent on DHC business. Costs relating to office space and equipment were allocated based upon actual usage. Management believes the methodology used for allocation is appropriate. Total expenses allocated to DHC from affiliated entities were $1,765 and $1,334 for the years ended December 2002 and 2001, respectively.
As described in Note 2, SZ Investments, Third Avenue and Laminar provided the bridge financing required for the Covanta acquisition. See Note 2 for terms and conditions relating to this debt. Interest expense on this financing amounted to $400 in 2003.
In connection with the DHC Recapitalization of ACL described in Note 3, DHC provided SZ Investments unlimited demand registration rights with respect to the ACL Senior Notes and ACL PIK Notes held by HY I Investments, L.L.C. ('HYI'), an affiliate of SZ Investments. Mr. Zell and Mr. Tinkler, DHC's Chief Financial Officer, are affiliated with SZ Investments and HYI. HYI is a holder of approximately 42% of ACL's Senior Notes and PIK Notes. Mr. Pate, a member of DHC's Board of Directors, is affiliated with SZ Investments and HYI and is an executive officer of EGI. A special committee of DHC's Board of Directors composed solely of disinterested directors oversees DHC's investment in ACL and related Chapter 11 bankruptcy proceedings.
On April 14, 1999, DHC entered into a non-exclusive investment advisory agreement with EGI pursuant to which EGI agreed to provide, at the request of DHC, certain investment banking services to DHC in connection with potential transactions. For these services, in 2002, DHC paid a fee of $63 to EGI. The agreement provided that, in the event that a transaction was consummated for which the Acquisition Committee of DHC's Board of Directors determined that EGI provided material services, DHC would pay to
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EGI a fee in the amount of 1% of the aggregate consideration in connection with such transaction (including indebtedness assumed or outstanding). As a result of services provided to DHC during the DHC Recapitalization of ACL, DHC and EGI agreed that the fee for EGI's services was $3,000. DHC also agreed to reimburse, upon request, EGI's out-of-pocket expenses related to services provided under the investment advisory agreement. For providing a standby commitment to purchase any DHC shares that were unsubscribed in the rights offering conducted by DHC as part of its acquisition of ACL, DHC paid SZ Investments a fee of $1,000. Messrs. Zell and Pate were members of the Acquisition Committee at the time of the DHC Recapitalization of ACL, along with Messrs. Whitman and Barse, all of whom are Directors of DHC. On December 1, 2003, DHC and EGI terminated this agreement.
NOTE 18. CONTINGENCIES
Insurance Services is involved in litigation relating to losses arising from insurance contracts in the normal course of business which are provided for under "unpaid losses and loss adjustment expenses." While litigation is by nature uncertain, management, based in part on advice from counsel, believes that the ultimate outcome of these actions will not have a material adverse effect on DHC's consolidated results of operations, financial position or cash flow.
NOTE 19. FINANCIAL INSTRUMENTS
The carrying amounts and fair values of financial instruments are as follows as of December 31, 2003:
CARRY
AMOUNT FAIR VALUE
------------ ----------
ASSETS:
Parent Investments -- Fixed Maturity Securities............. $ 488 $ 488
Insurance Services' Investments -- Fixed Maturity
Securities................................................ 70,168 70,168
Insurance Services' Investments -- Equity Securities........ 401 401
LIABILITIES:
Bridge Financing Loans...................................... 40,000 40,000
|
The fair values of the Fixed Maturity Securities and Equity Securities are based on quoted market values. The carrying values of the Bridge Financing Loans approximate their fair values since these loans were recently obtained in December 2003.
NOTE 20. EQUITY METHOD MARINE SERVICES INVESTEES
As discussed in Note 4, DHC wrote off its investment in ACL during the quarter ended March 28, 2003. The GMS and Vessel Leasing investments are not considered by DHC to be impaired. The reported net loss for the year ended December 31, 2003 includes, under the caption "Equity in Net Loss of Unconsolidated Marine Services Subsidiaries", the following components:
ACL's Reported Loss for the Three Months Ended March 28,
2003...................................................... $(46,998)
Other Than Temporary Impairment of Remaining Investment in
ACL as of March 28, 2003.................................. (8,205)
--------
Total ACL Loss.............................................. (55,203)
GMS Income.................................................. 55
Vessel Leasing Income....................................... 271
--------
Equity in Net Loss of Unconsolidated Marine Services
Subsidiaries.............................................. $(54,877)
========
|
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a summary of financial information for ACL as of December 26, 2003 and for the year ended:
Current Assets.............................................. $172,218
Noncurrent Assets........................................... 639,978
--------
$812,196
========
Liabilities not Subject to Compromise:
Current Liabilities....................................... $164,672
Other Liabilities......................................... 39,678
--------
204,350
Liabilities Subject to Compromise........................... 627,520
Member's Deficit............................................ (19,674)
--------
$812,196
========
Operating Revenue........................................... $620,071
Operating Income............................................ 367
Net Loss.................................................... (61,576)
|
NOTE 21. BUSINESS SEGMENTS
DHC has three reportable business segments -- insurance, marine and corporate. The Insurance Services segment writes property and casualty insurance in the western United States, primarily in California. The Marine segment includes the Barging, Construction and Terminals segments of the Marine Services businesses which are accounted for using the equity method during 2003. The corporate segment represents the operating expenses and miscellaneous income of the holding company, DHC.
Management evaluates performance based on segment earnings, which is defined as operating income before income taxes. The accounting policies of the reportable segments are consistent with those described in the summary of significant accounting policies.
Reportable segments are business units that offer different products or services. The reportable segments are managed separately because they provide distinct products and services to internal and external customers.
INSURANCE MARINE CORPORATE TOTAL
--------- -------- --------- ----------
YEAR ENDED DECEMBER 31, 2003
Revenues from External Customers................ $ 35,851 $ -- $ -- $ 35,851
Depreciation and Amortization................... 339 -- 36 375
Segment Loss.................................... (10,172) (54,877) (2,734) (67,783)
Segment Assets.................................. 110,012 -- 52,636 162,648
Property Additions.............................. 96 -- -- 96
YEAR ENDED DECEMBER 27, 2002
Revenues from External Customers................ $ 62,164 $462,104 $ -- $ 524,268
Depreciation and Amortization................... 479 41,785 95 42,359
Segment Earnings (Loss)......................... (10,492) 17,658 (3,833) 3,333
Segment Assets.................................. 134,881 889,837 8,227 1,032,945
Property Additions.............................. 26 18,126 -- 18,152
|
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INSURANCE MARINE CORPORATE TOTAL
--------- -------- --------- ----------
YEAR ENDED DECEMBER 31, 2001
Revenues from External Customers................ $ 81,854 $ -- $ -- $ 81,854
Depreciation and Amortization................... 1,435 -- 25 1,460
Segment Loss.................................... (13,849) -- (412) (14,261)
Segment Assets.................................. 178,433 -- 30,438 208,871
Property Additions.............................. 160 -- 99 259
|
The following is a reconciliation of segment (loss) earnings to consolidated totals:
2003 2002 2001
-------- -------- --------
Total Segment (Loss) Earnings............................... $(67,783) $ 3,333 $(14,261)
Unallocated Amounts:
Interest Expense.......................................... (1,424) (38,735) --
Investment Income Related to ACL Debt..................... -- 8,402 --
Other, Net................................................ -- (5,609) --
-------- -------- --------
Loss before Provision for Income Taxes...................... $(69,207) $(32,609) $(14,261)
======== ======== ========
|
NOTE 22. QUARTERLY DATA (UNAUDITED)
2003
-------------------------------------------------
1ST 2ND 3RD 4TH TOTAL
-------- ------- ------- ------- --------
Operating Revenue.......................... $ 11,076 $11,837 $ 8,909 $ 9,301 $ 41,123
Operating Loss............................. (2,650) (4,578) (3,546) (2,132) (12,906)
Net Loss................................... (57,836) (4,501) (3,442) (3,446) (69,225)
Net Loss Per Basic and Diluted Share....... (1.88) (0.15) (0.11) (0.11) (2.25)
|
2002
--------------------------------------------------
1ST 2ND 3RD 4TH TOTAL
------- ------- -------- -------- --------
Operating Revenue......................... $20,720 $84,086 $207,927 $218,768 $531,501
Operating Loss............................ 390 1,469 306 1,168 3,333
Net (Loss) Income......................... (54) 4,341 (18,285) (18,957) (32,955)
Net Income (Loss) Per Basic and Diluted
Share................................... -- 0.18 (0.59) (0.62) (1.26)
|
As discussed in Note 3, DHC acquired ACL on May 29, 2002 and, accordingly, the operating results for 2002 include ACL beginning with the date of acquisition. As discussed in Note 1, DHC began accounting for its investment in ACL on the equity method in the first quarter of 2003 and, as discussed in Note 20, wrote off its investment in ACL in the same quarter.
DANIELSON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 23. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive (loss) as of December 31, 2003 and December 27, 2002 consists of the following:
2003 2002
------- --------
Unrealized Gain on Available for Sale Securities............ $ 850 $ 3,727
Unrealized Gain (Loss) on Cash Flow Hedging Instruments:
Fuel Swaps................................................ -- 68
Interest Rate Swaps....................................... -- (355)
Foreign Currency Translation................................ -- 453
Minimum Pension Liability................................... (1,295) (16,357)
------- --------
$ (445) $(12,464)
======= ========
|
NOTE 24. PURCHASE OF COVANTA
On March 5, 2004, the Bankruptcy Court confirmed the proposed plans discussed in Note 2 and, on March 10, 2004, DHC purchased 100% of the equity of the energy and water businesses of Covanta in connection with its emergence from Chapter 11 bankruptcy proceedings.
A preliminary estimate of the purchase price ranges from $46,000 to $51,000 which includes the cash purchase price of $30,000, an expense estimate of approximately $6,000 for professional fees and other costs incurred in connection with the acquisition, and an estimated fair value ranging from $10,000 to $15,000 for DHC's commitment to sell up to 3 million shares of its Common Stock at $1.53 per share to certain creditors of Covanta, subject to certain limitations (see Note 2). The final purchase cost will be determined as DHC obtains additional information. The results of operations of Covanta will be consolidated with DHC commencing with the date of acquisition, March 10, 2004. A preliminary allocation of the purchase price has not been determined by DHC. Accordingly, it is not practicable at this time to disclose the amount to be assigned to each major asset and liability caption of Covanta at the acquisition date.
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Danielson Holding Corporation
We have audited the accompanying consolidated statement of financial position of Danielson Holding Corporation ("DHC") as of December 31, 2003 and December 27, 2002, and the related consolidated statements of operations, stockholders' equity, and cash flows for the years then ended. Our audits also included the financial statement schedules listed in the index at Item 15(a) for the years then ended. These financial statements and schedules are the responsibility of DHC's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of DHC at December 31, 2003 and December 27, 2002, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedules for the years ended December 31, 2003 and December 27, 2002, when considered in relation to the 2003 and 2002 basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.
/s/ ERNST & YOUNG, LLP Louisville, Kentucky February 20, 2004, except for Note 24 as to which the date is March 10, 2004 |
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Danielson Holding Corporation
We have audited the accompanying consolidated statements of operations, stockholders' equity and comprehensive income, and cash flows of Danielson Holding Corporation and subsidiaries for the year ended December 31, 2001. Our audit also included the financial statement schedules listed in the index at Item 15(a) for the year ended December 31, 2001. These consolidated financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedules based on our audits.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Danielson Holding Corporation and subsidiaries for the year ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedules for the year ended December 31, 2001, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.
/S/ KPMG LLP New York, New York March 5, 2002 |
SCHEDULE I.
DANIELSON HOLDING CORPORATION
CONDENSED STATEMENT OF OPERATIONS
PARENT COMPANY ONLY
(DOLLARS IN THOUSANDS)
FOR THE YEAR ENDED
------------------------------------------
DECEMBER 31, DECEMBER 27, DECEMBER 31,
2003 2002 2001
------------ ------------ ------------
OPERATING REVENUES
Net Investment Income................................. $ 344 $ 826 $ 1,717
Net Realized Investment Gains......................... 1,090 438 281
Parent Company Investment Income Related to ACL
Debt............................................... -- 8,402 --
-------- -------- --------
TOTAL OPERATING REVENUES................................ 1,434 9,666 1,998
OPERATING EXPENSES
Employee Compensation and Benefits.................... 611 2,828 1,156
Director Fees......................................... 163 248 52
Professional Fees..................................... 1,044 567 454
Insurance Expense..................................... 978 778 121
Intercompany Interest Expense......................... -- 237 151
Other General and Administrative Expenses............. 1,372 787 627
-------- -------- --------
TOTAL PARENT COMPANY ADMINISTRATIVE EXPENSES............ 4,168 5,445 2,561
-------- -------- --------
OPERATING (LOSS) INCOME BEFORE INCOME TAXES............. (2,734) 4,221 (563)
(BENEFIT) PROVISION FOR INCOME TAXES.................... (1) (77) 50
-------- -------- --------
OPERATING (LOSS) INCOME BEFORE EQUITY IN NET LOSS OF
SUBSIDIARIES.......................................... (2,733) 4,298 (613)
Equity in Net Loss of Insurance Subsidiaries excluding
gain on ACL Bonds.................................. (10,191) (15,432) (13,721)
Insurance Subsidiary Gain on ACL Bonds................ -- 5,212 --
Equity in Net Loss of Marine Services Subsidiaries.... (54,877) (27,033) --
-------- -------- --------
Total Equity in Net Loss of Subsidiaries.............. (65,068) (37,253) (13,721)
Interest Expense...................................... (1,424) -- --
-------- -------- --------
NET LOSS................................................ $(69,225) $(32,955) $(14,334)
======== ======== ========
Parent Co Expenses from Above........................... $ 4,168 $ 5,445 $ 2,561
Elimination of Amortization of Unearned Compensation.... -- (297) --
Intercompany Interest Expense -- NAICC.................. -- (237) (151)
-------- -------- --------
Parent Co Expenses Reported on Consolidated IS.......... $ 4,168 $ 4,911 $ 2,410
======== ======== ========
|
SCHEDULE I. -- (CONTINUED)
DANIELSON HOLDING CORPORATION
CONDENSED STATEMENT OF FINANCIAL POSITION
PARENT COMPANY ONLY
(DOLLARS IN THOUSANDS)
DECEMBER 31, DECEMBER 27,
2003 2002
------------ ------------
ASSETS
Cash...................................................... $ 3,529 $ 1,280
Restricted Cash, Covanta Escrow........................... 37,026 --
Fixed Maturities, available for sale at fair value (cost:
$453 and $3,473)....................................... 488 5,118
------- -------
Total Cash and Investments........................... 41,043 6,398
Investment in Marine Services Subsidiaries................ 4,425 43,962
Investment in Insurance Services Subsidiaries............. 17,314 23,300
Accrued Investment Income................................. 45 64
Intercompany Note Receivable.............................. -- 6,035
Deferred Financing Costs (Net of Amortization of
$1,024)................................................ 6,145 --
Other Assets.............................................. 978 1,765
------- -------
Total Assets......................................... $69,950 $81,524
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Interest Payable.......................................... $ 400 $ --
Intercompany Note Payable................................. -- 4,028
Long-Term Debt Payable to Related Parties................. 40,000 --
Other Liabilities......................................... 1,759 136
------- -------
Total Liabilities.................................... 42,159 4,164
STOCKHOLDERS' EQUITY:
Preferred Stock ($0.10 par value; authorized 10,000,000
shares; none issued and outstanding)................... -- --
Common Stock ($ .10 par value; authorized 150,000,000
shares; issued 35,793,440 shares and 30,828,093 shares;
outstanding 35,782,644 shares and 30,817,297 shares)... 3,579 3,083
Additional Paid-in Capital................................ 123,446 117,148
Unearned Compensation..................................... (289) (1,132)
Accumulated Other Comprehensive Loss...................... (445) (12,464)
Accumulated Deficit....................................... (98,434) (29,209)
Treasury Stock (Cost of 10,796 shares).................... (66) (66)
------- -------
Total Stockholders' Equity........................... 27,791 77,360
------- -------
Total Liabilities and Stockholders' Equity........... $69,950 $81,524
======= =======
|
SCHEDULE I. -- (CONTINUED)
DANIELSON HOLDING CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
PARENT COMPANY ONLY
(DOLLARS IN THOUSANDS)
FOR THE YEAR ENDED
------------------------------------------
DECEMBER 31, DECEMBER 27, DECEMBER 31,
2003 2002 2001
------------ ------------ ------------
OPERATING ACTIVITIES
Net Loss.............................................. $(69,225) $(32,955) $(14,334)
Adjustments to Reconcile Net Loss to Net Cash Provided
by (Used in) Operating Activities:
Gain Related to ACL Debt Contributed in Acquisition
of ACL........................................... -- (8,402) --
Net Realized Gain on the Sale of Investment
Securities....................................... (1,090) (438) (281)
Depreciation and Amortization...................... 36 95 25
Amortization of Deferred Financing Costs........... 1,024 -- --
Change in Accrued Investment Income................ 18 3 109
Stock Option Compensation Expense.................. 521 920 57
Equity in Net Loss of Marine Services
Subsidiaries..................................... 44,898 27,033 --
Equity in Net Loss of Insurance Subsidiaries....... 20,198 10,220 13,721
Other Operating Activities......................... -- 289 --
Changes in Other Assets and Liabilities:
Other Assets..................................... 1,730 (1,413) (180)
Other Liabilities................................ 1,926 (195) (4)
-------- -------- --------
Net Cash Provided by (Used in) Operating
Activities.................................... 36 (4,843) (887)
INVESTING ACTIVITIES
Property Additions................................. -- -- (99)
Collection of Note Receivable from Affiliate....... 6,035 -- --
Distribution Received from Unconsolidated Marine
Services Subsidiary.............................. 58 -- --
Purchase of ACL, GMS and Vessel Leasing............ -- (42,665) --
Proceeds from the Sale of Investment Securities.... 4,110 1,100 12,634
Restricted Cash, Covanta Escrow.................... (37,026) -- --
Matured or Called Investment Securities............ -- -- 1,456
Purchase of Investment Securities.................. -- (2,163) (20,865)
Other Investing Activities, Net.................... (978) (6,035) --
Capital Contributions to NAICC..................... (6,000) -- --
-------- -------- --------
Net Cash Used in Investing Activities............ (33,801) (49,763) (6,874)
FINANCING ACTIVITIES
Long-Term Debt Issued -- NAICC..................... -- -- 4,000
Repayment of Debt from NAICC....................... (4,000) -- --
Borrowings under Note Purchase Agreement........... 40,000 -- --
Proceeds from Rights Offering, Net of Expenses..... -- 42,228 --
Proceeds from Exercise of Warrants for Common
Stock............................................ -- 9,500 --
Proceeds from Exercise of Options for Common
Stock............................................ -- 1,088 630
Cash Received from Restricted Stock................ 14 -- --
-------- -------- --------
Net Cash Provided by Financing Activities........ 36,014 52,816 4,630
-------- -------- --------
Net Increase (Decrease) in Cash and Cash Equivalents.... 2,249 (1,790) (3,131)
Cash and Cash Equivalents at Beginning of Year.......... 1,280 3,070 6,201
-------- -------- --------
Cash and Cash Equivalents at End of Year......... $ 3,529 $ 1,280 $ 3,070
======== ======== ========
|
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
ADDITIONS
-----------------------
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER BALANCE AT
OF PERIOD EXPENSE ACCOUNTS DEDUCTIONS END OF PERIOD
---------- ---------- ---------- ---------- -------------
(DOLLARS IN THOUSANDS)
INSURANCE SERVICES
Allowance for premiums and fees
receivable
2003................................ $1,623 $ 228 $ -- $(1,389) $ 462
2002................................ 1,431 734 -- (542) 1,623
2001................................ 587 1,094 -- (250) 1,431
Allowance for uncollectible
reinsurance on paid losses
2003................................ 780 1,328 -- (210) 1,898
2002................................ 636 144 -- -- 780
2001................................ 623 13 -- -- 636
Allowance for uncollectible
reinsurance on unpaid losses
2003................................ 206 60 -- (29) 237
2002................................ 118 96 -- (8) 206
2001................................ 101 17 -- -- 118
MARINE SERVICES
Allowance for uncollectible accounts
in 2002............................. $ -- $1,070 $2,037(1) $ (761) $2,346
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(1) Acquired with purchase of ACL and GMS
SCHEDULE V -- SUPPLEMENTAL INFORMATION
CONCERNING PROPERTY-CASUALTY INSURANCE OPERATIONS
OTHER
DEFERRED RESERVES FOR UNPAID DISCOUNT FROM POLICY CLAIMS
ACQUISITION CLAIMS AND CLAIM RESERVES FOR UNEARNED AND BENEFITS NET EARNED
AFFILIATION WITH REGISTRANT COSTS ADJUSTMENT EXPENSES UNPAID CLAIMS PREMIUMS PAYABLE PREMIUMS
--------------------------- ------------ ------------------- ------------- -------- ------------- ----------
Consolidated Property-Casualty
Entities:
As of and for the year ended
12/31/2003.................. $ 833 $ 83,380 $ -- $ 4,595 $ -- $35,851
As of and for the year ended
12/31/2002.................. 1,612 101,249 -- 10,622 -- 62,164
As of and for the year ended
12/31/2001.................. 2,209 105,745 -- 21,117 -- 81,854
INVESTMENT
AFFILIATION WITH REGISTRANT INCOME
--------------------------- ----------
Consolidated Property-Casualty
Entities:
As of and for the year ended
12/31/2003.................. $3,999
As of and for the year ended
12/31/2002.................. 5,603
As of and for the year ended
12/31/2001.................. 7,580
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CLAIMS AND CLAIM ADJUSTMENT AMORTIZATION PAID CLAIMS
EXPENSES INCURRED RELATED TO OF DEFERRED OTHER AND CLAIM NET
---------------------------------- ACQUISITION OPERATING ADJUSTMENT WRITTEN
AFFILIATION WITH REGISTRANT CURRENT YEAR PRIOR YEARS COSTS EXPENSES EXPENSES PREMIUMS
--------------------------- ------------ ------------------- ------------- --------- ------------- ----------
Consolidated Property-Casualty
Entities:
As of and for the year ended
12/31/2003...................... $23,199 $ 13,485 $ 6,610 $ 1,337 $50,734 $30,408
As of and for the year ended
12/31/2002...................... 49,474 10,407 11,437 2,678 68,701 52,655
As of and for the year ended
12/31/2001...................... 68,848 7,646 16,174 4,621 67,871 80,355
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no disagreements with accountants in 2001 or 2002. KPMG LLP ("KPMG") served as DHC's principal independent accounting firm until July 25, 2002. On July 25, 2002, KPMG's appointment as the principal independent accounting firm for DHC was terminated and Ernst & Young LLP ("E&Y") was engaged as DHC's principal independent accounting firm. The decision to change accounting firms was made by the Audit Committee of the Board of Directors of DHC. Prior to such change, DHC actively considered whether it was advisable to change firms following DHC's acquisition of ACL, whose business is different from DHC's traditional areas. DHC solicited bids from a group of accounting firms, including KPMG, and on the basis of that information the Audit Committee determined that DHC should change accounting firms.
In connection with the audit of the fiscal year ended December 31, 2001, and during the subsequent interim period through July 25, 2002, there were no disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements if not resolved to their satisfaction would have caused them to make reference to the subject matter of the disagreement in connection with their report.
The audit report of KPMG on the consolidated financial statements of DHC and its subsidiaries for the year ended December 31, 2001 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles.
During DHC's fiscal year ended December 31, 2001 and the subsequent interim period through July 25, 2002, DHC did not consult with E&Y regarding any of the matters or events set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.
E&Y has reviewed the disclosures in this Item 9 and concurs with the statements regarding E&Y set forth herein. DHC has also provided KPMG with a copy of the disclosures contained herein. KPMG previously has furnished a letter to the SEC attached as Exhibit 16.1 to DHC's Current Report on Form 8-K filed on August 1, 2002.
ITEM 9A. CONTROLS AND PROCEDURES
DHC's management, with the participation of its Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of DHC's disclosure controls and procedures, as required by Rule 13a-15(e) and 15d- 15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"). Based upon the results of that evaluation, DHC's Chief Executive Officer and Chief Financial Officer have concluded that as of the end of the period covered by this annual report, DHC's disclosure controls and procedures were effective in all material respects to ensure that the information required to be disclosed by DHC in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms.
We also maintain a system of internal control over financial reporting (as defined in Rules 13A-15(f) and 15d-15(f) designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. During our most recent fiscal quarter, there have been no changes in our internal control over financial reporting that occurred that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
DHC's management, including the Chief Executive Officer and Chief Financial Officer, does not expect that its disclosure controls and procedures or internal controls and procedures will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within DHC have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
MANAGEMENT
EXECUTIVE OFFICERS
NAME AGE POSITION
---- --- --------
Samuel Zell.......................... 62 Chief Executive Officer and President -- DHC
Philip G. Tinkler.................... 39 Chief Financial Officer -- DHC (January 27,
2003 -- Present)
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BOARD OF DIRECTORS
DIRECTOR
NAME AGE POSITION SINCE
---- --- -------- --------
Samuel Zell........................... 62 Chairman of the Board, Chief Executive 1999
Officer and President
David M. Barse........................ 41 Director 1996
Richard L. Huber...................... 67 Director 2002
Eugene M. Isenberg.................... 74 Director 1990
William C. Pate....................... 40 Director 1999
Jean Smith............................ 48 Director 2003
Joseph P. Sullivan.................... 70 Director 2002
Martin J. Whitman..................... 79 Director 1990
Clayton Yeutter....................... 73 Director 2002
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BACKGROUND OF BOARD OF DIRECTORS AND MANAGEMENT
David M. Barse has served as a Director since 1996. Mr. Barse is a member of the ACL Special Committee. Mr. Barse is also a member of the ACL Board of Managers. Mr. Barse served as the President and Chief Operating Officer of DHC from July 1996 until July 24, 2002. Since June 1995, Mr. Barse has been the President (and, since July 1999, Chief Executive Officer) of M.J. Whitman, LLC ("MJW") and it's predecessor, a full service broker-dealer. From April 1995 until February 1998 he served as the Executive Vice President and Chief Operating Officer of Third Avenue Trust and its predecessor, Third Avenue Value Fund, Inc. (together with its predecessor, "Third Avenue Trust"), before assuming the position of President in May 1998 and Chief Executive Officer in September 2003. Since February 1998, Mr. Barse has served as President, and since June 2003, Chief Executive Officer of Third Avenue Management LLC ("TAM") and its predecessor, the investment adviser of Third Avenue Trust and Third Avenue Variable Series Trust ("Variable Trust"). In 2001, Mr. Barse became Trustee of both the Third Avenue Trust and Variable Trust. Mr. Barse joined the predecessor of MJW and TAM in December 1991 as General Counsel. Mr. Barse also presently serves as a director of American Capital Access Holdings, a financial insurance company. Mr. Barse is 41 years old.
Richard L. Huber has been a Director since July 2002. Mr. Huber is the Chairman of the Audit Committee. Mr. Huber has been Managing Director, Chief Executive Officer and Principal of the Latin American direct investment group Norte-Sur Partners, a direct private equity investment firm focused on Latin America since January 2001. Mr. Huber held various positions with Aetna, Inc. since 1995, most recently as the Chief Executive Officer until February 2000. Mr. Huber has approximately forty years of prior investment and merchant banking, international business, and management experience, including executive positions with Chase Manhattan Bank, Citibank, Bank of Boston, and Continental Bank. Mr. Huber is also Chairman of ACL and a member of its Board or Managers, a DHC subsidiary, UABL Ltd., a 50% owned subsidiary of DHC, and a director of Opticare Health Systems, Inc., an integrated eye care services company. Mr. Huber is 67 years old.
Eugene M. Isenberg has been a Director since 1990. Mr. Isenberg is a member of the Compensation and ACL Special Committees. Mr. Isenberg has been Chairman and Chief Executive Officer of Nabors Industries, Inc., the worlds largest land and offshore platform drilling company since 1987. Prior to 1987, Mr. Isenberg was Chairman of the Board and principal stockholder of Genimar Inc., a steel trading and building products company and served in various management capacities with Exxon Corp. Mr. Isenberg presently serves as a director of the American Stock Exchange, the National Association of Securities Dealers, Inc., and the National Petroleum Council. Mr. Isenberg founded and is the principal sponsor of the Parkside School for children with learning disabilities in New York City and The University of Massachusetts Eugene M. Isenberg School of Management is named in recognition of his generous contributions. Mr. Isenberg is 74 years old.
William C. Pate has been a Director since 1999. Mr. Pate is Managing Director of Equity Group Investments, L.L.C., a privately-held investment firm ("EGI"). Mr. Pate has been employed by EGI or its predecessor in various capacities since 1994. Mr. Pate is 40 years old.
Jean Smith has been a director since December 2003 and a member of the audit committee since March 5, 2004. Ms. Smith has been a private investor and consultant since 2001. From 1998 to 2001, Ms. Smith was Managing Director, Corporate Finance, for U.S. Bancorp Libra, a unit of U.S. Bancorp Investments, Inc., a subsidiary of U.S. Bancorp in New York. Ms. Smith has approximately 25 years of investment and international banking experience, including positions with Banker Trust Company, Citicorp Investment Bank, Security Pacific Merchant Bank and UBS Securities. Ms. Smith is 48 years old.
Joseph P. Sullivan has been a Director since July 2002. Mr. Sullivan is the Chairman of the Compensation Committee and a member of the Audit Committee. Mr. Sullivan is a private investor and is currently retired after serving as the Chairman of the Board of IMC Global from July 1999 to November 2000, and as a Member of its Board of Directors and Executive Committee from March 1996 through December 2000. Mr. Sullivan served as Chairman of the Board of the Vigoro Corporation from March 1991 through February 1996 and as its Chief Executive Officer from March 1991 to September 1994. Mr. Sullivan is 70 years old.
Philip G. Tinkler has served as the Chief Financial Officer of DHC since January 27, 2003. Mr. Tinkler is Chief Financial Officer of EGI and has served in various other capacities for EGI or its predecessor since 1990. Mr. Tinkler has been Vice President - Finance and Treasurer of First Capital Financial, LLC, a sponsor of public limited real estate partnerships, since April 2001. Mr. Tinkler is 39 years old.
Martin J. Whitman has been a Director since 1990. Mr. Whitman is a member of the ACL Special Committee. Mr. Whitman served as the Chief Executive Officer of DHC from July 1996 until July 24, 2002. Since 1974, Mr. Whitman has been the President and controlling stockholder of MJW which, until August 1991, was a registered broker-dealer. Since March 1990, Mr. Whitman has been the Chairman of the Board, Chief Executive Officer (until September 2003) and a Trustee (and, from January 1991 to May 1998, the President) of Third Avenue Trust. Since July 1999, Mr. Whitman has been the Chairman of the Board, Chief Executive Officer (until September 2003) and a Trustee of Variable Trust. Since March 1990, Mr. Whitman has been Chairman of the Board (and, until February 1998, the President and until June 2003 Chief Executive Officer) of TAM and its predecessor. Since March 1991, Mr. Whitman has served as a Director of Nabors Industries, Inc. ("Nabors"), a publicly-traded oil and gas drilling company. Mr. Whitman is 79 years old.
Clayton Yeutter has served as a Director since July 2002. Mr. Yeutter is a member of the Audit Committee. Mr. Yeutter has been Of Counsel to Hogan & Hartson LLP, a law firm in Washington, D.C., since 1993 where he has an international trade and agricultural law practice. From 1985 through 1991 he served in the Reagan Administration as the U.S. Trade Representative and in the first Bush Administration as Secretary of Agriculture. During 1991-92, he was Chairman of the Republican National Committee and then returned to the Bush Administration as Counselor to the President for most of 1992. He was President and Chief Executive Officer of the Chicago Mercantile Exchange from 1978-1985. In the 1970s, Mr. Yeutter held several positions in the Nixon and Ford Administrations as Assistant Secretary of Agriculture for Marketing and Consumer Services, Assistant Secretary of Agriculture for International Affairs and Commodity Programs, and Deputy Special Trade Representative. Mr. Yeutter is the Chairman of the Board of Oppenheimer Funds, an institutional investment manager, a director of Weyerhaeuser Company, a timber, forest products and real estate company, Crop Solutions, Inc., a privately owned agricultural chemical company and America First, a privately owned investment management company. Mr. Yeutter is 73 years old.
Samuel Zell has served as a Director since 1999 and as the President, Chief
Executive Officer and Chairman of the Board of the Company since July 24, 2002.
Mr. Zell has served as Chairman of the Board of Directors of EGI, a
privately-held investment firm, since 1999, and had been Chairman of the Board
of its predecessor, Equity Group Investments, Inc., for more than five years.
Mr. Zell has been a trustee and Chairman of the Board of Trustees of Equity
Office Properties Trust, an equity real estate investment trust (a "REIT")
primarily focused on office buildings, since October 1996, and was President
from April 2002 to
November 2002 and Chief Executive Officer from April 2002 to April 2003. For more than the past five years, Mr. Zell has served as Chairman of the Board of Anixter International, Inc., a distributor of electrical and cable products; as Chairman of the Board of Trustees of Manufactured Home Communities, an equity REIT primarily focused on manufactured home communities; and as Chairman of the Board of Trustees of Equity Residential Properties Trust, an equity REIT primarily focused on multifamily residential properties. For more than the past five years, Mr. Zell has been Chairman of the Board of Capital Trust, Inc., a specialized finance company. Mr. Zell is 62 years old.
AUDIT COMMITTEE
The Board of Directors has a standing audit committee, which currently consists of Messrs. Huber (Chairman), Sullivan, Yeutter and Ms. Smith. All of the current members of the audit committee are Independent Directors, as defined by Section 121(A) of the American Stock Exchange listing standards. The Board of Directors has determined that Mr. Sullivan is an "audit committee financial expert" under applicable SEC rules.
CODE OF ETHICS
DHC has a Code of Ethics which applies to DHC's senior financial officers, including its Chief Executive Officer and Chief Financial Officer. The Code of Ethics is available on DHC's web site at www.danielsonholding.com and DHC will provide a copy of the Code of Ethics without charge to any person who requests it by writing to Philip G. Tinkler, Chief Financial Officer, at Two North Riverside Plaza, Suite 600, Chicago, Illinois 60606. DHC will post on its website amendments to or waivers from its Code of Ethics for executive officers, the principal accounting officer or directors, in accordance with applicable laws and regulations.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires DHC's Directors and executive officers, and persons who own more than ten percent of a registered class of DHC's equity securities, to file with the SEC and the American Stock Exchange initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of DHC. Executive officers, Directors and greater than ten-percent stockholders are required by Federal securities regulations to furnish DHC with copies of all Section 16(a) forms they file.
Based upon a review of filings with the Securities and Exchange Commission and/or written representations from certain reporting persons, DHC believes that all of its Directors, executive officers and other Section 16 reporting persons complied during fiscal 2003 with the reporting requirements of Section 16(a), except that Mr. Zell filed late one Form 4 with respect to shares held by his spouse as trustee of a revocable trust.
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and long-term compensation for services in all capacities to DHC, or its subsidiary companies or their predecessors for 2001 through 2003 of those persons who served as (i) the Chief Executive Officer during 2003, (ii) the most highly compensated executive officer employed by DHC as of December 31, 2003, and (iii) the former Chief Executive Officer
and Director of a significant subsidiary of DHC but who was not serving as an executive officer at year end (collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
-----------------------
AWARDS
-----------------------
ANNUAL COMPENSATION(4) RESTRICTED SECURITIES
NAME AND -------------------------- OTHER ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) AWARDS(3) OPTIONS COMPENSATION(4)
------------------ ---- -------- -------- --------------- ---------- ---------- ---------------
Samuel Zell................... 2003 $200,000
President and Chief
Executive 2002 $ 87,949
Officer (July 24,
2002 -- Present)
Michael C. Hagan(5)........... 2003 $262,500 $7,700 $292,920
President and Chief
Executive 2002 $315,000 N/A $9,240 $556,205 $210,000 $ 52,007
Officer ACL, a significant
subsidiary of DHC
(May 29, 2002 to October 31,
2003)
Philip G. Tinkler............. 2003 $ 68,750
Chief Financial Officer
(January 22,
2003 -- Present)
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(1) No bonuses were paid to Named Executive Officers in 2003.
(2) Consists of automobile allowance only.
(3) Consists of the dollar value of restricted stock awards (calculated by multiplying the number of shares awarded by the closing market price of DHC's Common Stock on the date of the grant - which was $6.16 as of the May 29, 2002 grant date) to certain members of ACL management made in restricted DHC Common Stock as part of the DHC Recapitalization whereby Mr. Hagen, who held preferred membership units in American Commercial Holdings LLC ("ACL Holdings") at the time of the DHC Recapitalization abandoned those units to ACL Holdings for no consideration and received 90,293 shares of restricted DHC Common Stock for his continued employment with ACL, 60,195 of such shares were forfeited upon Mr. Hagan's termination of employment.
(4) Amounts shown include the 2002 above-market portion of earnings on a CSX Corporation deferred compensation program available to Mr. Hagan through his employment at ACL in the amount of $29,621. Amounts shown also include life insurance premium payments made on behalf of Mr. Hagan in the amount of $5,433; matching contributions made by ACL in conjunction with deferral of salary or bonus to a supplementary savings plan on behalf of Mr. Hagan in the amount of $9,450; and payment for the provision of tax services for Mr. Hagan in the amount of $1,991. Amounts for 2002 also include matching contributions made by ACL to Mr. Hagan to the ACL 401(k) plan in the amount of $5,512.
For 2003, includes severance pay of $275,000; life insurance premium payment made on behalf of Mr. Hagan in the amount of $2,901; payment for the provision of tax services for Mr. Hagan in the amount of $2,903; and accrued vacation pay of $12,116.
(5) Amounts shown for Mr. Hagan were paid by ACL, a significant subsidiary of DHC as of December 27, 2002 and until January 31, 2003.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
There were no stock options or SARS granted to DHC's Named Executive Officers in 2003.
The following table sets forth the number of securities underlying unexercised options held by each of the Named Executive Officers and the value of such options at the end of fiscal 2003:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-
UNEXERCISED OPTIONS AT THE-MONEY OPTIONS AT
SHARES ACQUIRED VALUE FISCAL YEAR END FISCAL YEAR END
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
---- --------------- -------- ------------------------- ----------------------------
Samuel Zell................ N/A N/A 0/0 $0/0
Michael C. Hagan........... N/A N/A 26,250/0 $0/0
Philip G. Tinkler.......... N/A N/A 4,166/834 $0/0
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(1) Value of unexercised options at fiscal year-end represents the difference between the exercise price of any outstanding in-the-money options and $2.95, the mean value of DHC common stock on December 31, 2003. All outstanding options have exercise prices in excess of $2.95 and, as a result, none of the options have value as of December 31, 2003.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information regarding the number of securities which could be issued upon the exercise of outstanding options, the weighted average exercise price of those options and the number of securities remaining for future issuance under the 1995 Stock and Incentive Plan. DHC does not have any equity compensation plans that have not been approved by its security holders.
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
FUTURE ISSUANCE UNDER
NUMBER OF SECURITIES TO WEIGHTED AVERAGE EQUITY COMPENSATION
BE ISSUED UPON EXERCISE EXERCISE PRICE OF PLANS (EXCLUDING
OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, SECURITIES REFLECTED IN
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS COLUMN A)
------------- ----------------------- -------------------- -----------------------
(A) (B) (C)
EQUITY COMPENSATION PLANS
APPROVED BY SECURITY
HOLDERS....................... 2,564,543 $4.79 2,141,048
EQUITY COMPENSATION PLANS NOT
APPROVED BY SECURITY
HOLDERS....................... N/A N/A N/A
--------- ----- ---------
TOTAL.................. 2,564,543 $4.79 2,141,048
========= ===== =========
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is currently composed of Messrs. Sullivan (Chairman), Barse and Isenberg. During 2003, none of the persons who served as members of the Compensation Committee of DHC's Board also was, during that year or previously, an officer or employee of DHC or any of its subsidiaries or had any other relationship requiring disclosure herein, except as follows:
Mr. Barse is the Chief Executive Officer of Third Avenue Trust and Third Avenue Management, LLC ("TAM"), the sole investment advisor to the Third Avenue Value Fund Series ("TAVF") of Third Avenue Trust. TAM owns over 5% of DHC. Mr. Barse served as the President and Chief Operating Officer of DHC from July 1996 until July 24, 2002.
As part of the investment and purchase agreement dated as of December 2, 2003 pursuant to which DHC agreed to acquire Covanta, DHC arranged for a new $118 million replacement letter of credit facility for Covanta, secured by a second lien on Covanta's domestic assets. This financing was provided by the Bridge
Lenders: SZ Investments, L.L.C. ("SZ Investments"), Third Avenue Trust, on behalf of Third Avenue Value Fund Series ("Third Avenue") and D. E. Shaw Laminar Portfolios, L.L.C., a significant creditor of Covanta ("Laminar"). Each of SZ Investments, Third Avenue and Laminar or an affiliate own over 5% of DHC's Common Stock. Samuel Zell, Chairman of the Board of Directors and Chief Executive Officer of DHC, Philip G. Tinkler, Chief Financial Officer of DHC and William Pate, a director of DHC, are affiliated with SZ Investments. Martin Whitman and David Barse, directors of DHC, are affiliated with Third Avenue.
DHC obtained the financing for its acquisition of Covanta pursuant to a note purchase agreement dated December 2, 2003, from the Bridge Lenders. Pursuant to the note purchase agreement, the Bridge Lenders provided DHC with $40 million bridge financing in exchange for notes issued by DHC. In the event that DHC is unable to repay all or a portion of the notes pursuant to a planned rights offering of Common Stock, then the notes are convertible without action by the Bridge Lenders into shares of Common Stock at a price of $1.53 per share subject to certain agreed upon limitations necessitated by DHC's NOLs. These notes have a scheduled maturity date of January 2, 2005 and an extended maturity date of July 15, 2005, and bear interest at a rate of 12% through July 15, 2004 and 16% thereafter. In the event of a default or the failure to pay a convertible note on its maturity, the interest rate under the convertible note increases by 2%. In consideration for the $40 million of bridge financing and the arrangement by the Bridge Lenders of the $118 million second lien credit facility and the arrangement by Laminar of a $10 million international revolving credit facility secured by Covanta's international assets, DHC issued to the Bridge Lenders an aggregate of 5,120,853 shares of Common Stock.
At the time that DHC entered into the note purchase agreement, agreed to issue the notes convertible into shares of Common Stock and issued the equity compensation to the Bridge Lenders, the Common Stock was trading on the American Stock Exchange at a price of $1.40 per share, which was below the $1.53 per share conversion price of the notes. DHC has agreed with the Bridge Lenders to file a registration statement with the SEC to register the shares of Common Stock issued to them under the note purchase agreement not later than the earlier of June 30, 2004 and ten days after closing of the rights offering.
PENSION PLANS
DHC does not offer a pension benefit. NAICC offers certain pension and retirement benefits.
BENEFIT PLANS
DHC does not offer employee benefits. However, Mr. Hagan participated in the ACL 401(k) Plan and received health benefits through ACL. NAICC offers certain benefit plans.
COMPENSATION OF THE BOARD OF DIRECTORS
Each Director who was not an officer or employee of the DHC or its subsidiaries received compensation of $7,500 per quarter for their services. Each eligible Director was paid $30,000. Members of the Audit, Compensation, Public Policy and Independent Committees were eligible to receive $1,500 per meeting. Payments to Directors for these meetings were $27,000 in total for all Directors. Directors who are officers or employees of DHC or its subsidiaries receive no fees for service on the Board.
BY-LAW AMENDMENT
DHC's By-Laws were amended in 2003, to allow a holder of 20% of more of the outstanding Common Stock to nominate a candidate for election by DHC's shareholders as a member of the Board of Directors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
SECURITY OWNERSHIP
The following table sets forth the beneficial ownership of Common Stock as of March 11, 2004 of (a) each Director, (b) each executive officer, and (c) each person known by DHC to own beneficially more
than five percent of the outstanding shares of Common Stock. DHC believes that, except as otherwise stated, the beneficial holders listed below have sole voting and investment power regarding the shares reflected as being beneficially owned by them.
AMOUNT AND NATURE PERCENT OF
PRINCIPAL STOCKHOLDERS OF BENEFICIAL OWNERSHIP(1) CLASS
---------------------- -------------------------- ----------
SZ Investments LLC
2 N. Riverside Plaza, Suite 600
Chicago, IL 60606................................ 6,740,824 18.75
Third Avenue Management LLC
622 Third Avenue, 32nd Floor
New York, NY 10017............................... 2,600,372(2) 7.23
Commissioner of Insurance of the State of
California
c/o Loren Suter Special Deputy Commissioner
Mission Insurance Companies' Trusts
425 Market Street
San Francisco, CA 94105.......................... 1,803,235(3) 5.02
D.E. Shaw Laminar Portfolios, L.L.C.
120 West Forty-Fifth Street
Floor 39, Tower 45
New York, NY 10036............................... 2,788,127(4) 7.76
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EXECUTIVE OFFICERS AND DIRECTORS -------------------------------- Samuel Zell........................................ 6,876,990(5) 19.06 David M. Barse..................................... 2,966,170(6) 8.18 Richard L. Huber................................... 33,333(7) * Eugene M. Isenberg................................. 170,189(8) * William Pate....................................... 96,238(9) * Jean Smith......................................... -- * Joseph P. Sullivan................................. 53,333(10) * Philip G. Tinkler.................................. 16,900(11) * Martin J. Whitman.................................. 3,271,788(12) 9.10 Clayton Yeutter.................................... 13,333(13) * All Executive Officers and Directors as a Group (10 persons)......................................... 13,498,274 36.96 |
* Percentage of shares beneficially owned does not exceed one percent of the outstanding Common Stock.
(1) In accordance with provisions of DHC's certificate of incorporation, all certificates representing shares of Common Stock beneficially owned by holders of five percent or more of the Common Stock are owned of record by DHC, as escrow agent, and are physically held by DHC in that capacity.
(2) Includes 2,600,372 shares beneficially owned by Third Avenue Management, LLC ("TAM"), as the sole investment adviser to Third Avenue Value Fund Series of the Third Avenue Trust ("TAVF"), an investment company registered under the Investment Company Act of 1940 and by separate accounts managed by TAM.
(3) Beneficially owned by the Commissioner of Insurance of the State of California in his capacity as trustee for the benefit of holders of certain deficiency claims against certain trusts which assumed liabilities of certain present and former insurance subsidiaries of DHC.
(4) In addition, under a note purchase agreement, Laminar has agreed to acquire up to 8.75 million shares of Common Stock, based upon levels of publication participation in DHC's previously announced rights offering, pursuant to the conversion of notes purchased by Laminar in connection with the financing of the Covanta acquisition. The actual number of shares to be acquired and the date on which such shares will be acquired cannot be determined at this time.
(5) Includes 6,740,825 shares of Common Stock owned by SZ Investments, which is affiliated with Mr. Zell. Includes 7,000 shares of Common Stock owned by Helen Zell, his wife as trustee of a revocable trust. Also includes shares underlying currently exercisable options to purchase 129,166 shares of Common Stock at an exercise price of $3.37 per share owned by EGI, also an affiliate of Mr. Zell.
(6) Includes 2,600,372 shares beneficially owned by TAM, as the sole advisor to TAVF and in separate accounts managed by TAM, of which Mr. Barse is the Chief Executive Officer. Includes shares underlying currently exercisable options to purchase an aggregate of 50,000 shares of Common Stock at an exercise price of $5.6875 per share, 50,000 shares of Common Stock at an exercise price of $7.0625 per share, 25,000 shares of Common Stock at an exercise price of $3.65625 per share, 50,000 shares of Common Stock at an exercise price of $5.3125 per share, 50,000 shares of Common Stock at an exercise price of $4.00 per share and 100,000 shares of Common Stock at an exercise price of $3.37 per share. Mr. Barse disclaims beneficial ownership of the shares of Common Stock owned by TAM and, therefore, these shares are not held in escrow by DHC.
(7) Includes 20,000 shares of restricted stock issued to Mr. Huber on May 29, 2002, of which one-third have vested. Also includes shares underlying currently exercisable options to purchase 13,333 shares of Common Stock at an exercise price of $4.26 per share.
(8) Includes 152,457 shares owned by Salmon Atlas, a partnership controlled by Mr. Isenberg and his wife. Includes shares underlying options to purchase an aggregate of 13,334 shares of Common Stock at an exercise price of $4.00 per share.
(9) Includes shares underlying currently exercisable options to purchase an aggregate of 22,800 shares of Common Stock at an exercise price of $4.00 per share.
(10) Includes shares underlying currently exercisable options to purchase an aggregate of 40,000 shares of Common Stock at an exercise price of $5.78 per share and an aggregate of 13,333 shares of Common Stock at an exercise price of $4.26 per share.
(11) Includes shares underlying currently exercisable options to purchase an aggregate of 5,000 shares of Common Stock at an exercise price of $4.00 per share.
(12) Includes 2,600,372 shares beneficially owned by TAM, as the sole investment advisor to TAVF and by separate accounts managed by TAM; 170,509 shares beneficially owned by Martin J. Whitman LLC ("MJW"), a private investment company; and 134,587 shares beneficially owned by Mr. Whitman's wife and three adult family members. Mr. Whitman may be deemed to control TAM. Mr. Whitman is the principal stockholder in MJW and may be deemed to own beneficially the shares owned by MJW. Mr. Whitman disclaims beneficial ownership of the shares of Common Stock owned by TAM and owned by Mr. Whitman's family members and, therefore, these shares are not held in escrow by DHC.
(13) Includes shares underlying currently exercisable options to purchase an aggregate of 13,333 shares of Common Stock at an exercise price of $4.26 per share.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
EMPLOYMENT ARRANGEMENTS
In connection with his announced retirement as of October 31, 2003, a separation agreement was entered into between Michael C. Hagan and ACL. Under this agreement, Mr. Hagan agreed, among other things, that he would (i) not compete with or solicit employees or customers from ACL during the period from the date of his retirement through June 30, 2004, and (ii) release ACL from all claims he may have against ACL, including any claims relating to his employment with and his separation from ACL, arising under any employment benefit program of ACL, relating to any severance or similar benefit program of ACL, and arising
under any age discrimination laws. Under this separation agreement, Mr. Hagan also agreed to provide certain consulting services to ACL through June 30, 2004, including, advising ACL on asset dispositions, its bankruptcy proceedings, and certain customer and business transitional matters. In exchange for his agreements under this separation agreement, including his agreement not to compete with ACL and his release of claims, Mr. Hagan received $275,000 in addition to a $25,000 per month payment for his consulting services to be performed thereunder. Mr. Hagan also will participate in ACL's group medical and dental insurance plans for 2 years after his separation and maintain his participation under ACL's pension plan and 401(k) plan.
Also in connection with his retirement from ACL, DHC has agreed with Mr. Hagan to extend the period during which Mr. Hagan can exercise options to acquire 26,250 shares of Common Stock to the one-year period running from his retirement date through October 31, 2004. Under this agreement, DHC and Mr. Hagan have mutually agreed to waive and release the other from all claims that may have existed between them, other than any arising under DHC's or any of its subsidiaries' indemnification obligations to its current and former directors, members, officers or board of representative members.
AFFILIATE AGREEMENTS
DHC has agreed to provide SZ Investments unlimited demand registration rights with respect to the ACL Senior Notes and ACL PIK Notes held by SZ Investments and its affiliates. The selling noteholder, HYI, is an affiliate of SZ Investments. Mr. Zell, DHC's President and Chief Executive Officer and Chairman of the DHC's Board, and Mr. Tinkler, DHC's Chief Financial Officer, are affiliated with SZ Investments and HYI. Mr. Pate, a member of DHC's Board, is affiliated with SZ Investments.
Prior to and shortly after the acquisition of ACL, DHC shared certain personnel and facilities with several affiliated and unaffiliated companies who have certain common directors and officers, and certain expenses were allocated among the various entities. Personnel costs were allocated based upon actual time spent on DHC business. Costs relating to office space and equipment were allocated based upon actual usage. DHC believes the methodology used for allocation was appropriate. Total expenses allocated to DHC from affiliated entities were $1.7 million for the year ended December 27, 2002.
DHC has entered into a corporate services agreement dated as of September 2, 2003, pursuant to which EGI has agreed to provide certain administrative services to DHC, including, among others, shareholder relations, insurance procurement and management, payroll services, cash management and treasury functions, technology services, listing exchange compliance and financial and corporate record keeping. Under the agreement, DHC pays to EGI $20,000 per month plus certain out-of-pocket fees and expenses incurred by EGI under this corporate services agreement. Either party may terminate this corporate services agreement on 30 days written notice.
As part of the investment and purchase agreement dated as of December 2, 2003 pursuant to which DHC agreed to acquire Covanta, DHC arranged for a new $118 million replacement letter of credit facility for Covanta, secured by a second lien on Covanta's domestic assets. This financing was provided by the Bridge Lenders; SZ Investments, L.L.C. ("SZ Investments"), Third Avenue Trust, on behalf of Third Avenue Value Fund Series ("Third Avenue") and D. E. Shaw Laminar Portfolios, L.L.C., a significant creditor of Covanta ("Laminar"). Each of SZ Investments, Third Avenue and Laminar or an affiliate own over 5% of DHC's Common Stock. Samuel Zell, Chairman of the Board of Directors and Chief Executive Officer of DHC, Philip G. Tinkler, Chief Financial Officer of DHC and William Pate, a director of DHC, are affiliated with SZ Investments. Martin Whitman and David Barse, directors of DHC, are affiliated with Third Avenue.
DHC obtained the financing for its acquisition of Covanta pursuant to a note purchase agreement dated December 2, 2003, from the Bridge Lenders. Pursuant to the note purchase agreement, the Bridge Lenders provided DHC with $40 million of bridge financing in exchange for notes issued by DHC. In the event that DHC is unable to repay all or a portion of the notes pursuant to a planned rights offering of Common Stock, then the notes are convertible without action by the Bridge Lenders into shares of Common Stock at a price of $1.53 per share subject to certain agreed upon limitations necessitated by DHC's NOLs. These notes have a scheduled maturity date of January 2, 2005 and an extended maturity date of July 15, 2005, and bear interest at a rate of 12% per annum through July 15, 2004 and 16% per annum thereafter. In the event of a default or
the failure to pay a convertible note on its maturity, the interest rate under the convertible note increases by 2%. In consideration for the $40 million of bridge financing and the arrangement by the Bridge Lenders of the $118 million second lien credit facility and the arrangement by Laminar of a $10 million international revolving credit facility secured by Covanta's international assets, DHC issued to the Bridge Lenders an aggregate of 5,120,853 shares of Common Stock.
At the time that DHC entered into the note purchase agreement, agreed to issue the notes convertible into shares of Common Stock and issued the equity compensation to the Bridge Lenders, the Common Stock was trading on the American Stock Exchange at a price of $1.40 per share, which was below the $1.53 per share conversion price of the notes. DHC has agreed with the Bridge Lenders to file a registration statement with the SEC to register the shares of Common Stock issued to them under the note purchase agreement not later than the earlier of June 30, 2004 and ten days after closing of the rights offering.
In addition, under the note purchase agreement Laminar has agreed to convert an amount of convertible notes to acquire up to an additional 8.75 million shares of the Common Stock at $1.53 per share based upon the levels of public participation in the rights offering.
As part of DHC's negotiations with Laminar and their becoming a 5% shareholder, pursuant to a letter agreement dated December 2, 2003, Laminar has agreed to transfer restrictions on the shares of Common Stock that Laminar holds or will acquire. Further in accordance with the transfer restrictions contained in Article Five of DHC's charter restricting the resale of Common Stock by 5% stockholders, DHC has agreed with Laminar to provide it with limited rights to resell the common stock that it holds.
The note purchase agreement and other transactions involving the Bridge Lenders were negotiated, reviewed and approved by a special committee of DHC's Board of Directors composed solely of disinterested directors and advised by independent legal and financial advisors.
The arrangements described above are each on terms and conditions that DHC believes are in the aggregate not materially more burdensome to DHC than would be obtained on an arm's-length basis among unaffiliated parties.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table presents the aggregate fees for audit, audit related, tax and other services rendered by Ernst & Young LLP for the years ended December 31, 2003 and December 27, 2002:
SERVICES 2003 2002
-------- ---------- ----------
Audit fees.................................................. $ 844,790 $1,106,942
Audit-related fees........................................ 292,395 79,805
Tax fees.................................................. 407,199 124,860
All other fees............................................ -- --
---------- ----------
Total............................................. $1,544,384 $1,311,607
========== ==========
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Audit services included the audits of the consolidated financial statements of DHC and review of financial statements included in DHC's Form 10-Qs. Audit services also included services that are normally provided by the independent auditor in connection with statutory and regulatory filings or engagements for each of the referenced years. Fees include statutory and financial audits for subsidiaries.
Audit-related services are for assurance and related services that are reasonably related to the performance of the audit or review of DHC's financial statements. These services were primarily related to financial statement audits of ACL's and NAICC's employee benefit plans in both 2003 and 2002, as well as accounting consultations in connection with the Covanta acquisition and ACL bankruptcy considerations in 2003.
Tax services fees in 2003 were related principally to tax compliance services for U.S. federal and state and foreign tax returns, as well as tax consulting services for subsidiaries. Tax services fees in 2002 were for tax compliance and consulting services.
Ernst & Young LLP did not bill any fees that would be categorized as "all other fees" during either of the years ended December 31, 2003 and December 27, 2002.
The Audit Committee has established a policy in 2003 to review and pre-approve all auditing services and permitted non-audit services. The Chair of the Audit Committee may pre-approve the rendering of services on behalf of the Audit Committee, provided the matter is then presented to the full Audit Committee at the next scheduled meeting.
All of Ernst & Young's 2003 audit fees were approved by the Audit Committee. The Audit Committee has considered and concluded that the provision of non-audit services is compatible with maintaining the independence of Ernst & Young LLP.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
(1) CONSOLIDATED FINANCIAL STATEMENTS OF DANIELSON HOLDING CORPORATION:
Included in Part II of this Report:
Consolidated Statement of Operations, for the years ended December 31, 2003, December 27, 2002 and December 31, 2001.
Consolidated Statement of Financial Position, as of December 31, 2003 and December 27, 2002.
Consolidated Statement of Cash Flows, for the years ended December 31, 2003, December 27, 2002 and December 31, 2001.
Consolidated Statement of Stockholders' Equity, for the years ended December 31, 2003, December 27, 2002 and December 31, 2001.
Notes to Consolidated Financial Statements, for the years ended December 31, 2003, December 27, 2002 and December 31, 2001.
Report of Ernst & Young LLP, Independent Auditors, on the consolidated financial statements of Danielson Holding Corporation for the years ended December 31, 2003 and December 27, 2002.
Report of KPMG LLP, Independent Accountants, on the consolidated financial statements of Danielson Holding Corporation for the year ended December 31, 2001.
(2) FINANCIAL STATEMENT SCHEDULES OF DANIELSON HOLDING CORPORATION
Included in Part II of this report:
Schedule I -- Condensed Financial Information of Registrant
Schedule II -- Valuation and Qualifying Accounts
Schedule V -- Supplemental Information Concerning Property -- Casualty Insurance Operations
Included, beginning on page 111 of this report:
Consolidated Financial Statements of American Commercial Lines LLC:
Consolidated Statement of Operations, for the year ended December 26, 2003, the period from December 29, 2001 to May 28, 2002, the period from May 29, 2002 to December 27, 2002 and the year ended December 28, 2001.
Consolidated Statement of Financial Position, as of December 26, 2003 and December 27, 2002.
Consolidated Statement of Cash Flows, for the year ended December 26, 2003, the period from December 29, 2001 to May 28, 2002, the period from May 29, 2002 to December 27, 2002 and the year ended December 28, 2001.
Consolidated Statement of Member's (Deficit) Equity, for the year ended December 26, 2003, the period from December 29, 2001 to May 28, 2002, the period from May 29, 2002 to December 27, 2002 and the year ended December 28, 2001.
Notes to Consolidated Financial Statements, for the year ended December 26, 2003, the period from December 29, 2001 to May 28, 2002, the period from May 29, 2002 to December 27, 2002 and the year ended December 28, 2001.
Report of Ernst & Young LLP, Independent Auditors, on the consolidated financial statements of American Commercial Lines, LLC for the year ended December 26, 2003 and the periods from December 29, 2001 to May 28, 2002 and May 29, 2002 to December 27, 2002.
Report of PricewaterhouseCoopers LLP, Independent Accountants, on the consolidated financial statements of American Commercial Lines, LLC for the year ended December 28, 2001.
All other schedules are omitted because they are not applicable, not significant or not required, or because the required information is included in the financial statement notes thereto.
(3) EXHIBITS
EXHIBIT
NO. DESCRIPTION
------- -----------
+2.1 Recapitalization Agreement by and among Danielson Holding Corporation, American Commercial Lines
Holdings LLC ("ACL Holdings") American Commercial Lines LLC ("ACL"), the Preferred Unitholders
signatory thereto and the Management Unitholders signatory thereto dated as of March 15, 2002
(incorporated by reference to Exhibit 10.23 to ACL's Current Report on Form 8-K dated March 15,
2002 and filed with the Commission on March 27, 2002). The exhibits and schedules referenced in
the Recapitalization Agreement have been omitted in accordance with Item 601(b)(2) of Regulation
S-K. A copy of any omitted exhibit and/or schedule will be furnished supplementally to the
Securities and Exchange Commission upon request.
+2.2 First Amendment to Recapitalization Agreement dated as of May 29, 2002 by and among Danielson
Holding Corporation, ACLH Acquisition LLC, ACL Holdings, ACL, the Preferred Unitholders (as
defined therein) party thereto, the Management Unitholders (as defined therein) party thereto and
the Consenting Common Unitholders (as defined therein) party thereto (incorporated by reference to
Exhibit 10.23 of ACL's Current Report on Form 8-K dated May 29, 2002 and filed with the Commission
on June 10, 2002).
+3.1 Restated Certificate of Incorporation of Danielson Holding Corporation.
3.2 Amended and Restated Bylaws of Danielson Holding Corporation.
+3.3 Certificate of Formation of ACL Holdings (incorporated by reference to Exhibit 3.1 of ACL's
Registration Statement on Form S-4 filed with the Commission on August 28, 1998, as amended
(Registration No. 333-62227)).
+3.4 Form of Certificate of Formation of ACL and the Subsidiary Guarantors (incorporated by reference
to Exhibit 3.2 of ACL's Registration Statement on Form S-4 filed with the Commission on August 28,
1998, as amended (Registration No. 333-62227)).
+3.5 Form of Limited Liability Company Agreement for the Subsidiary Guarantors (incorporated by
reference to Exhibit 3.3 of ACL's Registration Statement on Form S-4 filed with the Commission on
August 28, 1998, as amended (Registration No. 333-62227)).
|
EXHIBIT
NO. DESCRIPTION
------- -----------
+3.6 Amended and Restated Limited Liability Company Agreement of the Parent dated as of January 22,
2003 by and between the Parent and ACLines LLC. (incorporated by reference to Exhibit 3.4 of ACL's
2002 Annual Report on Form 10-K for the period ended December 27, 2002 and filed with the
Commission on March 27, 2003).
+3.7 Amended and Restated Limited Liability Company Agreement of ACL dated as of January 22, 2003 by
and between the Parent and ACL (incorporated by reference to Exhibit 3.4 of ACL's 2002 Annual
Report on Form 10-K for the period ended December 27, 2002 and filed with the Commission on March
27, 2003).
+3.8 Certificate of Incorporation of ACL Capital (incorporated by reference to Exhibit 3.6 of ACL's
Registration Statement on Form S-4 filed with the Commission on August 28, 1998, as amended
(Registration No. 333-62227)).
+3.9 By-laws of ACL Capital (incorporated by reference to Exhibit 3.7 of ACL's Registration Statement
on Form S-4 filed with the Commission on August 28, 1998, as amended (Registration No.
333-62227)).
+4.1 Indenture dated as of June 30, 1998 by and among ACL, ACL Capital and the Subsidiary Guarantors
and the United States Trust Company of New York, as trustee (incorporated by reference to Exhibit
4.1 of ACL's Registration Statement on Form S-4 filed with the Commission on August 28, 1998, as
amended (Registration No. 333-62227)).
+4.2 Purchase Agreement dated as of June 23, 1998 among ACL, ACL Capital and the Subsidiary Guarantors,
Wasserstein Perella Securities, Inc. and Chase Securities Inc. (incorporated by reference to
Exhibit 4.2 of ACL's Registration Statement on Form S-4 filed with the Commission on August 28,
1998, as amended (Registration No. 333-62227)).
+4.3 Registration Rights Agreement dated as of June 23, 1998 by and among ACL, ACL Capital and the
Subsidiary Guarantors, Wasserstein Perella Securities, Inc. and Chase Securities Inc.
(incorporated by reference to Exhibit 4.3 of ACL's Registration Statement on Form S-4 filed with
the Commission on August 28, 1998, as amended (Registration No. 333-62227)).
+4.4 Registration Rights Agreement dated as of June 30, 1998 by and among ACL, Vectura, National
Marine, CSX Brown, Stuart Agranoff and Steven Anderson and each Person whose name is set forth on
Schedule I therein (incorporated by reference to Exhibit 4.4 of ACL's Registration Statement on
Form S-4 filed with the Commission on August 28, 1998, as amended (Registration No. 333-62227)).
+4.5 Supplemental Indenture dated as of May 29, 2002 by and among ACL, ACL Capital Corp. and The Bank
of New York (as successor trustee to United States Trust Company of New York) as Trustee
(incorporated by reference to Exhibit 4.1 of ACL's Quarterly Report on Form 10-Q for period ending
June 28, 2002 and filed with the Commission on August 14, 2002).
+4.6 Indenture dated May 29, 2002 for 11 1/4% Senior Notes due 2008 by and among ACL, ACL Capital
Corp., the Subsidiary Guarantors (defined therein) party thereto and The Bank of New York, as
Trustee (incorporated by reference to Exhibit T3C filed with Amendment No. 1 to ACL's Application
for Qualification of Indenture Under the Trust Indenture Act of 1939 on Form T-3, filed with the
Commission on May 29, 2002 (File No. 022-28597)).
+4.7 Indenture dated May 29, 2002 for 12% Pay-In-Kind Senior Subordinated Notes due 2008 by and among
ACL, ACL Capital Corp., the Subsidiary Guarantors (defined therein) party thereto and The Bank of
New York, as Trustee (incorporated by reference to Exhibit T3C filed with Amendment No. 1 to ACL's
Application for Qualification of Indenture Under the Trust Indenture Act of 1939 on Form T-3,
filed with the Commission on May 29, 2002 (File No. 022-28598)).
+4.8 Credit Agreement dated as of June 30, 1998 among ACL, ACL Holdings, the Lenders (as defined
therein) and The Chase Manhattan Bank, as issuing bank, as administrative agent, as security
trustee and as collateral agent ("Credit Agreement") (incorporated by reference to Exhibit 10.1 of
ACL's Registration Statement on Form S-4 filed with the Commission on August 28, 1998, as amended
(Registration No. 333-62227)).
|
EXHIBIT
NO. DESCRIPTION
------- -----------
+4.9 Amendment No. 1, Waiver and Agreement dated as of January 29, 1999 to Credit Agreement
(incorporated by reference to Exhibit 10.14 of ACL's 2000 Annual Report on Form 10-K for the
period ended December 29, 2000 and filed with the Commission on March 29, 2001).
+4.10 Amendment and Waiver No. 2 dated as of December 13, 1999 to Credit Agreement (incorporated by
reference to Exhibit 10.15 of ACL's 2000 Annual Report on Form 10-K for the period ended December
29, 2000 and filed with the Commission on March 29, 2001).
+4.11 Consent and Waiver No. 3 dated as of June 1, 2000 to Credit Agreement (incorporated by reference
to Exhibit 10.16 of ACL's 2000 Annual Report on Form 10-K for the period ended December 29, 2000
and filed with the Commission on March 29, 2001).
+4.12 Amendment No. 4, Consent and Waiver dated as of October 13, 2000 to Credit Agreement (incorporated
by reference to Exhibit 10.17 of ACL's 2000 Annual Report on Form 10-K for the period ended
December 29, 2000 and filed with the Commission on March 29, 2001).
+4.13 Amendment No. 5, Waiver and Agreement dated as of December 29, 2000 to Credit Agreement
(incorporated by reference to Exhibit 10.18 of ACL's 2000 Annual Report on Form 10-K for the
period ended December 29, 2000 and filed with the Commission on March 29, 2001).
+4.14 Forbearance Agreement dated as of February 22, 2002 among the Parent, ACL, the ACL subsidiary
guarantors, the Lenders (as defined therein), and The JPMorgan Chase Bank, as administrative agent
(incorporated by reference to Exhibit 10.20 of ACL's 2001 Annual Report on Form 10-K for the
period ended December 28, 2001 and filed with the Commission on March 28, 2002).
+4.15 Amendment Agreement dated as of April 11, 2002 among ACL, the Parent, the Lenders (as defined
therein) party thereto and The JPMorgan Chase Bank, as issuing bank, as administrative agent, as
security trustee and as collateral agent (incorporated by reference to Exhibit 10.1 of ACL's
Quarterly Report on Form 10-Q for the period ended June 28, 2002 and filed with the Commission on
August 14, 2002).
+4.16 Credit Agreement dated as of June 30, 1998, as Amended and Restated as of April 11, 2002, among
ACL, the Parent, the Lenders (as defined therein) party thereto and The JPMorgan Chase Bank, as
issuing bank, as administrative agent, as security trustee and as collateral agent (incorporated
by reference to Exhibit 10.2 of ACL's Quarterly Report on Form 10-Q for the period ended June 28,
2002 and filed with the Commission on August 14, 2002).
+4.17 Amendment No. 1 and Agreement dated as of September 27, 2002 to the Amended and Restated Credit
Agreement dated as of April 11, 2002 among ACL, the Parent, the Lenders (as defined therein) party
thereto and The JPMorgan Chase Bank, as issuing bank, as administrative agent, as security
trustee, and as collateral agent (incorporated by reference to Exhibit 10.1 of ACL's Quarterly
Report on Form 10-Q for the period ended September 27, 2002 and filed with the Commission on
November 12, 2002).
4.18 Credit Agreement, dated as of March 10, 2004, by and among Covanta Energy Corporation and each of
its Subsidiaries party thereto, the Lenders listed therein, Bank of America, N.A., and Deutsche
Bank AG, New York Branch.
4.19 Credit Agreement, dated as of March 10, 2004, by and among Covanta Energy Corporation and each of
its Subsidiaries party thereto, the Lenders listed therein, and Bank One, NA.
4.20 Indenture dated as of March 10, 2004 by and among Covanta Energy Corporation, the Guarantors named
therein, and U.S. Bank National Association, as trustee, for the 8.25% Senior Secured Notes due
2011.
4.21 Indenture dated as of March 10, 2004 by and among Covanta Energy Corporation and U.S. Bank Trust
National Association, as trustee for the 7.5% Unsecured Notes due 2012.
+4.22 Registration Rights Agreement dated November 8, 2002 among Danielson Holding Corporation and S.Z.
Investments, LLC.
|
EXHIBIT
NO. DESCRIPTION
------- -----------
+4.23 Registration Rights Agreement, dated as of December 2, 2003, by and between Danielson Holding
Corporation, D.E. Shaw Laminar Portfolios, L.L.C., S.Z. Investments, L.L.C., and Third Avenue
Trust, on behalf of the Third Avenue Value Fund Series, a Delaware business trust (incorporated by
reference to Exhibit 4.1 of Danielson Holding Corporation's Current Report on Form 8-K dated
December 2, 2003 and filed with the Commission on December 5, 2003).
4.24 Pledge Agreement, dated March 10, 2004, by and between Danielson Holding Corporation and Bank of
America, N.A. in its capacity as collateral agent for and representative of the Secured Parties as
defined therein.
4.25 Intercreditor Agreement, dated March 10, 2004, by and among Covanta Energy Corporation, the
Subsidiaries listed therein, the Detroit L/C Lenders listed therein, the New L/C Lenders listed
therein, Bank of America, N.A., Bank One, NA, Deutsche Bank Securities, Inc., Danielson Holding
Corporation, U.S. Bank National Association, and the Companies listed therein.
4.26 Intercreditor Agreement, dated March 10, 2004, by and among Covanta Power International Holdings,
Inc., the Subsidiaries listed therein, Covanta Energy Americas, Inc., Revolver Lenders listed
therein, the Term Loan Lenders listed therein, Bank of America, N.A., Deutsche Bank Securities,
Inc., Deutsche Bank AG, New York Branch, U.S. Bank National Association, Wells Fargo Bank, N.A.,
and the Companies listed therein.
4.27 Security Agreement, dated March 10, 2004, by and among Covanta Energy Corporation, the Other
Borrowers listed therein, any Additional Grantors, and Bank of America, N.A.
4.28 Security Agreement, dated March 10, 2004, by and among Covanta Power International Holdings, Inc.,
the Other Borrowers listed therein, and Bank of America, N.A.
4.29 Pledge Agreement, dated March 10, 2004, by and between Covanta Energy Americas, Inc., and Bank of
America, N.A.
4.30 Security and Pledge Agreement, dated January 31, 2003, by and among ACL, the Subsidiaries listed
therein, the Debtor-in Possession listed therein, and JPMorgan Chase Bank.
4.31 Revolving Credit and Guaranty Agreement, dated January 31, 2003, by and among ACL, ACL Holdings,
the Guarantors listed therein, the Lenders listed therein, JPMorgan Chase Bank, J.P. Morgan
Securities Inc., General Electric Capital Corporation, and Bank One, NA.
4.32 First Amendment to Revolving Credit and Guaranty Agreement, dated March 13, 2003, by and among
ACL, ACL Holdings, the Guarantors listed therein, the Lenders listed therein, JPMorgan Chase Bank,
General Electric Capital Corporation, and Bank One, NA.
4.33 Second Amendment to Revolving Credit and Guaranty Agreement, dated March 13, 2003, by and among
ACL, ACL Holdings, the Guarantors listed therein, the Lenders listed therein, JPMorgan Chase Bank,
General Electric Capital Corporation, and Bank One, NA.
4.34 Third Amendment to Revolving Credit and Guaranty Agreement, dated December 22, 2003, by and among
ACL, ACL Holdings, the Guarantors listed therein, the Lenders listed therein, JPMorgan Chase Bank,
General Electric Capital Corporation, and Bank One, NA.
4.35 Fourth Amendment to Revolving Credit and Guaranty Agreement, dated February 24, 2004, by and among
ACL, ACL Holdings, the Guarantors listed therein, the Lenders listed therein, JPMorgan Chase Bank,
General Electric Capital Corporation, and Bank One, NA.
4.36 First Preferred Fleet Mortgage, dated February 3, 2003, by ACL in favor of JPMorgan Chase Bank.
4.37 First Preferred Fleet Mortgage, dated February 3, 2003, by Houston Fleet LLC in favor of JPMorgan
Chase Bank.
4.38 First Preferred Fleet Mortgage, dated February 3, 2003, by Louisiana Dock Company LLC in favor of
JPMorgan Chase Bank.
+10.1 Stock Purchase and Sale Agreement dated as of April 14, 1999 by and between Samstock, L.L.C. and
Danielson Holding Corporation (incorporated by reference to Exhibit 10.1 of Danielson Holding
Corporation's Report on Form 10-Q for the period ended June 30, 1999 and filed with the Commission
on August 13, 1999).
|
EXHIBIT
NO. DESCRIPTION
------- -----------
+10.2 Amendment No. 1, Assignment and Consent to Assignment of Stock Purchase and Sale Agreement dated
May 7, 1999 among Samstock, L.L.C., S.Z. Investments, LLC and Danielson Holding Corporation
(incorporated by reference to Exhibit 10.2 of Danielson Holding Corporation's Report on Form 10-Q
for the period ended June 30, 1999 and filed with the Commission on August 13, 1999).
+10.3 Termination of Investment Agreement dated November 8, 2002 among Danielson Holding Corporation,
Martin J. Whitman and S.Z. Investments, LLC.
+10.4 Letter Agreement dated April 14, 1999 by and between Equity Group Investments, L.L.C. and
Danielson Holding Corporation (incorporated by reference to Exhibit 10.5 of Danielson Holding
Corporation's Report on Form 10-Q for the period ended June 30, 1999 and filed with the Commission
on August 13, 1999).
+10.5 Amendment dated June 2, 1999 to Letter Agreement dated April 14, 1999 by and between Equity Group
Investments, L.L.C. and Danielson Holding Corporation (incorporated by reference to Exhibit 10.6
of Danielson Holding Corporation's Report on Form 10-Q for the period ended June 30, 1999 and
filed with the Commission on August 13, 1999).
*+10.6 1995 Stock and Incentive Plan. (Included as Amended Appendix B to Proxy Statement filed on August
2, 2000.)
+10.7 Letter Agreement dated December 20, 2002 between Danielson Holding Corporation, ACL and Credit
Suisse First Boston Corporation.
*+10.8 ACL Severance Pay Plan (incorporated by reference to Exhibit 10.10 of ACL's Annual Report on Form
10-K for the period ended December 25, 1998 and filed with the Commission on March 25, 1999).
*+10.9 ACL Salary Continuation Plan, as amended (incorporated by reference to Exhibit 10.11 of ACL's
Annual Report on Form 10-K for the period ended December 25, 1998 and filed with the Commission on
March 25, 1999).
+10.10 Receivables Purchase Agreement between American Commercial Lines Funding Corporation, as Seller,
American Commercial Barge Line LLC, as Servicer, Jupiter Securitization Corporation, as a
Purchaser, The Financial Institutions from time to time party thereto, as Purchasers and Bank One,
NA (Main Office Chicago), as Agent, dated as of May 24, 2002 (incorporated by reference to Exhibit
10.3 of ACL's Quarterly Report on Form 10-Q for the period ended June 28, 2002 and filed with the
Commission on August 14, 2002).
+10.11 First Amendment to Receivables Purchase Agreement dated as of November 11, 2002 between American
Commercial Lines Funding Corporation, as Seller, American Commercial Barge Line LLC, as Servicer,
the financial institutions from time to time party to the Receivables Purchase Agreement, as bank
inventors, Jupiter Securitization Corporation (together with the bank investors, the Purchaser)
and Bank One, NA (Main Office Chicago), as agent (incorporated by reference to Exhibit 10.2 of
ACL's Quarterly Report on Form 10-Q for the period ended September 27, 2002 and filed with the
Commission on November 12, 2002).
+10.12 Receivables Sales Agreement between American Commercial Barge Line LLC, as an Originator, American
Commercial Terminals LLC, as an Originator, and American Commercial Lines Funding Corporation, as
Buyer, dated as of May 24, 2002 (incorporated by reference to Exhibit 10.4 of ACL's Quarterly
Report on Form 10-Q for the period ended June 28, 2002 and filed with the Commission on August 14,
2002).
*+10.13 Management Agreement by and between ACL and Michael C. Hagan dated May 29, 2002 (incorporated by
reference to Exhibit 10.5 of ACL's Quarterly Report on Form 10-Q for the period ended June 28,
2002 and filed with the Commission on August 14, 2002).
*10.14 Separation and Termination Agreement by and between ACL and Michael C. Hagan dated August 12,
2003.
*10.15 Separation Agreement by and between Danielson Holding Corporation and Michael C. Hagan dated
October 10, 2003.
*+10.16 Management Agreement by and between ACL and James J. Wolff dated May 29, 2002 (incorporated by
reference to Exhibit 10.6 of ACL's Quarterly Report on Form 10-Q for the period ended June 28,
2002 and filed with the Commission on August 14, 2002).
|
EXHIBIT
NO. DESCRIPTION
------- -----------
*10.17 Release and Waiver of Employment and Separation from Employment Claims by and between ACL and
James J. Wolff dated June 25, 2003.
*+10.18 Amendment of the Special Retirement Plan of ACL dated May 22, 2002 (incorporated by reference to
Exhibit 10.7 of ACL's Quarterly Report on Form 10-Q for the period ended June 28, 2002 and filed
with the Commission on August 14, 2002).
*+10.19 Amendment of the Supplemental Savings Plan of Eligible Executives of ACL dated May 22, 2002
(incorporated by reference to Exhibit 10.8 of ACL's Quarterly Report on Form 10-Q for the period
ended June 28, 2002 and filed with the Commission on August 14, 2002).
10.20 Engagement Letter, dated July 28, 2003, by and between Danielson Holding Corporation and Credit
Suisse First Boston LLC.
+10.21 Investment and Purchase Agreement by and between Danielson Holding Corporation and Covanta Energy
Corporation, dated December 2, 2003 (incorporated by reference to Exhibit 2.1 of Danielson Holding
Corporation's Current Report on Form 8-K dated December 2, 2003 and filed with the Commission on
December 5, 2003), as amended by that certain Amendment to the Investment and Purchase Agreement,
made and entered into on February 23, 2004, by and between the same parties (incorporated by
reference to Exhibit 2.3 of Danielson Holding Corporation's Current Report on Form 8-K dated March
10 2004 and filed with the Commission on March 11, 2004).
+10.22 Note Purchase Agreement by and among Danielson Holding Corporation, S.Z. Investments, L.L.C.,
Third Avenue Trust, on behalf of Third Avenue Value Fund, and D. E. Shaw Laminar Portfolios,
L.L.C. dated December 2, 2003 (incorporated by reference to Exhibit 2.2 of Danielson Holding
Corporation's Current Report on Form 8-K dated December 2, 2003 and filed with the Commission on
December 5, 2003), as amended by that certain First Amendment to Note Purchase Agreement and
Consent, made and entered into as of February 23, 2004, by and among the same parties
(incorporated by reference to Exhibit 2.4 of Danielson Holding Corporation's Current Report on
Form 8-K dated March 10, 2004 and filed with the Commission on March 11, 2004).
+10.23 Letter Agreement by and between Danielson Holding Corporation and D.E. Shaw Laminar Portfolios,
L.L.C. dated December 2, 2003 (incorporated by reference to Exhibit 10.1 of Danielson Holding
Corporation's Current Report on Form 8-K dated December 2, 2003 and filed with the Commission on
December 5, 2003).
+10.24 Letter Agreement by and between Danielson Holding Corporation and Equity Group Investments, L.L.C.
dated December 1, 2003 (incorporated by reference to Exhibit 10.2 of Danielson Holding
Corporation's Current Report on Form 8-K dated December 2, 2003 and filed with the Commission on
December 5, 2003).
10.25 Tax Sharing Agreement, dated as of March 10, 2004, by and among Danielson Holding Corporation,
Covanta Energy Corporation, and Covanta Power International Holdings, Inc.
10.26 Corporate Services Reimbursement Agreement, dated as of March 10, 2004, by and between Danielson
Holding Corporation and Covanta Energy Corp.
+10.27 Corporate Services Reimbursement Agreement, dated as of September 2, 2003, by and between
Danielson Holding Corporation and Equity Group Investments, L.L.C. (incorporated by reference to
Exhibit 10.1 of Danielson Holding Corporation's Quarterly Report on Form 10-Q for the period ended
September 30, 2003 and filed with the Commission on November 7, 2003).
10.28 Credit Agreement, dated as of March 10,. 2004, by and among Covanta Power International Holdings,
Inc. and each of its Subsidiaries party thereto, the Lenders listed therein, Bank of America,
N.A., and Deutsche Bank Securities, Inc.
10.29 Credit Agreement, dated as of March 10,. 2004, by and among Covanta Power International Holdings,
Inc. and each of its Subsidiaries party thereto, the Lenders listed therein, and Deutsche Bank AG,
New York Branch.
10.30 Management Services and Reimbursement Agreement, dated March 10, 2004, by among Covanta Energy
Corporation, Covanta Energy Group, Inc., Covanta Projects, Inc., Covanta Power International
Holdings, Inc., and certain Subsidiaries listed therein.
|
EXHIBIT
NO. DESCRIPTION
------- -----------
+21.1 Subsidiaries of Danielson Holding Corporation. (incorporated by reference to Exhibit 21 of
Danielson Holding Corporation's Annual Report on Form 10-K for the fiscal year ended December 31,
1996, and filed with the Commission on March 28, 1997).
23.1 Consent of Independent Accountants, dated March 15, 2004, by PricewaterhouseCoopers LLP.
31.1 Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes Oxley Act of
2002 (pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended).
31.2 Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes Oxley Act of
2002 (pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended).
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 from the Chief Executive Officer of Danielson Holding Corporation.
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 from the Chief Financial Officer of Danielson Holding Corporation.
|
+ Not filed herewith. In accordance with Rule 12b-32 of the General Rules and Regulations under the Securities and Exchange Act of 1934, reference is made to the document previously filed with the Commission.
* Management Contract or Compensatory Plan or Arrangement.
(b) DHC filed a current report on Form 8-K dated November 7, 2003 to file its press release announcing its earnings for the quarter ended September 20, 3003. DHC filed a current report on Form 8-K dated December 2, 2003 to report its proposed acquisition of Covanta.
(c) Exhibits: See Index to Exhibits.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Danielson Holding Corporation
(Registrant)
By: /s/ SAMUEL ZELL
--------------------------------------
Samuel Zell
President and Chief Executive Officer
March 15, 2004
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
NAME DATE TITLE
---- ---- -----
/s/ SAMUEL ZELL March 15, 2004 President, Chief Executive Officer
------------------------------------- and Chairman of DHC Board of
Samuel Zell Directors (Principal Executive
Officer)
/s/ PHILIP G. TINKLER March 15, 2004 Chief Financial Officer (Principal
------------------------------------- Financial and Accounting Officer)
Philip G. Tinkler * Attorney-in-Fact
* DAVID M. BARSE March 15, 2004 Director
-------------------------------------
David M. Barse
* RICHARD L. HUBER March 15, 2004 Director
-------------------------------------
Richard L. Huber
* EUGENE M. ISENBERG March 15, 2004 Director
-------------------------------------
Eugene M. Isenberg
/s/ WILLIAM C. PATE March 15, 2004 Director
-------------------------------------
William C. Pate
* JEAN SMITH March 15, 2004 Director
-------------------------------------
Jean Smith
* JOSEPH P. SULLIVAN March 15, 2004 Director
-------------------------------------
Joseph P. Sullivan
* MARTIN J. WHITMAN March 15, 2004 Director
-------------------------------------
Martin J. Whitman
* CLAYTON YEUTTER March 15, 2004 Director
-------------------------------------
Clayton Yeutter
|
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL FISCAL
YEAR ENDED YEAR ENDED
DECEMBER 26, MAY 29, 2002 TO DECEMBER 29, 2001 DECEMBER 28,
2003 DECEMBER 27, 2002 TO MAY 28, 2002 2001
---- ----------------- --------------- ----
(DOLLARS IN THOUSANDS)
OPERATING REVENUE
Revenue $ 609,663 $ 420,013 $ 279,807 $729,692
Revenue from Related Parties 10,408 8,034 4,998 58,809
---------- ---------- ---------- ---------
620,071 428,047 284,805 788,501
OPERATING EXPENSE
Materials, Supplies and Other 273,803 184,332 138,092 341,606
Restructuring Cost - 565 13,493 -
Rent 37,044 29,896 23,121 56,711
Labor and Fringe Benefits 148,474 97,021 65,760 166,041
Fuel 83,427 49,348 30,434 93,560
Depreciation and Amortization 54,918 37,407 21,824 55,497
Gain on Property Dispositions, Net (287) - (455) (16,498)
Taxes, Other Than Income Taxes 22,325 15,485 10,926 26,223
---------- ---------- ---------- ---------
Total Operating Expenses 619,704 414,054 303,195 723,140
---------- ---------- ---------- ---------
OPERATING INCOME (LOSS) 367 13,993 (18,390) 65,361
OTHER EXPENSE (INCOME)
Interest Expense ($71,106 Contractual Interest for 2003) 41,514 35,944 25,712 70,932
Other, Net (6,016) 3,307 827 (359)
---------- ---------- ---------- ---------
35,498 39,251 26,539 70,573
---------- ---------- ---------- ---------
LOSS BEFORE REORGANIZATION ITEMS, INCOME TAXES,
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE (35,131) (25,258) (44,929) (5,212)
REORGANIZATION ITEMS 24,344 - - -
---------- ---------- ---------- ---------
LOSS BEFORE INCOME TAXES AND CUMULATIVE EFFECT
OF ACCOUNTING CHANGE (59,475) (25,258) (44,929) (5,212)
INCOME TAXES (BENEFIT) 2,101 743 (919) 118
---------- ---------- ---------- ---------
LOSS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE (61,576) (26,001) (44,010) (5,330)
CUMULATIVE EFFECT OF ACCOUNTING CHANGE - - - (490)
---------- ---------- ---------- ---------
NET LOSS $ (61,576) $ (26,001) $ (44,010) $ (5,820)
========== ========== ========== =========
|
The accompanying notes are an integral part of the consolidated financial statements.
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
DECEMBER 26, DECEMBER 27,
2003 2002
---- ----
(DOLLARS IN THOUSANDS)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 35,275 $ 14,496
Cash, Restricted 7,754 6,328
Accounts Receivable, Net 74,204 40,884
Accounts Receivable - Related Parties 6,356 11,494
Materials and Supplies 33,090 34,384
Other Current Assets 15,539 25,809
------------------ ------------------
Total Current Assets 172,218 133,395
PROPERTIES-Net 540,144 585,785
PENSION ASSETS 21,824 20,806
INVESTMENT IN EQUITY INVESTEES 57,862 55,677
OTHER ASSETS 20,148 15,978
------------------ ------------------
Total Assets $ 812,196 $ 811,641
================== ==================
LIABILITIES
LIABILITIES NOT SUBJECT TO COMPROMISE
CURRENT LIABILITIES
Accounts Payable $ 21,833 $ 33,301
Accrued Payroll and Fringe Benefits 14,075 15,713
Deferred Revenue 8,180 10,364
Accrued Claims and Insurance Premiums 4,924 26,547
Accrued Interest 5,184 16,429
Short-Term Debt - 41,000
Current Portion of Long-Term Debt 84,996 553,620
Other Liabilities 25,456 35,423
Other Liabilities - Related Parties 24 168
------------------ ------------------
Total Current Liabilities 164,672 732,565
Pension Liability 21,516 15,072
Other Liabilities 18,162 19,982
------------------ ------------------
Total Liabilities Not Subject to Compromise 204,350 767,619
LIABILITIES SUBJECT TO COMPROMISE
Accounts Payable 34,759 -
Accrued Claims and Insurance Premiums 4,506 -
Accrued Interest 10,762 -
Short-Term Debt 46,146 -
Current Portion of Long-Term Debt 528,449 -
Other Liabilities 2,898 -
------------------ ------------------
Total Liabilities Subject to Compromise 627,520 -
------------------ ------------------
Total Liabilities 831,870 767,619
------------------ ------------------
MEMBER'S (DEFICIT) EQUITY
Member's Interest 85,025 85,025
Other Capital 1,021 1,429
Unearned Compensation (289) (1,132)
Retained Deficit (87,577) (26,001)
Accumulated Other Comprehensive Loss (17,854) (15,299)
------------------ ------------------
Total Member's (Deficit) Equity (19,674) 44,022
------------------ ------------------
Total Liabilities and Member's (Deficit) Equity $ 812,196 $ 811,641
================== ==================
|
The accompanying notes are an integral part of the consolidated financial statements.
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
CONSOLIDATED STATEMENT OF CASH FLOWS
FISCAL YEAR MAY 29, 2002 DECEMBER 29, FISCAL YEAR
ENDED TO 2001 ENDED
DECEMBER 26, DECEMBER 27, TO MAY 28, DECEMBER 28,
2003 2002 2002 2001
---- ---- ---- ----
(DOLLARS IN THOUSANDS)
Net Loss $ (61,576) $ (26,001) $ (44,010) $ (5,820)
Adjustments to Reconcile Net Loss to Net Cash
Provided by (Used in) Operating Activities:
Depreciation and Amortization 54,918 37,407 21,824 55,497
Interest Accretion and Debt Issuance Cost Amortization 8,877 4,033 1,245 4,413
Gain on Property Dispositions (287) - (455) (16,498)
Other Operating Activities (4,170) 2,751 (5,422) (1,735)
Reorganization Items 24,344 - - -
Changes in Operating Assets and Liabilities:
Accounts Receivable (36,465) (10,100) (3,240) (12,010)
Materials and Supplies 2,281 2,111 (5,160) (1,384)
Accrued Interest 6,485 15,407 10,332 413
Other Current Assets (1,517) 6,366 (3,149) (4,998)
Other Liabilities 12,803 (5,396) 8,357 6,710
----------- ---------- ---------- ------------
Net Cash Provided by (Used In) Operating Activities
before Reorganization Items 5,693 26,578 (19,678) 24,588
Reorganization Items Paid (21,759) - - -
----------- ---------- ---------- ------------
Net Cash (Used in) Provided by Operating Activities (16,066) 26,578 (19,678) 24,588
----------- ---------- ---------- ------------
INVESTING ACTIVITIES
Property Additions (9,209) (7,757) (5,605) (19,772)
Investment in Vessel Leasing LLC - - - (6,808)
Proceeds from Property Dispositions 2,422 1,089 988 23,918
Net Change in Restricted Cash (1,426) 236 - -
Proceeds from Sale of Terminals - - - 7,818
Proceeds from Property Condemnation - - - 2,730
Other Investing Activities (3,604) (894) (2,859) (4,594)
----------- ---------- ---------- ------------
Net Cash (Used in) Provided by Investing Activities (11,817) (7,326) (7,476) 3,292
FINANCING ACTIVITIES
Danielson Holding Corporation Investment - - 25,000 -
Short-Term Borrowings 5,146 7,000 - 17,250
DIP Credit Facility Borrowings 50,000 - - -
Long-Term Debt Repaid (3,204) (28,353) (25,190) (47,937)
Bank Overdrafts 325 (1,785) 1,149 (6,670)
Debt Costs (3,001) (1,035) - (3,463)
Other Financing Activities (604) (1,468) (173) 625
----------- ---------- ---------- ------------
Net Cash Provided by (Used in) Financing Activities 48,662 (25,641) 786 (40,195)
----------- ---------- ---------- ------------
Net Increase (Decrease) in Cash and Cash Equivalents 20,779 (6,389) (26,368) (12,315)
Cash and Cash Equivalents at Beginning of Period 14,496 20,885 47,253 59,568
----------- ---------- ---------- ------------
Cash and Cash Equivalents at End of Period $ 35,275 $ 14,496 $ 20,885 $ 47,253
=========== ========== ========== ============
Supplemental Cash Flow Information:
Interest Paid $27,708 $13,061 $36,595 $65,504
Income Taxes Paid 3,343 306 1,104 1,175
|
The accompanying notes are an integral part of the consolidated financial statements.
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
CONSOLIDATED STATEMENT OF MEMBER'S (DEFICIT) EQUITY
ACCUMULATED
RETAINED OTHER
MEMBER'S OTHER UNEARNED EARNINGS COMPREHENSIVE
INTEREST CAPITAL COMPENSATION (DEFICIT) INCOME (LOSS) TOTAL
-------- ------- ------------ --------- ------------- -----
(DOLLARS IN
THOUSANDS)
Balance at December 29, 2000 $ 220,074 $ 163,799 $ - $ (526,007) $ (484) $ (142,618)
Cumulative Effect of Accounting Change
as of December 30, 2000 - - - - (300) (300)
Comprehensive Loss:
Net loss - - - (5,820) - (5,820)
Net loss on fuel swaps designated as
cash flow hedging instruments - - - - (271) (271)
Net loss on interest rate swaps
designated as cash flow
hedging instruments - - - - (747) (747)
Foreign currency translation - - - - (55) (55)
-------- ------- ------ --------- --------- ---------
Total Comprehensive Loss - - - (5,820) (1,073) (6,893)
Contribution of capital by CSX - 2,781 - - - 2,781
Consolidation of ACL Funding Corp. - - - (989) - (989)
-------- ------- ------ --------- --------- ---------
Balance at December 28, 2001 220,074 166,580 - (532,816) (1,857) (148,019)
-
Comprehensive Loss: -
Net loss - - - (44,010) - (44,010)
Net gain on fuel swaps designated as -
cash flow hedging instruments - - - - 174 174
Net gain on interest rate swaps -
designated as cash flow
hedging instruments - - - - 228 228
Foreign currency translation - - - - (219) (219)
-------- ------- ------ --------- --------- ---------
Total Comprehensive Loss - - - (44,010) 183 (43,827)
Other - (373) - - - (373)
-------- ------- ------ --------- --------- ---------
Balance at May 28, 2002 220,074 166,207 - (576,826) (1,674) (192,219)
Elimination of historical equity (220,074) (166,207) - 576,826 1,674 192,219
Acquisition of ACL by Danielson
Holding Corporation 82,256 - - - - 82,256
Acquisition of Vessel Leasing 2,769 - - - - 2,769
Issuance of restricted Parent
Company common stock - 1,695 (1,695) - - -
Amortization of unearned compensation - - 297 - - 297
Cancellation of restricted Parent
Company common stock - (266) 266 - - -
Comprehensive Loss:
Net loss - - - (26,001) - (26,001)
Net gain on fuel swaps designated as
cash flow hedging instruments - - - - 68 68
Net loss on interest rate swaps
designated as cash flow
hedging instruments - - - - (290) (290)
Foreign currency translation - - - - 408 408
Minimum pension liability adjustment - - - - (15,485) (15,485)
-------- ------- ------ --------- --------- ---------
Total Comprehensive Loss - - - (26,001) (15,299) (41,300)
-------- ------- ------ --------- --------- ---------
Balance at December 27, 2002 85,025 1,429 (1,132) (26,001) (15,299) 44,022
Amortization of unearned compensation - - 435 - - 435
Cancellation of restricted Parent
Company common stock - (408) 408 - - -
Comprehensive Loss:
Net loss - - - (61,576) - (61,576)
Net gain on fuel swaps designated as
cash flow hedging instruments - - - - 452 452
Net gain on interest rate swaps
designated as
cash flow hedging instruments - - - - 440 440
Foreign currency translation - - - - 504 504
Minimum pension liability adjustment - - - - (3,951) (3,951)
-------- ------- ------ --------- --------- ---------
Total Comprehensive Loss - - - (61,576) (2,555) (64,131)
-------- ------- ------ --------- --------- ---------
Balance at December 26, 2003 $ 85,025 $ 1,021 $ (289) $ (87,577) $ (17,854) $ (19,674)
======== ======= ====== ========= ========= =========
|
The accompanying notes are an integral part of the consolidated financial statements.
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1. NATURE OF OPERATIONS AND PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
NATURE OF OPERATIONS
The operations of American Commercial Lines LLC ("ACL") include barge transportation together with related terminal, marine construction and vessel repair along the inland waterways. Barge transportation services include the movement of steel and other bulk products, grain, coal, and liquids in the United States and South America, and account for the majority of ACL's revenues. Marine construction, repair and terminal services are provided to customers in marine transportation and other related industries in the United States. ACL has long-term contracts with some customers.
ACL was a wholly-owned subsidiary of CSX Corporation ("CSX") until June 30, 1998. On June 30, 1998 ACL's parent, American Commercial Lines Holdings LLC (the "Parent") completed a recapitalization in a series of transactions in which the barge business of Vectura Group, Inc. ("Vectura") and its subsidiaries ("NMI" or the "NMI Contribution") were combined with that of ACL.
On May 29, 2002, American Commercial Lines Holding LLC ("ACL Holdings"), ACL's parent company, and ACL completed a comprehensive restructuring involving the acquisition and recapitalization of ACL Holdings and ACL (the "Danielson Recapitalization") by Danielson Holding Corporation ("DHC") and its subsidiaries (collectively with DHC, "Danielson") and the restructuring of ACL's outstanding debt obligations (see Note 6). Consulting fees and legal costs incurred in connection with the Danielson Recapitalization are included in restructuring costs in the accompanying consolidated statement of operations.
PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
During 2002 and 2003, ACL experienced a decline in barging rates, reduced shipping volumes and excess barging capacity during a period of slow economic growth. Due to these factors, ACL's revenues and earnings did not meet expectations and ACL's liquidity was significantly impaired. Debt covenant violations occurred as discussed in Note 6 and as a result, ACL was unable to meet its financial obligations as they became due. On January 31, 2003 (the "Petition Date"), ACL filed a petition with the U.S. Bankruptcy Court for the Southern District of Indiana, New Albany Division (the "Bankruptcy Court") to reorganize under Chapter 11 of the U.S. Bankruptcy Code (the "Bankruptcy Code" or "Chapter 11") under case number 03-90305. Included in the filing are ACL, ACL's direct parent (American Commercial Lines Holdings LLC), American Commercial Barge Line LLC, Jeffboat LLC, Louisiana Dock Company LLC and ten other U.S. subsidiaries of ACL (collectively with ACL, the "Debtors") under case numbers 03-90306 through 03-90319. These cases are jointly administered for procedural purposes before the Bankruptcy Court under case number 03-90305. The Chapter 11 petitions do not cover any of ACL's foreign subsidiaries or certain of its U.S. subsidiaries.
ACL and the other Debtors are continuing to operate their businesses as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. As debtors-in-possession, the Debtors may not engage in transactions outside of the ordinary course of business without approval, after hearing, of the Bankruptcy Court. As part of the Chapter 11 cases, the Debtors intend to develop and propose for confirmation pursuant to Chapter 11 a plan of reorganization that will restructure the operations and liabilities of the Debtors to the extent necessary to result in the continuing viability of ACL. A filing date for such a plan has not been determined; however, the Debtors have the exclusive right to file a plan of reorganization at any time on or before March 28, 2004. If the exclusive filing period were to expire, other parties, such as ACL creditors, would have the right to propose alternative plans of reorganization. During the pendency of these Chapter 11 cases, the Debtors have routinely requested extension of the exclusivisity period. Such extensions have been granted with the support of the Debtors' creditors. The Debtors intend to file for an additional extension of the exclusivity period beyond the current March 28, 2004 date, as may be necessary.
The Debtors' direct and indirect foreign subsidiaries and foreign joint venture entities did not file petitions under Chapter 11 of the Bankruptcy Code and are not debtors-in-possession. Two other entities in which ACL has an ownership interest, Vessel Leasing LLC and Global Materials Services LLC, also did not file petitions under Chapter 11 of the Bankruptcy Code and are not debtors-in-possession.
Qualifying pension and 401k plan funds are held in trust and protected under federal regulations. All required contributions are current in the respective plans.
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Debtors have entered into a Revolving Credit and Guaranty Agreement ("DIP Credit Facility") that provides up to $75 million of financing during ACL's Chapter 11 proceeding. As of December 26, 2003, participating bank commitments under the DIP Credit Facility total $75 million, consisting of a $50 million term loan and a $25 million revolving credit facility. Of this amount, the Debtors have fully drawn the $50 million term loan, which was used to retire ACL's Pre-Petition Receivables Facility (see Note 5) and which continues to be used to fund the Debtors' day-to-day cash needs. The Debtors have made no draws against the revolving credit facility. Total amounts drawn under the DIP Credit Facility are limited by a borrowing base (as defined in the DIP Credit Facility). The borrowing base limit was $56 million as of December 26, 2003 and is updated weekly. The DIP Credit Facility is secured by the same and additional assets that collateralized the Senior Credit Facilities and ACL's Pre-Petition Receivables Facility, and bears interest, at ACL's option, at London Inter Bank Offered Rates ("LIBOR") plus four percent or an Alternate Base Rate (as defined in the DIP Credit Facility) plus three percent. There are also certain interest rates in the event of a default under the facility.
The obligations of the Debtors under the DIP Credit Facility, by court order, have super-priority administrative claim status as provided under the Bankruptcy Code. Under the Bankruptcy Code, a super-priority claim is senior to secured and unsecured pre-petition claims and all administrative expenses incurred in the Chapter 11 case. In addition, with certain exceptions (including a carve-out for unpaid professional fees and disbursements), the DIP Credit Facility obligations are secured by (1) a first-priority lien on all unencumbered pre- and post-petition property of the Debtors, (2) a first-priority priming lien on all property of the Debtors that is encumbered by the existing liens securing the Debtors' pre-petition secured lenders and (3) a junior lien on all other property of the Debtors that is encumbered by the pre-petition liens.
The DIP Credit Facility also contains certain restrictive covenants that, among other things, restrict the Debtors' ability to incur additional indebtedness or guarantee the obligations of others. ACL is also required to maintain minimum cumulative EBITDA, as defined in the DIP Credit Facility, limit its capital expenditures to defined levels and restrict advances to certain subsidiaries.
The DIP Credit Facility will terminate and the borrowings thereunder will be due and payable upon the earliest of (i) July 31, 2004 (with borrowings repayable on August 2, 2004), (ii) the date of the substantial consummation of a plan of reorganization that is confirmed pursuant to an order by the Bankruptcy Court, or (iii) the acceleration of the term loans or the revolving credit loans made by any of the banks who are a party to the DIP Credit Facility and the termination of the total commitment under the DIP Credit Facility pursuant to the DIP Credit Facility.
As a result of the Chapter 11 filings, certain events of default under the
Senior Credit Facilities, Senior Notes, PIK Notes and Old Senior Notes (see Note
6) have occurred, the effects of which are stayed pursuant to certain provisions
of the Bankruptcy Code.
Under Chapter 11, actions by creditors to collect claims in existence at the filing date are stayed or deferred absent specific Bankruptcy Court authorization to pay such pre-petition claims while the Debtors continue to manage their businesses as debtors-in-possession and act to develop a plan of reorganization for the purpose of emerging from these proceedings. The Debtors have received approval from the Bankruptcy Court to pay or otherwise honor certain of its pre-petition obligations, including but not limited to employee wages and certain employee benefits, certain critical vendor payments, certain insurance and claim obligations and certain tax obligations as a plan of reorganization is developed. A claims bar date of December 5, 2003 was established for all other pre-petition creditors to file a claim against the estate of the various debtors. The Debtors are currently in the process of reviewing the claims that were filed against the Debtors. The ultimate amount of claims allowed by the Court against the Debtors could be significantly different than the amount of the liabilities recorded by the Debtors.
The consolidated financial statements contained herein have been prepared in accordance with the American Institute of Certified Public Accountants Statement of Position 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code" ("SOP 90-7"), assuming that ACL will continue as a going concern. The claims in existence at the filing date are presented as Liabilities Subject to Compromise in the accompanying Consolidated Statement of Financial Position.
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The amount of the claims to be filed against the Debtors by their creditors could be significantly different than the amount of the liabilities recorded by the Debtors. The Debtors also have numerous executory contracts and other agreements that could be assumed or rejected during the Chapter 11 proceedings. Parties affected by these rejections may file claims with the Bankruptcy Court in accordance with the reorganization process. Under these Chapter 11 proceedings, the rights of and ultimate payments to pre-petition creditors, rejection damage claimants and ACL's equity investor may be substantially altered. This could result in claims being liquidated in the Chapter 11 proceedings at less (possible substantially less) than 100% of their face value, and the membership interests of ACL's equity investor being diluted or cancelled. The Debtors have not yet proposed a plan of reorganization. The Debtors' pre-petition creditors and ACL's equity investor will each have a vote in the plan of reorganization.
The Chapter 11 process presents inherent material uncertainty; it is not possible to determine the additional amount of claims that may arise or ultimately be filed, or predict the length of time that the Debtors will continue to operate under the protection of Chapter 11, the outcome of the Chapter 11 proceedings in general, whether the Debtors will continue to operate in their present organizational structure, or the effects of the proceedings on the business of ACL, the other Debtors and its non-filing subsidiaries and affiliates, or on the interests of the various creditors and equity holder. The ultimate recovery, if any, by creditors and equity holder will not be determined until confirmation of a plan or plans of reorganization. No assurance can be given as to what value will be ascribed in the bankruptcy proceedings to each of these constituencies.
Reorganization items, as reported in the accompanying consolidated statement of operations are compromised of income, expense and loss items that were realized or incurred by the Debtors as a direct result of the ACL's decision to reorganize under Chapter 11. Pursuant to SOP 90-7, these items are aggregrated and reported as a separate component of expense below operating income. For the year ended December 26, 2003 , these items include:
REORGANIZATION ITEMS:
Professional Fees $ 16,740
Severance and Retention 1,486
Charter Guarantees 5,146
Interest Income (138)
Other Reorganization Items 1,110
--------
TOTAL REORGANIZATION ITEMS $ 24,344
========
|
The Debtors have received Bankruptcy Court approval for the retention of legal, financial and management consulting professionals to advise the Debtors in the bankruptcy proceedings and the restructuring of its business. In accordance with the Bankruptcy Code, the creditors also have the right to retain their own financial, legal and other professionals to provide these constituencies advice during the pendency of the Chapter 11 cases. The Debtors are obligated to pay the cost of the creditors' professionals. The professional fees above reflect payment for those services in addition to the accrual of $1,250 toward a $2,500 success fee payable to one of the Debtor's financial advisors upon consummation of the plan of reorganization.
The Debtors have also received Bankruptcy Court approval for the payment of a retention bonus to certain key executives and the payment of a success fee bonus to an executive upon consummation of the plan of reorganization and the achievement of other performance goals. The expense for these items is $1,277 in 2003 and is included in the severance and retention amount presented above.
As a result of the bankruptcy filing, ACL has initially rejected certain barge
leases and other executory contracts. These rejections and the consequent
reduction in the size of the domestic barging fleet resulted in a number of
salary and vessel employee positions being eliminated. In addition, a number of
management changes were initiated to better position ACL to emerge from Chapter
11. The related severance expense and payments of $1,169 is included in the
severance and retention amount presented above. As a part of this process,
certain executives also released their claims to benefits under several
non-qualified executive compensation programs. The resultant gain of $960 is
also included in severance and retention.
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
As a result of the rejection of certain barge charter agreements due to the Chapter 11 filing and the rights of the charter owners to rely upon letters of credit to guarantee future payments of charter hire, draws totalling $5,146 were made on the letters of credit.
Pursuant to SOP 90-7, interest income from cash on hand as a result of debtor-in-possession financing is also presented as a reorganization item.
Other reorganization items include cost incurred related to the DIP Credit Facility and expense from rejecting executory contracts.
NOTE 2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
In connection with Danielson becoming the owner of 100% of the membership interests in ACLines LLC ("ACLines"), which wholly owns ACL Holdings, Danielson elected to push down its basis of accounting to the net assets of ACL. ACL's net assets, liabilities and member's equity have been adjusted, as of the acquisition date, following push down accounting (see Note 3). Accordingly, effective May 29, 2002, ACL's accounts have been adjusted to a new basis to reflect Danielson's basis in ACL's assets and liabilities based on the estimated fair values of such assets and liabilities using the principles of Financial Accounting Standards No. 141, "Business Combinations."
As noted above, the consolidated financial statements contained herein have been prepared in accordance with SOP 90-7, assuming that ACL will continue as a going concern. ACL and certain of its subsidiaries are currently operating under the jurisdiction of Chapter 11 of the Bankruptcy Code and the Bankruptcy Court. Continuation of ACL as a going concern is contingent upon, among other things, ACL's ability to formulate a plan of reorganization which will gain approval of the requisite parties under the Bankruptcy Code and confirmation by the Bankruptcy Court, ACL's ability to continue to comply with the DIP Credit Facility (see Note 1) and the ability of ACL to generate the required cash flows from operations and, where necessary, obtain financing sources sufficient to satisfy future obligations.
ACL's liquidity generally depends on cash provided by operating activities and access to the DIP Credit Facility. The ability of ACL to continue as a going concern (including its ability to meet post-petition obligations) and the continued appropriateness of using the going concern basis for its financial statements are dependent upon, among other things, (i) ACL's ability to comply with the covenants of the DIP Credit Facility, (ii) the ability of ACL to maintain adequate cash on hand, (iii) the ability of ACL to continue to generate cash from operations, (iv) confirmation of a plan of reorganization under the Bankruptcy Code and the terms of such plan, (v) ability of ACL to attract, retain and compensate key executives and associates and to retain employees generally and (vi) ACL's ability to achieve profitability following such confirmation.
Management expects that normal cash flows from operations and access to the DIP Credit Facility will be sufficient to meet planned working capital, capital expenditures and other cash requirements until such time as it seeks to obtain approval for a plan of reorganization. However, due to material uncertainties associated with the outcome of the Chapter 11 proceedings in general, and the effects of such proceedings on the business of ACL and its subsidiaries, there can be no assurances that such plan will be approved or whether ACL will obtain sufficient liquidity enabling it to continue to operate in its present organizational structure.
The accompanying consolidated financial statements do not give effect to any adjustment to the carrying value of assets or amounts and classifications of liabilities that might be necessary as a result of resolving the bankruptcy. A plan of reorganization could materially change the amounts recorded in the consolidated financial statements in future periods.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements reflect the results of operations, cash flows and financial position of ACL and its majority-owned subsidiaries as a single entity. All significant intercompany accounts and transactions have been eliminated. Investments in companies that are not majority-owned are accounted for under the equity method, depending on the extent of control.
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
FISCAL YEAR
ACL follows an annual fiscal reporting period, which ends on the last Friday in December.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include short-term investments with a maturity of less than three months when purchased. ACL has from time to time, cash in banks in excess of federally insured limits.
RESTRICTED CASH
As part of the Maritime Administration guaranteed financing, Vessel Leasing LLC ("Vessel Leasing") is required to maintain a minimum cash balance on account which amounted to $7,754 as of December 26, 2003 and $6,328 as of December 27, 2002.
ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
2003 2002
-------------------- --------------------
Accounts Receivable $ 75,838 $ 42,747
Allowance for Doubtful Accounts (1,634) (1,863)
-------------------- --------------------
$ 74,204 $ 40,884
==================== ====================
|
ACL maintains an allowance for doubtful accounts based upon the expected collectibility of accounts receivable. See Note 5 regarding repurchase of receivables in 2003.
MATERIALS AND SUPPLIES
Materials and supplies are carried at the lower of cost (average) or market and consist of the following:
2003 2002
-------------------- --------------------
Raw Materials $ 3,715 $ 3,818
Work in Process 15,227 15,577
Parts and Supplies 14,148 14,989
-------------------- --------------------
$ 33,090 $ 34,384
==================== ====================
|
PROPERTIES, DEPRECIATION AND AMORTIZATION
Properties consist of the following:
2003 2002
-------------------- --------------------
Land $ 15,741 $ 11,050
Buildings and Improvements 24,674 16,537
Equipment 589,961 593,935
-------------------- --------------------
630,376 621,522
Less Accumulated Depreciation 90,232 35,737
-------------------- --------------------
$ 540,144 $ 585,785
==================== ====================
|
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Properties are stated at cost less accumulated depreciation. At May 29, 2002, properties were fair valued in conjunction with the purchase price allocation. Provisions for depreciation of properties are based on the estimated useful service lives computed on the straight-line method. Buildings and improvements are depreciated from 15 to 45 years. Equipment is depreciated from 5 to 42 years.
Properties and other long-lived assets are reviewed for impairment whenever events or business conditions indicate the carrying amount of such assets may not be fully recoverable. Initial assessments of recoverability are based on estimates of undiscounted future net cash flows associated with an asset or a group of assets. Where impairment is indicated, the assets are evaluated for sale or other disposition, and their carrying amount is reduced to fair value based on discounted net cash flows or other estimates of fair value. Properties include $720 for barges which have been removed from service during 2003. These assets were written down to their estimated salvage value through a $2,078 charge to earnings which is included in materials, supplies and other in the consolidated statement of operations. In addition, intangible assets were written down, due to abandonment of a software project, through a $1,643 charge to earnings which is also included in materials, supplies and other in the consolidated statement of operations. There were no long-lived asset impairment losses in 2002 and 2001.
Depreciation expense was $45,745 for fiscal year 2003, $20,500 for the period December 29, 2001 through May 28, 2002, $35,737 for the period May 29, 2002 through December 27, 2002 and $52,100 for fiscal year 2001. Amortization expense, relating to software and intangible assets which are included in other assets, was $9,173 for fiscal year 2003; $1,324 for the period December 29, 2001 through May 28, 2002; $1,670 for the period May 29, 2002 through December 27, 2002 and $3,397 for fiscal year 2001. Remaining amortization related to intangible assets amounts to $3,858 in 2004 and $3,858 in 2005. In conjunction with the Bankruptcy filing, ACL rejected a substantial number of barge leases. As such, 2003 amortization expense includes a charge of $1,213 for writing favorable leases to zero. Depreciation and amortization expense for fiscal year 2003 was reduced by $4,397 due to changes in estimates in finalizing the purchase price allocation.
In the fourth quarter of 2001, ACL changed the useful life of towboats from 30 years to 42 years, which reduced the net loss by $1,142 for the year ended December 28, 2001. This change in accounting estimate was based on additional information about the useful life of the towboat fleet.
DEBT AMORTIZATION
ACL amortizes debt costs over the term of the debt. Amortization expense was $2,957 for fiscal year 2003, $1,245 for the period December 29, 2001 through May 28, 2002; $1,150 for the period May 29, 2002 through December 27, 2002; and $4,413 for fiscal year 2001 and is included in interest expense in the consolidated statement of operations.
DEBT DISCOUNT
On May 29, 2002 ACL issued new debt (see Note 6) which was recorded at fair value. The difference between the principle amount of the notes and the fair value (discount) is being amortized using the interest method over the life of the notes. The amortization of the discount was $5,919 for fiscal year 2003 and $2,882 for the period May 29, 2002 through December 27, 2002 and is included in interest expense in the consolidated statement of operations.
REVENUE RECOGNITION
Barge transportation revenue is recognized proportionately as shipments move from origin to destination. Terminal, repair and other revenue is recognized as services are provided. Marine construction revenue and related expense is primarily recognized on the completed-contract method, due to the short-term nature of contracts. Revenue from sale/leaseback transactions, if any, is deferred and recognized over the life of the lease.
REPAIRS AND MAINTENANCE
Repairs that extend the original economic life of an asset or that enhance the functionality of an asset are capitalized and amortized over their estimated economic life. All other repairs and maintenance are expensed. Routine boat engine overhauls that occur on a two to four year cycle are expensed when incurred. Repair and maintenance expense was $27,492 for fiscal year 2003 ; $14,357 for the period December 29, 2001 through May 28, 2002; $17,971 for the period May 29, 2002 through December 27, 2002; and $32,581 for fiscal year 2001 and is included in materials, supplies and other expense in the consolidated statement of operations.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities relating to investments in foreign operations are translated into U. S. dollars using current exchange rates; revenues and expenses are translated into U. S. dollars using the average exchange rate during the period. When the functional currency is the local currency, the translation gains and losses are excluded from income and are recorded in the other comprehensive income component of member's equity. If the functional currency is the U. S. dollar, the translation gains and losses are recorded as other income or expense in the consolidated statement of operations.
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current year presentation.
RECENTLY ISSUED ACCOUNTING STANDARDS
In May 2003, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 requires that certain financial instruments, which under previous guidance were accounted for as equity, must now be accounted for as liabilities. The financial instruments affected include mandatorily redeemable stock, certain financial instruments that require or may require the issuer to buy back some of its shares in exchange for cash or other assets, and certain obligations that can be settled with shares of stock. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003 and must be applied to the Company's existing financial instruments effective June 30, 2003, the beginning of the first interim period after June 15, 2003. The provisions of this statement did not have an impact on ACL's financial statements in 2003.
In January 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51 (FIN 46). In December 2003, the FASB modified FIN 46 to make certain technical corrections and address certain implementation issues that had arisen, including deferral of certain provisions to 2004. FIN 46 provides a new framework for identifying variable interest entities ("VIEs") and determining when a company should include the assets, liabilities, noncontrolling interests and results of activities of a VIE in its consolidated financial statements.
In general, a VIE is a corporation, partnership, limited-liability corporation, trust, or any other legal structure used to conduct activities or hold assets that either (1) has an insufficient amount of equity to carry out its principal activities without additional subordinated financial support, (2) has a group of equity owners that are unable to make significant decisions about its activities, or (3) has a group of equity owners that do not have the obligation to absorb losses or the right to receive returns generated by its operations.
FIN 46 requires a VIE to be consolidated if a party with an ownership, contractual or other financial interest in the VIE other financial interest in the VIE ("a variable interest holder") is obligated to absorb a majority of the risk of loss from the VIEs activities, is entitled to receive a majority of the VIEs residual returns (if no party absorbs a majority of the VIEs losses), or both. A variable interest holder that consolidates the VIE is called the primary beneficiary. Upon consolidation, the primary beneficiary generally must initially record all of the VIEs assets, liabilities and noncontrolling interests at fair value and subsequently account for the VIE as if it were consolidated based on majority voting interest. FIN 46 also requires disclosures about VIEs that the variable interest holder is not required to consolidate but in which it has a significant variable interest. FIN 46 was effective immediately for VIEs created after January 31, 2003. The provisions of this statement did not have an impact on ACL's financial statements in 2003. ACL continues to assess what impact FIN 46 may have in 2004, but does not believe it will have a significant impact.
In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS 146"), which addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs incurred in a Restructuring)" ("Issue 94-3"). The principal difference between SFAS 146 and Issue 94-3 relates to SFAS 146's requirements for recognition of a liability for a cost associated with an exit or disposal activity. SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit cost as generally defined in Issue 94-3 was recognized at the date of an entity's commitment to an exit plan. Severance pay under SFAS 146, in many cases, would be recognized over time rather than up front.
Additionally, under SFAS 146, if the benefit arrangement requires employees to render future service beyond a "minimum retention period," a liability should be recognized as employees render service over the future service period even if the benefit formula used to calculate an employee's termination benefit is based on length of service. The provisions of SFAS 146 did not have an impact on ACL's financial statements in 2003.
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 3. DANIELSON ACQUISITION OF ACL
Danielson's basis in ACL's net assets at the acquisition date of $85,025 includes $7,000 in cash paid for membership interests in ACL Holdings; $2,769 in cash paid for a 50% membership interest in Vessel Leasing LLC ("Vessel Leasing"), an entity in which ACL owns the other 50% membership interest; the contribution of $25,000 in cash and ACL 10 1/4% senior notes due June 30, 2008 having an estimated fair value of $43,650; and costs incurred by Danielson directly associated with the acquisition of $6,606.
As a result of Danielson's acquisition of ACL and the push down purchase accounting that resulted, ACL recorded several non-cash adjustments including the following:
Properties $ 117,772
Net Pension Asset (5,426)
Investment in Equity Investees (11,793)
Other Assets (7,555)
----------
$ 92,998
==========
Short-Term Debt $ (50,000)
Accrued Interest (22,492)
Other Current Liabilities 3,112
Pension Liability (18,264)
Other Long-Term Liabilities (16,408)
Contribution of 10 1/4% senior notes
at par including accrued interest (64,082)
Long-Term Debt (13,343)
Equity 274,475
----------
$ 92,998
==========
|
The above adjustments reflect the estimated fair value of assets and liabilities acquired by Danielson as of the date of the acquisition, May 29, 2002. In 2003, management finalized the allocation of the Danielson purchase price based on this fair value. The fair value of the assets exceeded the Danielson purchase price by $128,165. This excess was allocated as a pro rata reduction to individual assets based on fair value, excluding financial assets with the exception of equity method investments, assets to be disposed of by sale, prepaid assets related to pension plans and other current assets.
The pro forma unaudited results of operations for the years ended December 27, 2002 and December 28, 2001, assuming consummation of the acquisition as of December 30, 2000, are as follows:
2002 2001
---- ----
Revenue $ 712,686 $ 747,526
Loss before cumulative effect of accounting change (76,039) (9,935)
Net loss (76,039) (8,540)
|
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 4. INVESTMENT IN EQUITY INVESTEES
ACL has ownership interests in the following entities which are accounted for by the equity method:
UABL LIMITED ("UABL") - ACL has a 50% ownership interest in UABL, an Argentine company. UABL's operations include barge transportation services in Argentina, Bolivia, Brazil, Paraguay and Uruguay.
GLOBAL MATERIALS SERVICES LLC ("GMS") - ACL has a 50% ownership interest in GMS which is a joint venture between American Commercial Terminals-Memphis LLC, a wholly owned subsidiary of American Commercial Terminals, which is a wholly owned subsidiary of ACL, DHC, a 5.4% owner, and Mid-South Terminal Company, L.P., an unaffiliated third party. GMS' principal operations include terminal facilities along the inland waterways.
GLOBAL MATERIAL SERVICES VENEZUELA ("GMSV") - ACL has a 42% ownership interest in GMSV. During 2002, GMS, ACL and minority owners organized new companies to unload bauxite in Venezuela. The GMSV companies are Global Materials Services Venezuela C.A., GMS Venezuela Terminal Partners LLC and GMS Venezuela Terminal Holdings LLC. ACL contributed $1,417 in capital to GMSV in 2002.
VESSEL LEASING LLC ("Vessel Leasing") - In 2001, ACL and Vectura Group LLC invested in a new company, Vessel Leasing. Prior to May 29, 2002, ACL accounted for its investment in Vessel Leasing under the equity method. On May 29, 2002, Danielson acquired the remaining 50% membership interest in Vessel Leasing for $2,769 in cash. As a result, ACL consolidated the assets and liabilities of Vessel Leasing in the consolidated statement of financial position beginning May 29, 2002. ACL has also included the net income of Vessel Leasing in the consolidated statement of operations from the Danielson purchase date.
Earnings (losses) related to ACL's equity method investees aggregate $4,714 for fiscal year 2003; ($272) for the period May 29, 2002 through December 27, 2002; $642 for the period December 29, 2001 through May 28, 2002; and ($2,541) for the fiscal year 2001. These earnings (losses) are included in other income in the consolidated statement of operations.
ACL's most significant investments in equity investees relate to UABL and GMS which amounted to $40,467 and $12,685, respectively, at December 26, 2003. The excess of ACL's equity in the underlying net assets of UABL and GMS over its investments in these entities amounted to $7,874 and $775, respectively, at December 26, 2003. These differences are being amortized on a straight-line basis over 20 years for UABL and 8 years for GMS as a component of the equity in earnings of the investments.
The following is a summary of aggregated financial information for UABL and GMS:
December 26, December 27,
2003 2002
---- ----
Current assets $25,207 $16,937
Noncurrent assets 152,200 152,072
Current liabilities 25,317 34,538
Noncurrent liabilities 59,744 49,421
|
May 29, December 29,
Year Ended 2002 to 2001 Year Ended
December 26, December 27, to May 28, December 28,
2003 2002 2002 2001
---- ---- ---- ----
Revenue $111,078 $61,450 $35,671 $103,364
Operating income 10,475 2,272 2,982 3,117
Net earnings (loss) 5,367 (62) 235 (4,990)
|
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 5. ACCOUNTS RECEIVABLE SECURITIZATION
ACL's receivables facility, which was administered by PNC Bank, N.A., was replaced on May 29, 2002 with a Receivables Purchase Agreement among American Commercial Lines Funding Corporation ("ACLF"), American Commercial Barge Line LLC, Jupiter Securitization Corporation and Bank One, NA (the "Pre-Petition Receivables Facility") having substantially the same terms as the old receivables facility. As discussed in Note 1, the Pre-Petition Receivables Facility was retired by ACL repurchasing $37,000 of receivables with proceeds from the DIP Credit Facility.
At December 27, 2002, ACL had $39,300 outstanding under its accounts receivable securitization facility agreement and had $27,590 of net residual interest in the securitized receivables which is included in accounts receivable, net on the consolidated statement of financial position. The fair value of the net residual interest was measured at the time of the sale and was based on the sale of similar assets. From December 29, 2001 through May 28, 2002 ACL received gross proceeds of $3,800 from the sale of receivables and made gross payments of $12,200 under the agreement in place during that period. From May 29, 2002 through December 29, 2002 ACL received gross proceeds of $20,300 and made gross payments of $23,600 under the Pre-Petition Receivables Facility. In 2001, ACL received gross proceeds of $30,800 from the sale of receivables and made gross payments of $35,800 under the agreement in place during that period.
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities" ("SFAS 140"). The Statement was effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. ACL adopted SFAS 140 on April 1, 2001. The adoption required the consolidation of ACLF, a wholly-owned subsidiary, that was previously treated as a non-consolidated Qualified Special Purpose Entity. The consolidation resulted in a charge to retained earnings of $989 in 2001.
NOTE 6. DEBT
DECEMBER 26, DECEMBER 27,
2003 2002
---- ----
Short-term debt not subject to compromise:
Revolving Credit Facility $ -- $ 41,000
Current portion of long-term debt not subject to compromise:
Debtor in Possession Term Loan B 50,000 --
Bonds guaranteed by the Maritime Administration 34,996 37,740
Tranche A Term Loan -- 43,119
Tranche B Term Loan -- 124,141
Tranche C Term Loan -- 146,069
New Senior Notes -- 128,491
Senior Subordinated Notes (PIK Notes) -- 68,797
Old Senior Notes -- 4,946
Other Notes -- 317
-------- --------
84,996 553,620
Short-term debt subject to compromise:
Revolving Credit Facility 46,146 --
Current portion of long-term debt subject to compromise:
Tranche A Term Loan 43,119 --
Tranche B Term Loan 124,141 --
Tranche C Term Loan 146,069 --
New Senior Notes 129,793 --
Senior Subordinated Notes (PIK Notes) 80,194 --
Old Senior Notes 5,133 --
-------- --------
528,449 --
-------- --------
Total Debt $659,591 $594,620
======== ========
|
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DEBTOR IN POSSESSION AGREEMENT
As discussed above in Note 1, ACL and the other debtor subsidiaries entered into a DIP Credit Facility that provides up to $75,000 of financing consisting of a $50,000 term loan and a $25,000 revolving credit facility. The DIP Term Loan B was drawn in 2003 pursuant to the bankruptcy filing. The loan is limited to $50,000 and matures on July 31, 2004. No amounts have been drawn against the revolving credit facility. The DIP Credit Facility contains a provision limiting the total amount of outstanding loans under the facility based upon a borrowing base calculation (as defined in the DIP Credit Facility). The borrowing base limitation was $56,000 as of December 26, 2003 and is updated weekly. The DIP Credit Facility is secured by the same and additional assets that collateralized the Senior Credit Facilities (described below) and ACL's Pre-Petition Receivables Facility, and bears interest, at ACL's option, at LIBOR plus four percent or Alternate Base Rate (as defined in the DIP Credit Facility) plus three percent. The interest rates as of December 26, 2003 ranged from 5.1875% to 5.25%. There are also certain interest rates in the event of a default under the facility.
The DIP Credit Facility also contains certain restrictive covenants that, among other things, limit the Debtors' ability to incur additional indebtedness or guarantee the obligations of others. ACL is also required to maintain minimum cumulative EBITDA, as defined in the DIP Credit Facility, limit its capital expenditures to a defined level and restrict advances to certain subsidiaries.
PRE-PETITION SENIOR CREDIT FACILITIES
As a result of the Chapter 11 filings, certain events of default under the Senior Credit Facilities, New Senior Notes, PIK Notes and Old Senior Notes (see below) have occurred, the effects of which are stayed pursuant to certain provisions of the Bankruptcy Code.
ACL's credit facilities as of April 11, 2002 were amended and restated (the amended and restated credit facilities are hereafter referred to as the "Senior Credit Facilities") to, among other things, modify financial and restrictive covenants thereunder, prepay $25,000 of term loans (the "Term Loans") thereunder from the $25,000 in cash contributed by Danielson and convert $50,000 of revolving credit loans (the "Revolving Credit Facility") thereunder into a new tranche of term loans having an interest rate and other terms substantially similar to the revolving credit loans under ACL's old senior credit facilities. The amended and restated credit agreement with ACL's senior secured lenders contains mandatory prepayments of the term loans with net proceeds from certain asset sales, equity issuances, incurrence of indebtedness and sale and leaseback transactions, as well as excess cash flow, as defined in the credit agreement.
ACL also completed an exchange offer in 2002 (the "Exchange Offer") for the Old Senior Notes, pursuant to which $284,500 or approximately 96.4%, of the principal amount of ACL's Old Senior Notes were tendered, with the $58,493 principal amount of ACL's Old Senior Notes contributed by Danielson and its subsidiaries to ACL Holdings being deemed tendered in the Exchange Offer. Holders of Old Senior Notes who tendered their Old Senior Notes pursuant to the Exchange Offer received approximately $134,700 aggregate principal amount of new 11.25% senior notes ("New Senior Notes") and approximately $112,900 aggregate principal amount of 12% pay-in-kind senior subordinated notes ("PIK Notes"). The debt exchange was not an extinguishment of debt for accounting purposes since the terms of the new debt are not substantially different from the terms of the Old Senior Notes exchanged.
Following the consummation of the Exchange Offer, a holder of $4,000 aggregate principal amount of the Old Senior Notes exchanged such notes and accrued interest for approximately $2,400 of New Senior Notes and approximately $2,000 of PIK Notes as permitted by the indentures governing the notes, following which $6,500 of the Old Senior Notes remained outstanding.
Since ACL applied push down accounting effective with Danielson's acquisition of ACL, ACL's debt was adjusted to fair value at the acquisition date. The difference between the principal amount of the debt and its fair value is being accreted as interest expense over the term of the debt under the effective interest method.
The Revolving Credit Facility, which provides for revolving loans and letters of credit not to exceed the aggregate principal amount of $49,470, matures June 30, 2005, but each loan must be repaid within one year. The Revolving Credit Facility bears interest at a rate equal to LIBOR plus a margin based on ACL's performance. The interest rates as of December 26, 2003 ranged from 6.4375% to 6.5%.
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Tranche A Term Loans mature June 30, 2005. Tranche B Term Loans mature June 30, 2006. Tranche C Term Loans mature June 30, 2007. The Term Loans bear interest at a rate equal to LIBOR plus a margin based on ACL's performance. The annual interest rates as of December 26, 2003 were: Tranche A - 6.5%, Tranche B - 6.75% and Tranche C - 7.0%. These rates are inclusive of a 1% payment-in-kind ("PIK") interest rate which accrues from November 8, 2002 until the time of a consummation of a plan of reorganization under Chapter 11. ACL is paying the interest on the Senior Credit Facility as it becomes due. The 1% PIK interest will be payable upon consummation of a plan of reorganization.
The New Senior Notes are due January 1, 2008 and bear interest at an annual rate of 11.25%, payable semi-annually. The PIK Notes are due July 1, 2008 and bear interest at an annual rate of 12%. ACL has the option of issuing new PIK Notes in lieu of paying cash interest on such notes each June 30 and December 31 until maturity. After 2 years from issuance, interest accretes at 13.5% per annum if ACL elects to not pay the interest due in cash. The interest rate remains 12% if the interest is paid in cash. The Old Senior Notes are due June 30, 2008 and bear interest at an annual rate of 10.25%. Since the bankruptcy filing, ACL has not accrued or paid interest on the new Senior Notes, PIK Notes or the Old Senior Notes.
In connection with the Exchange Offer, ACL completed a consent solicitation of the holders of the Old Senior Notes, which resulted in the elimination or amendment of substantially all the restrictive covenants contained in the indenture governing the Old Senior Notes, the subordination of the subsidiary guarantees of the Old Senior Notes to the subsidiary guarantees of ACL's Senior Credit Facilities, the New Senior Notes and the PIK Notes and the waiver of any and all defaults under the indenture governing the Old Senior Notes through the effective date of the exchange offer, May 29, 2002.
As noted above, DHC purchased the 50% equity interests that Vectura Group LLC owned in Vessel Leasing at the time Danielson acquired ACL. Vessel Leasing, which was formerly accounted for under the equity method is now consolidated with ACL. Accordingly, the bonds issued by Vessel Leasing that are guaranteed by the U.S. Maritime Administration are included in ACL's debt balance. Vessel Leasing is not a debtor-in-possession and is a not a guarantor of the DIP Credit Facility. Vessel Leasing's long-term debt is not guaranteed by ACL or any of ACL's other subsidiaries.
ACL has an outstanding loan guarantee of $2,138 in the borrowings of one of its equity investees, GMS Venezuela C.A., from the International Finance Corporation.
The Senior Credit Facilities are secured by the assets of the guarantor subsidiaries. The New Senior Notes and the PIK notes are unsecured. The Senior Credit Facilities and the indentures governing the New Senior Notes and the PIK Notes (the "Indentures") contain a number of covenants with specified financial ratios and tests including, with respect to the Senior Credit Facilities, maximum leverage ratios, rent adjusted maximum leverage ratios and interest coverage ratios. The Indentures also contain certain cross default provisions.
On December 31, 2002, ACL elected to exercise its rights under the Indentures to postpone the interest payments due on the New Senior Notes and Old Senior Notes for thirty days. This resulted in an event of default under the Senior Credit Facilities and the Pre-Petition Receivables Facility. An additional default occurred under the Senior Credit Facilities when ACL initiated proceedings under Chapter 11 as of January 31, 2003. Accordingly, ACL has classified all of its long-term debt as current debt as of December 27, 2002. The effects of these events of default are stayed pursuant to certain provisions of the Bankruptcy Code.
At December 26, 2003, the principal payments of long-term debt based on the contractual terms of the instruments prior to the Chapter 11 filings were as follows:
2004 $ 35,891
2005 87,991
2006 89,322
2007 111,103
2008 269,383
Thereafter 21,273
---------
614,963
Unamortized debt discount (51,518)
---------
$ 563,445
=========
|
Upon adoption of SFAS No. 145 in 2003 which rescinded SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt", ACL reclassified an extraordinary gain of $1,885 recorded in 2001 (relating to the retirement of senior notes) to other income in the consolidated statement of operations for 2001.
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 7. INCOME TAXES
ACL and its subsidiaries (except for ACL Capital Corp., American Commercial Lines Funding Corporation and the foreign subsidiaries) are organized as limited liability companies. As such, ACL passes through its U.S. federal and substantially all of its state (but not foreign) taxable income to its members who are responsible for income taxes on such taxable income.
Components of income tax expense (benefit) follow:
May 29, 2002 to December 29, 2001
2003 December 27, 2002 to May 28, 2002 2001
---- ----------------- --------------- ----
State $ 37 $ (12) $ 1 $ 24
Foreign 2,069 750 (920) 94
Federal (5) 5 -- --
------- ----- ----- ----
$ 2,101 $ 743 $(919) $118
======= ===== ===== ====
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AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 8. EMPLOYEE BENEFIT PLANS
ACL sponsors or participates in defined benefit plans covering both salaried and hourly employees. The plans provide for eligible employees to receive benefits based on years of service and either compensation rates near retirement or at a predetermined multiplier factor. Contributions to the plans are sufficient to meet the minimum funding standards set forth in the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended. Plan assets consist primarily of common stocks, corporate bonds and cash and cash equivalents.
In addition to the defined benefit pension and related plans, ACL has a defined benefit post-retirement healthcare plan covering most full-time employees. The plan provides medical benefits and is contributory, with retiree contributions adjusted annually, and contains other cost-sharing features such as deductibles and coinsurance. The accounting for the healthcare plan anticipates future cost-sharing changes to the written plan that are consistent with ACL's expressed intent to increase the retiree contribution rate annually.
In 2003, ACL modified the post-retirement healthcare plan by discontinuing coverage to new hires and current employees who had not reached age 50 by July 1, 2003 and by terminating the prescription drug benefit for all retirees as of January 1, 2004.
ACL also sponsors a contributory defined contribution plan ("401k") covering eligible employee groups. ACL's non-qualified savings plan, for certain members of management, was suspended in 2003 as a result of the Chapter 11 filing. Contributions to such plans are based upon a percentage of employee contributions and were $391, $1,887 and $1,471 in 2003, 2002 and 2001, respectively. In 2003, ACL suspended the employer matching of employee contributions in the 401k plan.
Certain employees are covered by a union-sponsored, collectively-bargained, multi-employer defined benefit pension plan. Contributions to the plan, which are based upon a union contract, were approximately $23, $7 and $74 in 2003, 2002 and 2001, respectively.
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
A summary of the pension and post-retirement plan components follows:
Pension
----------------------------------------------------------------
December 26, 2003 December 27, 2002 May 28, 2002
----------------- ----------------- ------------
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation, beginning of period $(110,713) $ (97,901) $ (92,936)
Service cost (4,347) (2,451) (1,605)
Interest cost (7,379) (4,095) (2,816)
Impact of plan changes (47) (1,983) --
Liability loss (10,811) (7,381) (3,474)
Benefits paid 4,972 3,098 2,930
--------- --------- ---------
Benefit obligation, end of period $(128,325) $(110,713) $ (97,901)
========= ========= =========
CHANGE IN PLAN ASSETS:
Fair value of plan assets, beginning of period $ 104,764 $ 117,992 $ 112,964
Actual return on plan assets 17,114 (10,139) 7,942
Employer contributions 13 9 16
Benefits paid (4,972) (3,098) (2,930)
--------- --------- ---------
Fair value of plan assets, end of period $ 116,919 $ 104,764 $ 117,992
========= ========= =========
FUNDED STATUS:
Funded status $ (11,406) $ (5,949) $ 20,091
Unrecognized net actuarial loss 28,022 23,876 --
Unrecognized prior service cost 1,664 1,880 --
Net claims during 4th quarter -- 4 3
--------- --------- ---------
Prepaid benefit cost $ 18,280 $ 19,811 $ 20,094
========= ========= =========
AMOUNTS RECOGNIZED IN THE CONSOLIDATED
STATEMENT OF FINANCIAL POSITION CONSIST OF:
Prepaid benefit cost $ 21,824 $ 20,806 $ 22,702
Accrued benefit liability (22,979) (16,480) (2,608)
Minimum pension liability 19,435 15,485 --
--------- --------- ---------
Net amount recognized $ 18,280 $ 19,811 $ 20,094
========= ========= =========
|
The accumulated benefit obligation for ACL's pension plans amounts to $126,391 as of December 26, 2003.
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Post-Retirement
---------------------------------------------------------------
December 26, 2003 December 27, 2002 May 28, 2002
----------------- ----------------- ------------
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation, beginning of period $(15,304) $(12,614) $(12,412)
Service cost (483) (279) (195)
Interest cost (992) (524) (372)
Plan participants' contributions (623) (225) (154)
Plan amendment 4,139 -- --
Actuarial loss (1,516) (3,069) (185)
Benefits paid 1,902 1,407 704
-------- -------- --------
Benefit obligation, end of period $(12,877) $(15,304) $(12,614)
======== ======== ========
CHANGE IN PLAN ASSETS:
Fair value of plan assets, beginning of period $ -- $ -- $ --
Employer contributions 1,279 1,182 550
Plan participants' contributions 623 225 154
Benefits paid (1,902) (1,407) (704)
-------- -------- --------
Fair value of plan assets, end of period $ -- $ -- $ --
======== ======== ========
FUNDED STATUS:
Funded status $(12,877) $(15,304) $(12,614)
Unrecognized net actuarial loss 4,474 2,991 --
Unrecognized prior service cost (4,139) -- --
Net claims during 4th quarter 542 366 427
-------- -------- --------
Accrued benefit cost $(12,000) $(11,947) $(12,187)
======== ======== ========
|
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
COMPONENTS OF NET PERIODIC BENEFIT COST:
May 29, 2002 to December 29, 2001
2003 December 27, 2002 to May 28, 2002 2001
---- ----------------- --------------- ----
Pension:
Service cost $ 4,348 $ 2,451 $ 1,605 $ 3,818
Interest cost 7,379 4,095 2,816 6,408
Expected return on plan assets (10,461) (6,347) (4,848) (11,937)
Amortization of prior service costs 216 103 (854) (2,015)
Loss (gain) amortization 11 -- (13) (172)
-------- ------- ------- --------
Net periodic benefit cost (income) $ 1,493 $ 302 $(1,294) $ (3,898)
======== ======= ======= ========
Post-retirement:
Service cost $ 483 $ 279 $ 195 $ 399
Interest cost 992 524 372 826
Amortization of prior service costs -- -- (120) (288)
Loss (gain) amortization 152 -- (87) (348)
-------- ------- ------- --------
Net periodic benefit cost $ 1,627 $ 803 $ 360 $ 589
======== ======= ======= ========
|
ACL uses a September 30 measurement date in determining pension and other post-retirement benefit measurements for its plans.
WEIGHTED-AVERAGE ASSUMPTIONS:
Pension:
Discount rate 6.25% 6.75% 7.25% 7.50%
Expected return on plan assets 8.50% 9.00% 9.50% 10.00%
Rate of compensation increase 4.00% 4.00% 4.00% 4.00%
|
ACL employs a historical market and peer review approach in determining the long-term rate of return for plan assets. Historical markets are studied and long-term historical relationships between equities and fixed income are preserved consistent with the widely-accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors such as inflation and interest rates are evaluated before long-term capital market assumptions are determined. The long-term portfolio return is established via a building block approach with proper consideration of diversification and rebalancing. Peer data and historical returns are reviewed to check for reasonability and appropriateness.
Post-retirement:
Discount rate 6.75% 7.25% 7.50% 7.75%
|
The net post-retirement benefit obligation was determined using the assumption that the health care cost trend rate for retirees was 9.0% for the current year, decreasing gradually to a 5.0% trend rate by 2010 and remaining at that level thereafter. A 1% increase in the assumed health care cost trend rate would have increased the accumulated post-retirement benefit obligation as of December 26, 2003 by $135 and the aggregate of the service and interest cost components of net periodic post-retirement benefit expense for 2003 by $29.
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
PENSION PLAN ASSETS
The following table presents the fair value percentage of plan assets in each asset category .
December 26, 2003 December 27, 2002
----------------- -----------------
Asset Category
Equity securities 66.0% 50.7%
Debt securities 33.7 44.8
Cash 0.3 4.5
----- -----
Total 100.0% 100.0%
===== =====
|
INVESTMENT POLICIES AND STRATEGIES
ACL employs a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk. The intent of this strategy is to minimize plan expenses by outperforming plan liabilities over the long run. Risk tolerance is established through careful consideration of plan liabilities, plan funded status, and corporate financial condition. The investment portfolio contains a diversified blend of equity and fixed income investments. Furthermore, equity investments are diversified across U.S. and non-U.S. stocks as well as growth, value and small, mid and large capitalizations. Target allocations are maintained through monthly rebalancing procedures. Derivatives may be used to gain market exposure in an efficient and timely manner; however, derivatives may not be used to leverage the portfolio beyond the market value of the underlying investments. Investment risk is measured and monitored on an ongoing basis through annual liability measurements, periodic asset/liability studies, and quarterly investment portfolio reviews.
PLANS WITH BENEFIT OBLIGATIONS IN EXCESS OF PLAN ASSETS
The following plans have projected benefit obligations and accumulated benefit obligations in excess of the plan assets.
ACL Pension Evansville Pension Special Plan
----------- ------------------ ------------
Projected Benefit Obligation $(98,817) $(146) $(1,180)
Accumulated Benefit Obligation (96,903) (146) (1,168)
Plan Assets 75,420 113 --
|
CONTRIBUTIONS
The post-retirement benefit plan is unfunded. ACL expects to pay $700 in medical benefits under the plan in 2004, net of retiree contributions. The pension plans are funded and held in trust. ACL expects to contribute $31 to the pension plans in 2004.
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 9. LEASE OBLIGATIONS
ACL leases buildings, data processing hardware and operating equipment under various operating leases and charter agreements, which expire from 2003 to 2017 and which generally have renewal options at similar terms. Certain vessel leases also contain purchase options at prices approximating fair value of the leased vessels. Rental expense under continuing obligations was $37,044 for fiscal year 2003; $23,121 for the period December 29, 2001 through May 28, 2002; $29,896 for the period May 29, 2002 through December 27, 2002; and $56,711 for fiscal year 2001.
At December 26, 2003, obligations under ACL's operating leases with initial or remaining noncancelable lease terms longer than one year and capital leases were as follows:
2009
2004 2005 2006 2007 2008 and after
Operating Lease Obligations:
Operating Leases $20,382 $18,424 $17,425 $14,030 $13,413 $52,354
Operating Leases - Related Parties 840 839 27 -- -- --
------- ------- ------- ------- ------- -------
$21,222 $19,263 $17,452 $14,030 $13,413 $52,354
======= ======= ======= ======= ======= =======
Future Capital Lease Obligations $ 460 $ 460 $ 460 $ 192 $ -- $ --
======= ======= ======= ======= ======= =======
|
The total future minimum lease payments under capital leases of $1,572 less an interest amount of $245 results in a present value of net minimum lease payments of $1,327 which is recorded in other liabilities subject to compromise.
ACL entered into capital leases of $3,924 in 2001 with Vessel Leasing, a related party. Due to a change in the lease terms in 2002, the lease became an operating lease. ACL incurred interest expense related to capital leases of $150 for fiscal year 2003; $220 for the period December 29, 2001 through May 28, 2002; $101 for the period May 29, 2002 through December 27, 2002; and $235 for fiscal year 2001.
NOTE 10. RELATED PARTY TRANSACTIONS
On July 24, 2002, the Board of Directors of DHC amended DHC's 1995 Stock and Incentive Plan and granted stock options to management of ACL for 1,560,000 shares of DHC common stock. The options have an exercise price of $5.00 per share and expire 10 years from the date of grant. One half of the options time vest over a 4 year period in equal annual installments and one half of the options vest over a 4 year period in equal annual installments contingent upon the financial performance of ACL. During 2003, options for 765,000 shares of common stock were forfeited due to terminations and ACL not achieving the financial performance targets. Options for 795,000 shares are outstanding as of December 26, 2003 of which 146,250 shares are vested. Of the outstanding options, options for 470,265 shares time vest and options for 324,375 shares vest contingent upon ACL's future financial performance. ACL accounts for stock options under the intrinsic value method based on APB 25, "Accounting for Stock Issued to Employees". Because the market price of DHC common stock was not greater than the exercise price of the options at the date of grant and the financial performance targets have not been met, no compensation expense has been recognized in the accompanying financial statements related to the stock options.
On May 29, 2002, DHC issued 339,040 shares of restricted DHC common stock to ACL management. These restricted shares have been valued at fair value at the date of issuance and vest one third annually over a three year period. The full value of these shares is recorded as other capital with an offset to unearned compensation in member's equity. As employees render service over the vesting period, compensation expense is recorded and unearned compensation is reduced. In 2003 and 2002, 102,333 shares and 53,173 shares, respectively, of restricted DHC common stock were cancelled.
ACL recorded terminal service expense with GMS of $1,313 for fiscal year 2003; $330 for the period December 29, 2001 through May 28, 2002; $579 for the period May 29, 2002 through December 27, 2002; and $400 for fiscal year 2001. In 2001, ACL received $11,969 from GMS for the sale of terminals and proceeds from the condemnation of a terminal. ACL recognized a gain of $1,886 from these transactions.
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
ACL recorded charter income from UABL of $10,125 for fiscal year 2003; $4,493 for the period December 29, 2001 through May 28, 2002; $5,936 for the period May 29, 2002 through December 27, 2002; and $11,052 for fiscal year 2001. ACL also recorded administrative fee expenses to UABL of $7,344 for fiscal year 2003; $3,158 for the period December 29, 2001 through May 28, 2002; $4,306 for the period May 29, 2002 to December 27, 2002; and $7,709 for fiscal year 2001. These expenses are included in material, supplies and other in the consolidated statement of operations. ACL sold used barges to UABL for $480 in 2003 and $790 in 2001. At December 26, 2003, ACL had receivables of $1,755 and payables of $25 with UABL. At December 27, 2002, ACL had receivables of $6,341 from UABL.
ACL earned $1,527 in 2002 for bauxite unloading revenue from GMSV. ACL had $4,519 and $3,787 in receivables from GSMV for revenue transactions and equipment advances at December 26, 2003 and December 27, 2002, respectively.
In 2001, ACL and Vectura Group invested in Vessel Leasing. ACL accounted for its 50% ownership in Vessel Leasing by the equity method until May 29, 2002 at which time ACL began consolidating Vessel Leasing as a result of the Danielson acquisition of ACL. ACL's share of Vessel Leasing's net loss is $38 for fiscal 2001 and is included in other income in the consolidated statement of operations.
ACL sold new barges for $47,757 to Vessel Leasing in 2001. Profit on sales of barges to Vessel Leasing was deferred by Jeffboat and was being recognized over the life of the lease. Deferred profit was eliminated with purchase accounting adjustments as a result of the Danielson recapitalization. All of these barges, except for the capital leases of $3,924, were leased by Vessel Leasing to ACL as operating leases which resulted in ACL charter expense of $1,760 for the period December 29, 2001 through May 28, 2002 and $1,705 for fiscal year 2001.
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 11. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The carrying amounts (net of debt discount) and fair values of ACL's financial instruments are as follows:
2003 2002
--------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- ------ ------
Assets:
Fuel rate cap $ 1,437 $ 1,437 $ -- $ --
Net unrealized gain on fuel hedge agreements -- -- 194 194
Liabilities:
Debtor in Possession Term Loan B 50,000 50,000 -- --
Revolving Credit Facility 46,146 38,993 41,000 41,000
Tranche A Term Loan 43,119 36,436 43,119 43,119
Tranche B Term Loan 124,141 104,899 124,141 124,141
Tranche C Term Loan 146,069 123,428 146,069 146,069
New Senior Notes 129,793 10,383 128,491 38,376
Senior Subordinated Notes (PIK Notes) 80,194 -- 68,797 3,483
Old Senior Notes 5,133 -- 4,946 1,820
Bonds guaranteed by the Maritime Administration 34,996 34,996 37,740 37,740
Other Notes -- -- 317 315
|
The fair values of the fuel rate cap and the fuel hedge agreements, the Term Loans, New Senior Notes, PIK Notes and Old Senior Notes payable are based on quoted market values. The carrying value of the DIP Credit Facility, which bears interest at a floating rate, approximates its fair value. The bonds guaranteed by the Maritime Administration were recently issued and, accordingly, the carrying values approximate fair values. The Other Notes have been estimated using discounted cash flow analyses based on ACL's current incremental borrowing rates for similar types of borrowing arrangements.
FUEL PRICE RISK MANAGEMENT
ACL uses fuel rate caps and forward fuel purchases to provide partial short-term protection against a sharp increase in diesel fuel prices. These instruments generally cover a portion of ACL's forecasted diesel fuel needs for towboat operations. ACL accounts for these instruments as cash flow hedges. In accordance with SFAS No. 133, such financial instruments are marked-to-market and, if they qualify for hedge accounting, the offset is recorded to other comprehensive income and then subsequently recognized as a component of fuel expense when the underlying fuel being hedged is used. Should these instruments not qualify for hedge accounting (correlation ratio is outside of defined deviation), such changes in value would be recorded through the statement of operations rather than other comprehensive income. ACL also has barging customer contract rate provisions for changes in fuel prices for approximately half of gallons consumed. The adjustments are deferred one calendar quarter.
At December 27, 2002, ACL had forward fuel purchase contracts outstanding with an aggregate notional value of $4,428 and a fair value of $194 which has been recorded in other current assets on the consolidated statement of financial position. At December 26, 2003, ACL had forward fuel rate cap contracts outstanding with an aggregate historical cost of $917 and a fair value of approximately $1,437, which has been recorded in other current assets on the consolidated statement of financial position. Under the rate cap agreements, ACL will receive reimbursement from the seller if the average index price defined in the agreements exceeds $0.81 - $0.86 per gallon. There were 9.6 million gallons protected under the caps on the contracts at December 26, 2003.
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
INTEREST RATE RISK MANAGEMENT
ACL entered into an interest rate cap agreement in the third quarter of 2000 to reduce the impact of potential rate increases on floating rate debt. The interest rate cap had a notional amount of $201,800 and a fair value of zero as of December 27, 2002 and was effective through August 11, 2003.
ACL recognizes changes in the fair value of interest rate swap agreements entered into by GMS. Such changes are recorded in other assets or liabilities on the accompanying consolidated statement of financial position, with the offset recorded as comprehensive income (loss) or other income (expense) depending on whether the swap is an effective or ineffective hedge. ACL's share of the change in fair value of the swap agreements amounted to $440 in 2003 and ($290) in 2002, after the acquisition of ACL by DHC.
NOTE 12. CONTINGENCIES
A number of legal actions are pending against ACL in which claims are made in substantial amounts. While the ultimate results of pending litigation cannot be predicted with certainty, management does not currently expect that resolution of these matters will have a material adverse effect on ACL's consolidated results of operations, financial position and cash flows.
NOTE 13. BUSINESS SEGMENTS
ACL has two reportable business segments - barging and construction. ACL's barging segment includes barge transportation operations in North and South America and domestic fleeting facilities that provide fleeting, shifting, cleaning and repair services at various locations along the inland waterways. The construction segment constructs marine equipment for ACL's domestic and international fleets, as well as external customers.
Management evaluates performance based on segment earnings, which is defined as operating income. The accounting policies of the reportable segments are consistent with those described in the summary of significant accounting policies. Intercompany sales are transferred at cost.
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Reportable segments are business units that offer different products or services. The reportable segments are managed separately because they provide distinct products and services to internal and external customers.
REPORTABLE SEGMENTS
--------------------------- ALL OTHER
BARGING CONSTRUCTION SEGMENTS(1) TOTAL
--------- ------------ ----------- ---------
YEAR ENDED DECEMBER 26, 2003
Revenues from external customers $ 542,764 $ 70,208 $ 7,099 $ 620,071
Intersegment revenues - 1,544 - 1,544
Depreciation and amortization expense 50,592 2,917 1,409 54,918
Segment income (loss) 1,676 (832) (477) 367
Segment assets 719,876 64,035 28,285 812,196
Property additions 8,541 598 70 9,209
MAY 29, 2002 TO DECEMBER 27, 2002
Revenues from external customers $ 377,498 $ 43,994 $ 6,555 $ 428,047
Intersegment revenues - 720 - 720
Depreciation and amortization expense 35,337 1,411 659 37,407
Segment earnings (loss) 14,896 (1,866) 963 13,993
Segment assets 728,856 55,236 27,549 811,641
Property additions 6,572 880 305 7,757
DECEMBER 29, 2001 TO MAY 28, 2002
Revenues from external customers $ 243,202 $ 37,659 $ 3,944 $ 284,805
Intersegment revenues - 560 20 580
Depreciation and amortization expense 20,373 989 462 21,824
Segment (loss) earnings (21,182) 1,287 1,505 (18,390)
Property additions 5,067 481 57 5,605
YEAR ENDED DECEMBER 28, 2001
Revenues from external customers $ 672,590 $ 102,862 $13,049 $ 788,501
Intersegment revenues - 1,563 4 1,567
Depreciation and amortization expense 51,890 2,203 1,404 55,497
Segment earnings 58,436 4,713 2,212 65,361
Segment assets 672,057 59,676 26,203 757,936
Property additions (excluding $5,811 in
capital leases, and related expenditures) 16,879 2,094 799 19,772
|
(1) Financial data for segments below the reporting thresholds is attributable to a segment operating terminals along the U.S. inland waterways and in Venezuela.
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The following is a reconciliation of ACL's revenues from external customers and segment earnings to ACL's consolidated totals.
MAY 29, 2002 TO DECEMBER 29, 2001
2003 DECEMBER 27, 2002 TO MAY 28, 2002 2001
--------- ----------------- --------------- ---------
REVENUES
Revenues from external customers $ 620,071 $ 428,047 $ 284,805 $ 788,501
Intersegment revenues 1,544 720 580 1,567
Elimination of intersegment revenues (1,544) (720) (580) (1,567)
--------- --------- --------- ---------
Operating revenue $ 620,071 $ 428,047 $ 284,805 $ 788,501
========= ========= ========= =========
EARNINGS
Total segment earnings (loss) $ 367 $ 13,993 $ (18,390) $ 65,361
Unallocated amounts:
Interest expense (41,514) (35,944) (25,712) (70,932)
Other, net 6,016 (3,307) (827) 359
--------- --------- --------- ---------
Loss before reorganization items, income taxes
and cumulative effect of accounting change $ (35,131) $ (25,258) $ (44,929) $ (5,212)
========= ========= ========= =========
|
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
GEOGRAPHIC INFORMATION
REVENUES
-------------------------------------------------------------------
MAY 29, 2002 TO DECEMBER 29, 2001
2003 DECEMBER 27, 2002 TO MAY 28, 2002 2001
-------- ----------------- --------------- --------
United States $583,961 $397,603 $272,548 $748,837
South America 36,110 30,444 12,257 39,664
-------- -------- -------- --------
Total $620,071 $428,047 $284,805 $788,501
======== ======== ======== ========
|
PROPERTIES - NET
----------------------------------------
DECEMBER 26, 2003 DECEMBER 27, 2002
----------------- -----------------
United States $512,404 $548,327
South America 27,740 37,458
-------- --------
Total $540,144 $585,785
======== ========
|
Revenues are attributed to countries based on the location of the service provided. Properties represent the only significant long-lived assets of ACL.
MAJOR CUSTOMER
Revenues from one customer of the barging segment represented approximately 15% for fiscal year 2003; 14% for the period December 29, 2001 through May 28, 2002; 16% for the period May 29, 2002 through December 27, 2002; and 15% for fiscal year 2001 of ACL's consolidated revenues.
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 14. ASSET DISPOSITIONS
In 2001, ACL sold five towboats, a shipyard in Harahan, Louisiana, a cleaning facility in Baton Rouge, Louisiana and other assets. This resulted in a gain of $16,762 which is included in the net gain on property dispositions in the consolidated statement of operations.
On May 25, 2001, ACL entered into an agreement to sell substantially all of the terminals of ACT, other than its coal transfer facility at St. Louis, Missouri and its tank storage facility at Memphis, Tennessee. The sale of seven terminals was completed on May 25, 2001. An additional terminal site in Omaha, Nebraska was transferred on June 29, 2001. Subsequent to June 29, 2001, additional proceeds were received from the condemnation of Omaha Terminal. ACL recorded a gain from these transactions of $1,886 in other income in the consolidated statement of operations.
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 15. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income (loss) as of December 26, 2003 and December 27, 2002 consists of the following:
2003 2002
-------- --------
Unrealized gain (loss) on cash flow hedging instruments:
Fuel swaps $ 520 $ 68
Interest rate swaps 150 (290)
Foreign currency translation 912 408
Minimum pension liability (19,436) (15,485)
-------- --------
$(17,854) $(15,299)
======== ========
|
Other comprehensive income (loss) related to ACL's investment in GMS was $973 for fiscal year 2003, $192 for the period December 29, 2001 through May 28, 2002; $89 for the period May 29, 2002 through December 27, 2002; and ($1,131) for the fiscal year 2001, related to interest rate swaps and foreign currency translation.
NOTE 16. DEBTOR GUARANTOR FINANCIAL STATEMENTS
The DIP Credit Facility and the Senior Credit Facilities are guaranteed by ACL and the other debtor subsidiaries (collectively the "Guarantors"). Such guarantees are full, unconditional and joint and several. The ACL guarantor companies filed collectively on January 31, 2003 to reorganize under Chapter 11 of the U.S. Bankruptcy Code (see Note 1) and continue to operate as Debtor Guarantors. The following supplemental financial information sets forth on a combined basis, combining statements of financial position, statements of operations and statements of cash flows for the Debtor Guarantors and non-guarantor subsidiaries as of December 26, 2003 and December 27, 2002 and the fiscal year ended December 26, 2003, periods May 29, 2002 through December 27, 2002 and December 29, 2001 through May 28, 2002, and for the fiscal year ended December 28, 2001.
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
COMBINING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 26, 2003
DEBTOR NON- COMBINED
GUARANTORS GUARANTORS ELIMINATIONS TOTALS
---------- ---------- ------------ ---------
(DOLLARS IN THOUSANDS)
OPERATING REVENUE
Revenue $ 579,071 $ 30,592 $ -- $ 609,663
Revenue from related parties 647 10,125 (364) 10,408
--------- -------- --------- ---------
579,718 40,717 (364) 620,071
OPERATING EXPENSE
Materials, Supplies and Other 254,050 19,753 -- 273,803
Rent 35,970 1,438 (364) 37,044
Labor and Fringe Benefits 142,368 6,106 -- 148,474
Fuel 82,829 598 -- 83,427
Depreciation and Amortization 48,122 6,796 -- 54,918
Gain on Property Dispositions, Net (274) (13) -- (287)
Taxes, Other Than Income Taxes 22,215 110 -- 22,325
--------- -------- --------- ---------
585,280 34,788 (364) 619,704
--------- -------- --------- ---------
OPERATING (LOSS) INCOME (5,562) 5,929 -- 367
OTHER EXPENSE (INCOME)
Interest Expense 38,781 2,733 -- 41,514
Interest Expense, Affiliate - Net -- 7,411 (7,411) --
Other, Net (7,382) (4,675) 6,041 (6,016)
--------- -------- --------- ---------
31,399 5,469 (1,370) 35,498
--------- -------- --------- ---------
LOSS BEFORE REORGANIZATION ITEMS AND
INCOME TAXES (36,961) 460 1,370 (35,131)
REORGANIZATION ITEMS 24,344 -- -- 24,344
--------- -------- --------- ---------
LOSS BEFORE INCOME TAXES (61,305) 460 1,370 (59,475)
INCOME TAXES 271 1,830 -- 2,101
--------- -------- --------- ---------
NET LOSS $ (61,576) $ (1,370) $ 1,370 $ (61,576)
========= ======== ========= =========
|
AMERICAN COMMERCIAL LINES LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
COMBINING STATEMENT OF OPERATIONS FOR THE PERIOD
MAY 29, 2002 THROUGH DECEMBER 27, 2002
NON- COMBINED
GUARANTORS GUARANTORS ELIMINATIONS TOTALS
--------- ---------- ------------ --------
(DOLLARS IN THOUSANDS)
OPERATING REVENUE
Revenue $ 395,108 $24,905 $ -- $420,013
Revenue from related parties 883 7,368 (217) 8,034
--------- ------- -------- --------
395,991 32,273 (217) 428,047
OPERATING EXPENSE
Materials, Supplies and Other 171,647 12,685 -- 184,332
Restructuring Cost 565 -- -- 565
Rent 29,297 816 (217) 29,896
Labor and Fringe Benefits 94,055 2,966 -- 97,021
Fuel 48,888 460 -- 49,348
Depreciation and Amortization 33,766 3,641 -- 37,407
Taxes, Other Than Income Taxes 15,408 77 -- 15,485
--------- ------- -------- --------
393,626 20,645 (217) 414,054
--------- ------- -------- --------
OPERATING INCOME 2,365 11,628 -- 13,993
OTHER EXPENSE (INCOME)
Interest Expense 34,776 1,168 -- 35,944
Interest Expense, Affiliate - Net -- 4,261 (4,261) --
Other, Net (6,845) 4,089 6,063 3,307
--------- ------- -------- --------
27,931 9,518 1,802 39,251
--------- ------- -------- --------
(LOSS) INCOME BEFORE INCOME TAXES (25,566) 2,110 (1,802) (25,258)
INCOME TAXES 435 308 -- 743
--------- ------- -------- --------
NET (LOSS) EARNINGS $ (26,001) $ 1,802 $ (1,802) $(26,001)
========= ======= ======== ========
|
AMERICAN COMMERCIAL LINES LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
COMBINING STATEMENT OF OPERATIONS FOR THE PERIOD
DECEMBER 29, 2001 THROUGH MAY 28, 2002
NON- COMBINED
GUARANTORS GUARANTORS ELIMINATIONS TOTALS
---------- ---------- ------------ ------
(DOLLARS IN THOUSANDS)
OPERATING REVENUE
Revenue $ 272,653 $ 7,154 $ -- $ 279,807
Revenue from related parties 547 4,588 (137) 4,998
--------- --------- --------- ---------
273,200 11,742 (137) 284,805
OPERATING EXPENSE
Materials, Supplies and Other 128,363 9,729 -- 138,092
Restructuring Cost 13,493 -- -- 13,493
Rent 22,664 594 (137) 23,121
Labor and Fringe Benefits 64,172 1,588 -- 65,760
Fuel 30,316 118 -- 30,434
Depreciation and Amortization 19,413 2,411 -- 21,824
Gain on Property Dispositions, Net (452) (3) -- (455)
Taxes, Other Than Income Taxes 10,902 24 -- 10,926
--------- --------- --------- ---------
288,871 14,461 (137) 303,195
--------- --------- --------- ---------
OPERATING LOSS (15,671) (2,719) -- (18,390)
OTHER EXPENSE (INCOME)
Interest Expense 25,691 21 -- 25,712
Interest Expense, Affiliate - Net 827 2,801 (2,801) 827
Other, Net 2,797 (502) (2,295) --
--------- --------- --------- ---------
29,315 2,320 (5,096) 26,539
--------- --------- --------- ---------
LOSS BEFORE INCOME TAXES (44,986) (5,039) 5,096 (44,929)
INCOME TAXES (BENEFIT) (976) 57 -- (919)
--------- --------- --------- ---------
NET LOSS $ (44,010) $ (5,096) $ 5,096 $ (44,010)
========= ========= ========= =========
|
AMERICAN COMMERCIAL LINES LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
COMBINING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 28, 2001
NON- COMBINED
GUARANTORS GUARANTORS ELIMINATIONS TOTALS
---------- ---------- ------------ ------
(DOLLARS IN THOUSANDS)
OPERATING REVENUE
Revenue $ 701,081 $ 28,611 $ -- $ 729,692
Revenue from related parties 47,757 11,052 -- 58,809
--------- --------- --------- ---------
748,838 39,663 -- 788,501
OPERATING EXPENSE
Materials, Supplies and Other 319,093 22,513 -- 341,606
Rent 55,191 1,520 -- 56,711
Labor and Fringe Benefits 161,606 4,435 -- 166,041
Fuel 92,991 569 -- 93,560
Depreciation and Amortization 50,364 5,133 -- 55,497
Gain on Property Dispositions, Net (16,498) -- -- (16,498)
Taxes, Other Than Income Taxes 26,166 57 -- 26,223
--------- --------- --------- ---------
688,913 34,227 -- 723,140
--------- --------- --------- ---------
OPERATING INCOME 59,925 5,436 -- 65,361
OTHER EXPENSE (INCOME)
Interest Expense 70,932 -- -- 70,932
Interest Expense, Affiliate - Net -- 6,364 (6,364) --
Other, Net (5,656) 3,490 1,807 (359)
--------- --------- --------- ---------
65,276 9,854 (4,557) 70,573
--------- --------- --------- ---------
LOSS BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE (5,351) (4,418) 4,557 (5,212)
INCOME TAXES (BENEFIT) (21) 139 -- 118
--------- --------- --------- ---------
LOSS BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE (5,330) (4,557) 4,557 (5,330)
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (490) -- -- (490)
--------- --------- --------- ---------
NET LOSS $ (5,820) $ (4,557) $ 4,557 $ (5,820)
========= ========= ========= =========
|
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
COMBINING STATEMENT OF FINANCIAL POSITION AT DECEMBER 26, 2003
DEBTOR NON- COMBINED
GUARANTORS GUARANTORS ELIMINATIONS TOTALS
---------- ---------- ------------ ------
(DOLLARS IN THOUSANDS)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 31,673 $ 3,602 $ -- $ 35,275
Cash, Restricted -- 7,754 -- 7,754
Accounts Receivable - Net 63,672 10,532 -- 74,204
Accounts Receivable - Related Parties 4,027 2,329 -- 6,356
Materials and Supplies 31,671 1,419 -- 33,090
Other Current Assets 21,631 (6,092) -- 15,539
--------- --------- --------- ---------
Total Current Assets 152,674 19,544 -- 172,218
PROPERTIES - NET 468,871 71,273 -- 540,144
NET PENSION ASSET 21,824 -- -- 21,824
INVESTMENTS IN & ADVANCES TO EQUITY INVESTEES 100,244 42,730 (85,112) 57,862
OTHER ASSETS 19,114 1,034 -- 20,148
--------- --------- --------- ---------
Total Assets $ 762,727 $ 134,581 $ (85,112) $ 812,196
========= ========= ========= =========
LIABILITIES
LIABILITIES NOT SUBJECT TO COMPROMISE
CURRENT LIABILITIES
Accounts Payable $ 20,787 $ 1,046 $ -- $ 21,833
Accrued Payroll and Fringe Benefits 14,075 -- -- 14,075
Deferred Revenue 4,135 4,045 -- 8,180
Accrued Claims and Insurance Premiums 4,924 -- -- 4,924
Accrued Interest 5,050 134 -- 5,184
Current Portion of Long-Term Debt 50,000 34,996 -- 84,996
Other Liabilities 23,822 1,634 -- 25,456
Other Liabilities - Related Parties (1) 25 -- 24
--------- --------- --------- ---------
Total Current Liabilities 122,792 41,880 -- 164,672
Long-Term Note Payable to Affiliate -- 98,411 (98,411) --
Pension Liability 21,516 -- -- 21,516
Other Liabilities 10,573 7,589 -- 18,162
--------- --------- --------- ---------
Total Liabilities Not Subject to Compromise 154,881 147,880 (98,411) 204,350
LIABILITIES SUBJECT TO COMPROMISE
Accounts Payable 34,759 -- -- 34,759
Accrued Claims and Insurance Premiums 4,506 -- -- 4,506
Accrued Interest 10,762 -- -- 10,762
Short-Term Debt 46,146 -- -- 46,146
Current Portion of Long-Term Debt 528,449 -- -- 528,449
Other Liabilities 2,898 -- -- 2,898
--------- --------- --------- ---------
Total Liabilities Subject to Compromise 627,520 -- -- 627,520
--------- --------- --------- ---------
Total Liabilities 782,401 147,880 (98,411) 831,870
--------- --------- --------- ---------
MEMBER'S DEFICIT
Member's Interest 85,025 10,511 (10,511) 85,025
Other Capital 1,021 50,874 (50,874) 1,021
Unearned Compensation (289) -- -- (289)
Retained Deficit (87,577) (74,684) 74,684 (87,577)
Accumulated Other Comprehensive Loss (17,854) -- -- (17,854)
--------- --------- --------- ---------
Total Member's Deficit (19,674) (13,299) 13,299 (19,674)
--------- --------- --------- ---------
Total Liabilities and Member's Deficit $ 762,727 $ 134,581 $ (85,112) $ 812,196
========= ========= ========= =========
|
AMERICAN COMMERCIAL LINES LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
COMBINING STATEMENT OF FINANCIAL POSITION AT DECEMBER 27, 2002
NON- COMBINED
GUARANTORS GUARANTORS ELIMINATIONS TOTALS
---------- ---------- ------------ ------
(DOLLARS IN THOUSANDS)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 11,518 $ 2,978 $ -- $ 14,496
Cash, Restricted -- 6,328 -- 6,328
Accounts Receivable - Net 24,277 37,759 (21,152) 40,884
Accounts Receivable - Related Parties 4,129 7,365 -- 11,494
Materials and Supplies 33,370 1,014 -- 34,384
Other Current Assets 38,656 (12,847) -- 25,809
--------- --------- --------- ---------
Total Current Assets 111,950 42,597 (21,152) 133,395
PROPERTIES - NET 512,614 73,171 -- 585,785
NET PENSION ASSET 20,806 -- -- 20,806
INVESTMENTS IN & ADVANCES TO EQUITY INVESTEES 100,285 42,933 (87,541) 55,677
OTHER ASSETS 14,921 1,057 -- 15,978
--------- --------- --------- ---------
Total Assets $ 760,576 $ 159,758 $(108,693) $ 811,641
========= ========= ========= =========
LIABILITIES
CURRENT LIABILITIES
Accounts Payable $ 31,804 $ 1,497 $ -- $ 33,301
Accrued Payroll and Fringe Benefits 15,713 -- -- 15,713
Deferred Revenue 7,407 2,957 -- 10,364
Accrued Claims and Insurance Premiums 26,547 -- -- 26,547
Accrued Interest 16,283 146 -- 16,429
Short-term Debt 41,000 -- -- 41,000
Current Portion of Long-Term Debt 515,879 37,741 -- 553,620
Other Current Liabilities 33,181 2,242 -- 35,423
Other Current Liabilities - Related Parties 168 21,152 (21,152) 168
--------- --------- --------- ---------
Total Current Liabilities 687,982 65,735 (21,152) 732,565
LONG-TERM NOTE PAYABLE TO AFFILIATE -- 92,569 (92,569) --
PENSION LIABILITY 15,072 -- -- 15,072
OTHER LONG-TERM LIABILITIES 13,500 6,482 -- 19,982
--------- --------- --------- ---------
Total Liabilities 716,554 164,786 (113,721) 767,619
--------- --------- --------- ---------
MEMBER'S EQUITY
Member's Interest 85,025 10,131 (10,131) 85,025
Other Capital 1,429 57,374 (57,374) 1,429
Unearned Compensation (1,132) -- -- (1,132)
Retained Deficit (26,001) (72,533) 72,533 (26,001)
Accumulated Other Comprehensive Loss (15,299) -- -- (15,299)
--------- --------- --------- ---------
Total Member's Equity 44,022 (5,028) 5,028 44,022
--------- --------- --------- ---------
Total Liabilities and Member's Equity $ 760,576 $ 159,758 $(108,693) $ 811,641
========= ========= ========= =========
|
AMERICAN COMMERCIAL LINES LLC
(DEBTORS-IN-POSSESSION AS OF JANUARY 31, 2003)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
COMBINING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 26, 2003
DEBTOR NON- COMBINED
GUARANTORS GUARANTORS ELIMINATIONS TOTALS
---------- ---------- ------------ ------
(DOLLARS IN THOUSANDS)
OPERATING ACTIVITIES
Net Loss $(61,576) $ (1,370) $ 1,370 $(61,576)
Adjustments to Reconcile Net Loss
to Net Cash Provided by (Used in) Operating Activities:
Depreciation and Amortization 48,122 6,796 -- 54,918
Interest Accretion and Debt Issuance Cost Amortization 8,734 143 -- 8,877
Gain on Property Dispositions (274) (13) -- (287)
Other Operating Activities 571 (921) (3,820) (4,170)
Reorganization Items 24,344 -- -- 24,344
Changes in Operating Assets and Liabilities:
Accounts Receivable (68,728) 32,263 -- (36,465)
Materials and Supplies 2,686 (405) -- 2,281
Accrued Interest 6,497 (12) -- 6,485
Other Current Assets 5,645 (7,162) -- (1,517)
Other Liabilities 33,810 (21,007) -- 12,803
-------- -------- -------- --------
Net Cash Provided by (Used in) Operating Activities (169) 8,312 (2,450) 5,693
Reorganization Items Paid (21,759) -- -- (21,759)
-------- -------- -------- --------
Net Cash (Used in) Provided by Operating Activities (21,928) 8,312 (2,450) (16,066)
-------- -------- -------- --------
INVESTING ACTIVITIES
Property Additions (8,271) (938) -- (9,209)
Proceeds from Property Dispositions 2,408 14 -- 2,422
Net Change in Restricted Cash -- (1,426) -- (1,426)
Other Investing Activities (3,603) (1) -- (3,604)
-------- -------- -------- --------
Net Cash Used in Investing Activities (9,466) (2,351) -- (11,817)
FINANCING ACTIVITIES
Short-Term Borrowings 5,146 -- -- 5,146
DIP Credit Facility Borrowing 50,000 -- -- 50,000
Long-Term Debt Repaid (317) (2,887) -- (3,204)
Bank Overdrafts 325 -- -- 325
Debt Costs (3,001) -- -- (3,001)
Cash Dividends Paid -- (2,450) 2,450 --
Other Financing (604) -- -- (604)
-------- -------- -------- --------
Net Cash Provided by (Used in) Financing Activities 51,549 (5,337) 2,450 48,662
-------- -------- -------- --------
Net Increase in Cash and Cash Equivalents 20,155 624 -- 20,779
Cash and Cash Equivalents at Beginning of Year 11,518 2,978 -- 14,496
-------- -------- -------- --------
Cash and Cash Equivalents at End of Year $ 31,673 $ 3,602 $ -- $ 35,275
======== ======== ======== ========
|
AMERICAN COMMERCIAL LINES LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
COMBINING STATEMENT OF CASH FLOWS FOR THE PERIOD
MAY 29, 2002 THROUGH DECEMBER 27, 2002
NON- COMBINED
GUARANTORS GUARANTORS ELIMINATIONS TOTALS
---------- ---------- ------------ ------
(DOLLARS IN THOUSANDS)
OPERATING ACTIVITIES
Net (Loss) Income $(26,001) $ 1,802 $ (1,802) $(26,001)
Adjustments to Reconcile Net (Loss) Income
to Net Cash Provided by Operating Activities:
Depreciation and Amortization 33,766 3,641 -- 37,407
Interest Accretion and Debt Issuance Cost Amortization 3,962 71 -- 4,033
Other Operating Activities 2,835 4,314 (4,398) 2,751
Changes in Operating Assets and Liabilities:
Accounts Receivable (508) (18,377) 8,785 (10,100)
Materials and Supplies 1,949 162 -- 2,111
Accrued Interest 16,046 (639) -- 15,407
Other Current Assets 922 5,444 -- 6,366
Other Current Liabilities (9,723) 13,112 (8,785) (5,396)
-------- -------- -------- --------
Net Cash Provided by Operating Activities 23,248 9,530 (6,200) 26,578
INVESTING ACTIVITIES
Property Additions (7,639) (118) -- (7,757)
Proceeds from Property Dispositions 1,089 -- -- 1,089
Net Change in Restricted Cash -- 236 -- 236
Other Investing Activities (906) 12 -- (894)
-------- -------- -------- --------
Net Cash (Used in) Provided by Investing Activities (7,456) 130 -- (7,326)
FINANCING ACTIVITIES
Short-Term Borrowings 7,000 -- -- 7,000
Long-Term Debt Repaid (25,713) (2,640) -- (28,353)
Cash Dividends Paid -- (6,200) 6,200 --
Bank Overdrafts (1,785) -- -- (1,785)
Debt Costs (1,035) -- -- (1,035)
Other Financing (1,468) -- -- (1,468)
-------- -------- -------- --------
Net Cash Used in Financing Activities (23,001) (8,840) 6,200 (25,641)
-------- -------- -------- --------
Net (Decrease) Increase in Cash and Cash Equivalents (7,209) 820 -- (6,389)
Cash and Cash Equivalents at Beginning of Period 18,727 2,158 -- 20,885
-------- -------- -------- --------
Cash and Cash Equivalents at End of Period $ 11,518 $ 2,978 $ -- $ 14,496
======== ======== ======== ========
|
AMERICAN COMMERCIAL LINES LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
COMBINING STATEMENT OF CASH FLOWS FOR THE PERIOD
DECEMBER 29, 2001 THROUGH MAY 28, 2002
NON- COMBINED
GUARANTORS GUARANTORS ELIMINATIONS TOTALS
---------- ---------- ------------ ------
(DOLLARS IN THOUSANDS)
OPERATING ACTIVITIES
Net Loss $(44,010) $ (5,096) $ 5,096 $(44,010)
Adjustments to Reconcile Net Loss to Net Cash (Used in)
Provided by Operating Activities:
Depreciation and Amortization 19,413 2,411 -- 21,824
Interest Accretion and Debt Issuance Cost Amortization 1,235 10 -- 1,245
Gain on Property Dispositions (452) (3) -- (455)
Other Operating Activities 459 (785) (5,096) (5,422)
Changes in Operating Assets and Liabilities:
Accounts Receivable (18,565) 2,958 12,367 (3,240)
Materials and Supplies (5,139) (21) -- (5,160)
Accrued Interest 10,331 1 -- 10,332
Other Current Assets (4,427) 1,278 -- (3,149)
Other Current Liabilities 20,029 695 (12,367) 8,357
-------- -------- -------- --------
Net Cash (Used in) Provided by Operating Activities (21,126) 1,448 -- (19,678)
INVESTING ACTIVITIES
Property Additions (5,554) (51) -- (5,605)
Proceeds from Property Dispositions 985 3 -- 988
Other Investing Activities (2,276) 5 (588) (2,859)
-------- -------- -------- --------
Net Cash Used in Investing Activities (6,845) (43) (588) (7,476)
FINANCING ACTIVITIES
Danielson Holding Corporation Investment 25,000 -- -- 25,000
Cash Dividends Paid -- (588) 588 --
Long-Term Debt Repaid (25,190) -- -- (25,190)
Bank Overdrafts 1,149 -- -- 1,149
Other Financing Activities (173) -- -- (173)
-------- -------- -------- --------
Net Cash Provided by (Used in) Financing Activities 786 (588) 588 786
-------- -------- -------- --------
Net (Decrease) Increase in Cash and Cash Equivalents (27,185) 817 -- (26,368)
Cash and Cash Equivalents at Beginning of Period 45,912 1,341 -- 47,253
-------- -------- -------- --------
Cash and Cash Equivalents at End of Period $ 18,727 $ 2,158 $ -- $ 20,885
======== ======== ======== ========
|
AMERICAN COMMERCIAL LINES LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
COMBINING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 28, 2001
NON- COMBINED
GUARANTORS GUARANTORS ELIMINATIONS TOTALS
---------- ---------- ------------ ------
(DOLLARS IN THOUSANDS)
OPERATING ACTIVITIES
Net Loss $ (5,820) $ (4,557) $ 4,557 $ (5,820)
Adjustments to Reconcile Net Loss
to Net Cash Provided by Operating Activities:
Depreciation and Amortization 50,364 5,133 -- 55,497
Interest Accretion and Debt Issuance Cost Amortization 4,413 -- -- 4,413
Gain on Property Dispositions (16,498) -- -- (16,498)
Other Operating Activities (2,196) 5,018 (4,557) (1,735)
Changes in Operating Assets and Liabilities:
Accounts Receivable 6,349 (32,340) 13,981 (12,010)
Materials and Supplies (1,119) (265) -- (1,384)
Accrued Interest 413 -- -- 413
Other Current Assets (14,648) 9,650 -- (4,998)
Other Current Liabilities (11,859) 18,569 -- 6,710
-------- -------- -------- --------
Net Cash Provided by Operating Activities 9,399 1,208 13,981 24,588
INVESTING ACTIVITIES
Property Additions (13,165) (6,607) -- (19,772)
Investment in Vessel Leasing LLC (6,808) -- -- (6,808)
Proceeds from Property Dispositions 23,918 -- -- 23,918
Proceeds from Sale of Terminals 7,818 -- -- 7,818
Proceeds from Property Condemnation 2,730 -- -- 2,730
Other Investing Activities (9,055) 1,846 2,615 (4,594)
-------- -------- -------- --------
Net Cash Provided by (Used in) Investing Activities 5,438 (4,761) 2,615 3,292
FINANCING ACTIVITIES
Short-Term Borrowings 17,250 -- -- 17,250
Long-Term Debt Repaid (47,937) -- -- (47,937)
Borrowing from Affiliates -- 567 (567) --
Affiliate Debt Repaid -- (567) 567 --
Bank Overdrafts (6,670) -- -- (6,670)
Debt Costs (3,463) -- -- (3,463)
Cash Dividends Paid -- (1,000) 1,000 --
Other Financing 625 3,615 (3,615) 625
-------- -------- -------- --------
Net Cash (Used in) Provided by Financing Activities (40,195) 2,615 (2,615) (40,195)
-------- -------- -------- --------
Net Decrease in Cash and Cash Equivalents (25,358) (938) 13,981 (12,315)
Cash and Cash Equivalents at Beginning of Year 57,289 2,279 -- 59,568
-------- -------- -------- --------
Cash and Cash Equivalents at End of Year $ 31,931 $ 1,341 $ 13,981 $ 47,253
======== ======== ======== ========
|
Report of Independent Auditors
To Board of Managers
American Commercial Lines LLC
We have audited the accompanying consolidated statement of financial position of American Commercial Lines LLC as of December 26, 2003 and December 27, 2002, and the related consolidated statements of operations, cash flows, and member's (deficit) equity for the year ended December 26, 2003 and for the periods from December 29, 2001 to May 28, 2002 and May 29, 2002 to December 27, 2002. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Commercial Lines LLC at December 26, 2003 and December 27, 2002, and the consolidated results of its operations and its cash flows for the year ended December 26, 2003 and for the periods from December 29, 2001 to May 28, 2002 and May 29, 2002 to December 27, 2002, in conformity with accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming American Commercial Lines LLC will continue as a going concern. As discussed in Note 1 to the financial statements, on January 31, 2003, American Commercial Lines LLC, its parent and certain of its subsidiaries filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code (""Chapter 11''). The Company is currently operating its business under the jurisdiction of Chapter 11 and the United States Bankruptcy Court in the Southern District of Indiana (the ""Bankruptcy Court''), and continuation of the Company as a going concern is contingent upon, among other things, the ability to formulate a plan of reorganization which will be approved by the requisite parties under the United States Bankruptcy Code and be confirmed by the Bankruptcy Court, the ability to comply with its debtor-in-possession financing facility, obtain adequate financing sources, and the ability to generate sufficient cash flows from operations to meet its future obligations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
/s/ ERNST & YOUNG, LLP Louisville, Kentucky February 20, 2004 |
Report of Independent Accountants
The Board of Managers
American Commercial Lines LLC
In our opinion, based on our audit and the report of other auditors who have ceased operations, the consolidated financial statements listed in the Index appearing under Item 15(a)(2) present fairly, in all material respects, the results operations of American Commercial Lines LLC (ACL) and their cash flows for the fiscal year ended December 28, 2001, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of ACL's management; our responsibility is to express an opinion on these financial statements based on our audit. We did not audit the financial statements of UABL Limited (UABL), a 50% owned subsidiary, for 2001, which statements reflect 27% of consolidated net loss for the fiscal year ended December 28, 2001. Those statements were audited by other auditors who have ceased operations and whose report thereon dated March 26, 2002 has been furnished to us, and our opinion expressed herein, insofar as it relates to the amounts included for UABL is based solely on the report of the other auditors who have ceased operations. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit and the report of other auditors who have ceased operations provide a reasonable basis for our opinion.
As discussed in Note 2 to the consolidated financial statements, during the fourth quarter of 2001 the Company prospectively increased its estimate of the useful lives of towboats, which reduced the loss before extraordinary items and the net loss by $1.1 million for the fiscal year ended December 28, 2001. Additionally, the consolidated financial statements reflect the restatement described in Note 12 to the December 28, 2001 consolidated financial statements (which Note is not presented separately herein).
The accompanying consolidated financial statements have been prepared assuming that ACL will continue as a going concern. ACL incurred a substantial loss during 2001. As discussed in Note 4 to the December 28, 2001 consolidated financial statements (which Note is not presented separately herein), subsequent to December 28, 2001 ACL also defaulted on its Senior Notes and Senior Credit Facilities and has determined that it is not likely that it will be able to meet the covenant requirements included in the Senior Credit Facilities agreement for 2002. Accordingly, ACL's outstanding debt has been classified as current in its consolidated balance sheet at December 28, 2001. The above facts raise substantial doubt that ACL's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 4 to the December 28, 2001 consolidated financial statements (which Note is not presented separately herein). The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ PricewaterhouseCoopers LLP Louisville, Kentucky March 26, 2002, except for the restatement described above, as to which the date is August 13, 2002. |
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
DANIELSON HOLDING CORPORATION
A DELAWARE CORPORATION
AMENDED AND RESTATED
BYLAWS
OF
DANIELSON HOLDING CORPORATION
(HEREINAFTER, THE "CORPORATION")
ARTICLE I.
OFFICES
SECTION 1.1. REGISTERED OFFICE. The registered office of the Corporation shall be established and maintained at the office of National Corporate Research, Ltd., in the City of Dover, in the County of Kent, in the State of Delaware, and said corporation shall be the registered agent of the Corporation in charge thereof.
SECTION 1.2. OTHER OFFICES. The Corporation may have other offices, either within or without the State of Delaware, at such place or places as the Board of Directors may from time to time appoint or the business of the Corporation may require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
SECTION 2.1. ANNUAL MEETINGS. Annual meetings of stockholders for the purpose of electing directors and of transacting such other business as may be stated in the notice of the meeting, shall be held at such place, either within or without the State of Delaware, and at such time and date as the Board of Directors, by resolution, shall determine and as set forth in the notice of the meeting.
If the date of the annual meeting shall fall upon a legal holiday, the meeting shall be held on the next succeeding business day. At each annual meeting, the stockholders entitled to vote shall elect a Board of Directors and they may transact such other corporate business as shall be stated in the notice of the meeting.
SECTION 2.2. VOTING. Each stockholder entitled to vote in accordance with the terms of the Certificate of Incorporation and in accordance with the provisions of these Bylaws shall be entitled to one vote, in person or by proxy, for each share of stock entitled to vote held by such stockholder, but no proxy shall be voted after three years from its date unless such proxy provides for a longer period. Upon the demand of any stockholder, the vote for directors and the vote upon any question before the meeting, shall be by ballot. All elections for directors shall be decided by plurality vote; all other questions shall be decided by majority vote
except as otherwise provided by the Certificate of Incorporation or the laws of the State of Delaware.
A complete list of the stockholders entitled to vote at the ensuing election, arranged in alphabetical order, with the address of each, and the number of shares held by each, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
SECTION 2.3. QUORUM. Except as otherwise required by law, by the Certificate of Incorporation or by these Bylaws, the presence, in person or by proxy, of stockholders holding a majority of the outstanding shares of each class of stock of the Corporation entitled to vote shall constitute a quorum at all meetings of the stockholders. In the absence of a quorum, a majority in interest of the stockholders entitled to vote thereat, present in person or by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite amount of stock entitled to vote shall be present. At any such adjourned meeting at which the requisite amount of stock entitled to vote shall be represented, any business may be transacted which might have been transacted at the meeting as originally noticed; but only those stockholders entitled to vote at the meeting as originally noticed shall be entitled to vote at any adjournment or adjournments thereof.
SECTION 2.4. SPECIAL MEETINGS. Special meetings of the stockholders for any purpose may be held at any time upon call of the Chairman of the Board, if any, the President, the Secretary, or a majority of the Board of Directors, at such time and place as may be stated in the notice. A special meeting of the stockholders may be called by the President or the Secretary upon the written request, stating time, place, and the purpose or purposes of the meeting of stockholders who together own of record a majority of the outstanding stock of all classes entitled to vote at such meeting.
SECTION 2.5. NOTICE OF MEETINGS. Written notice, stating the place, date and time of the meeting, and the general nature of the business to be considered, shall be given by the President, any Vice President, the Secretary or an Assistant Secretary to each stockholder entitled to vote thereat at his address as it appears on the records of the Corporation, not less than ten nor more than sixty days before the date of the meeting. No business other than that stated in the notice shall be transacted at any meeting without the unanimous consent of all the stockholders entitled to vote thereat.
SECTION 2.6. ACTION WITHOUT MEETING. Unless otherwise provided by the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered
to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.
SECTION 2.7. ADJOURNMENT. Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
ARTICLE III.
DIRECTORS
SECTION 3.1. NUMBER AND TERM OF OFFICE. The business, property, and affairs of the Corporation shall be managed by or under the direction of a Board of Directors. The number of directors shall be from six (6) to eleven (11). The number of directors shall be fixed at ten (10) until changed by an amendment to this Bylaw duly adopted by the Board of Directors or the stockholders. The directors shall be elected at the annual meeting of the stockholders, and each director shall serve (subject to the provisions of Sections 3.2, 3.3, and 3.4 of these Bylaws) until the next annual meeting of stockholders and his respective successor shall be elected and shall qualify. Directors need not be stockholders.
SECTION 3.2. RESIGNATIONS. Any director, member of a committee or other officer may resign at any time. Such resignation shall be made in writing, and shall take effect at the time specified therein, and if no time be specified, at the time of its receipt by the President or Secretary. The acceptance of a resignation shall not be necessary to make it effective.
SECTION 3.3. VACANCIES. If the office of any director, member of a committee or other officer becomes vacant, the remaining directors in office, though less than a quorum by a majority vote, may appoint any qualified person to fill such vacancy, who shall hold office for the unexpired term and until his successor shall be duly chosen.
SECTION 3.4. REMOVAL. Except as hereinafter provided, any director or directors may be removed either for or without cause at any time by the affirmative vote of the holders of a majority of all the shares of stock outstanding and entitled to vote, at a special meeting of the stockholders called for the purpose and the vacancies thus created may be filled, at the meeting held for the purpose of removal, by the affirmative vote of a majority in interest of the stockholders entitled to vote.
SECTION 3.5. INCREASE OF NUMBER OF DIRECTORS. The number of directors may be increased by amendment of these Bylaws by the affirmative vote of a majority of the directors, though less than a quorum, or, by the affirmative vote of a majority in interest of the stockholders, at the annual meeting or at a special meeting called for that purpose, and by like vote the additional directors may be chosen at such meeting to hold office until the next annual election and until their successors are elected and qualify.
SECTION 3.6. POWERS. The Board of Directors shall exercise all of the powers of the Corporation except such as are by law, or by the Certificate of Incorporation of the Corporation or by these Bylaws, conferred upon or reserved to the stockholders.
SECTION 3.7. COMMITTEES. The Board of Directors may, by resolution or resolutions passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the Board of Directors, or in these Bylaws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation of the Corporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the Bylaws of the Corporation; and, unless the resolution, these Bylaws, or the Certificate of Incorporation expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock.
SECTION 3.8. MEETINGS. The newly elected directors may hold their first meeting for the purpose of organization and the transaction of business, if a quorum is present, immediately after the annual meeting of the stockholders; or the time and place of such meeting may be fixed by consent in writing of all the directors.
Regular meetings of the Board of Directors may be held without notice at such place and time as shall be determined from time to time by the Board.
Special meetings of the Board of Directors shall be held at such time and place as shall be designated in the notice of the meeting whenever called by the Chairman of the Board, if any, the President, or by a majority of the directors then in office.
SECTION 3.9. TELEPHONE MEETINGS. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.
SECTION 3.10. QUORUM. A majority of the directors shall constitute a quorum for the transaction of business. If at any meeting of the Board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need be given other than by announcement at the meeting which shall be so adjourned.
SECTION 3.11. COMPENSATION. Directors shall not receive any stated salary for their services as directors or as members of committees, but by resolution of the Board a fixed fee and expenses of attendance may be allowed for attendance at each meeting. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity as an officer, agent or otherwise, and receiving compensation therefore.
SECTION 3.12. ACTION WITHOUT MEETING. Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting, if a written consent thereto is signed by all members of the Board, or of such committee as the case may be, and such written consent is filed with the minutes of proceedings of the Board or committee.
SECTION 3.13. SPECIAL NOMINATION RIGHTS. Any holder of 20% or more of the outstanding voting securities of the Corporation shall have the right, but not the obligation, to nominate one qualified candidate for election as a director of the Corporation and to be included as a nominee in the proxy statement of the Corporation; provided that such holder notifies the Corporation of such nominee within the time periods set forth in the Proxy Statement of the Corporation.
ARTICLE IV.
OFFICERS
SECTION 4.1. OFFICERS. The officers of the Corporation shall be a President, a Chief Financial Officer, and a Secretary, all of whom shall be elected by the Board of Directors and who shall hold office until their successors are elected and qualified. In addition, the Board of Directors may elect a Chairman (who need not be an officer of the Corporation), a Chief Executive Officer, a Chief Operating Officer, a Chief Investment Officer, one or more Vice-Presidents, a General Counsel and such Assistant Secretaries and Assistant Treasurers as they may deem proper. None of the officers of the Corporation need be directors. The officers shall be elected at the first meeting of the Board of Directors after each annual meeting. Any person may hold at one time two or more offices.
SECTION 4.2. OTHER OFFICERS AND AGENTS. The Board of Directors may appoint such other officers and agents as it may deem advisable, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors.
SECTION 4.3. CHAIRMAN OF THE BOARD. The directors may elect one of their members to be chairman of the Board of Directors (the "Chairman"). The Chairman shall preside at all meetings of the Board of Directors and shall have and perform such other duties as from time to time may be assigned to him by the Board of Directors, who shall determine whether or not the Chairman shall be an officer of the Corporation.
SECTION 4.4. CHIEF EXECUTIVE OFFICER. If appointed by the Board of Directors, the Chief Executive Officer shall be the chief executive officer of the Corporation and shall have the general powers and duties of supervision and management usually invested in a Chief Executive Officer of a corporation. He shall preside at all meetings of the stockholders if present thereat, and in the absence or non-election of the Chairman of the Board of Directors, at all meetings of the Board of Directors, and shall have general supervision, direction and control of the business of the Corporation.
SECTION 4.5. PRESIDENT. The President shall be the chief operating officer of the Corporation. The President shall have the general powers and duties of supervision and management usually vested in the office of President of a corporation. In the absence or non-election of the Chief Executive Officer, the President shall have the general powers and duties of the Chief Executive Officer. Except as the Board of Directors shall authorize the execution thereof in some other manner, he shall execute bonds, mortgages, and other contracts on behalf of the Corporation, and shall cause the seal to be affixed to any instrument requiring it and when so affixed the seal shall be attested by the signature of the Secretary or the Chief Financial Officer or an Assistant Secretary or an Assistant Treasurer.
SECTION 4.6. VICE-PRESIDENT. Each Vice-President shall have such powers and shall perform such duties as shall be assigned to him by the directors.
SECTION 4.7. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall have the custody of the corporate funds and securities and shall keep full and accurate account of receipts and disbursements in books belonging to the Corporation. He shall deposit all moneys and other valuables in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors.
The Chief Financial Officer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, the Chief Executive Officer, if any, or the President, taking proper vouchers for such disbursements. He shall render to the Chief Executive Officer, if any, the President and the Board of Directors at the regular meetings of the Board of Directors, or whenever they may request it, an account of all his transactions as Chief Financial Officer and of the financial condition of the Corporation. If required by the Board of Directors, he shall give the Corporation a bond for the faithful discharge of his duties in such amount and with such surety as the board shall prescribe.
SECTION 4.8. SECRETARY. The Secretary shall give, or cause to be given, notice of all meetings of stockholders and directors, and all other notices required by law or by these Bylaws, and in case of his absence or refusal or neglect so to do, any such notice may be given by any person thereunto directed by the Chief Executive Officer, if any, the President, or by the directors, or stockholders, upon whose requisition the meeting is called as provided in these Bylaws. He shall record all the proceedings of the meetings of the Corporation and of the directors in a book to be kept for that purpose, and shall perform such other duties as may be assigned to him by the directors, the Chief Executive Officer, if any, or the President. He shall have the custody of the seal of the Corporation and shall affix the same to all instruments requiring it, when authorized by the directors, the Chief Executive Officer, if any, or the President, and attest the same.
SECTION 4.9. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. Assistant Treasurers and Assistant Secretaries, if any, shall be elected and shall have such powers and shall perform such duties as shall be assigned to them, respectively, by the directors.
ARTICLE V.
CAPITAL STOCK
SECTION 5.1. CERTIFICATES OF STOCK. Certificates of stock, signed by the Chairman or Vice-Chairman of the Board of Directors or Chief Executive Officer, if they be elected, President or Vice President, and the Chief Financial Officer or an Assistant Treasurer, or Secretary or an Assistant Secretary, shall be issued to each stockholder certifying the number of shares owned by him in the Corporation. Any of or all the signatures may be facsimiles.
SECTION 5.2. LOST CERTIFICATES. A new certificate of stock may be issued in the place of any certificate theretofore issued by the Corporation, alleged to have been lost or destroyed, and the directors may, in their discretion, require the owner of the lost or destroyed certificate, or his legal representatives, to give the Corporation a bond, in such sum as they may direct, not exceeding double the value of the stock, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss of any such certificate, or the issuance of any such new certificate.
SECTION 5.3. TRANSFER OF SHARES. The shares of stock of the Corporation shall be transferable only upon its books by the holders thereof in person or by their duly authorized attorneys or legal representatives, and upon such transfer the old certificates shall be surrendered to the Corporation by the delivery thereof to the person in charge of the stock and transfer books and ledgers, or to such other person as the directors may designate, by whom they shall be canceled, and new certificates shall thereupon be issued. A record shall be made of each transfer and whenever a transfer shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer.
SECTION 5.4. STOCKHOLDERS RECORD DATE. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders, or to receive payment of any dividend or other distribution or allotment of any
rights or to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of any meeting of stockholders, nor more than sixty (60) days prior to the time for such other actions hereinbefore described; PROVIDED, HOWEVER, that if no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held, and, for determining stockholders entitled to receive payment of any dividend or other distribution or allotment of rights or to exercise any rights of change, conversion or exchange of stock or for any other purpose, the record date shall be at the close of business on the day on which the Board of Directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; PROVIDED, HOWEVER, that the Board of Directors may fix a new record date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall be not more than ten (10) days after the date upon which the resolution fixing the record date is adopted. If no record date has been fixed by the Board of Directors and no prior action by the Board of Directors is required by the Delaware General Corporation Law, the record date shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation in the manner prescribed by Article II, Section 2.6 hereof. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by the Delaware General Corporation Law with respect to the proposed action by written consent of the stockholders, the record date for determining stockholders entitled to consent to corporate action in writing shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.
SECTION 5.5. DIVIDENDS. Subject to the provisions of the Certificate of Incorporation, the Board of Directors may, out of funds legally available therefore at any regular or special meeting, declare dividends upon the capital stock of the Corporation as and when they deem expedient. Before declaring any dividend there may be set apart out of any funds of the Corporation available for dividends, such sum or sums as the directors from time to time in their discretion deem proper for working capital or as a reserve fund to meet contingencies or for equalizing dividends or for such other purposes as the directors shall deem conducive to the interests of the Corporation.
ARTICLE VI.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 6.1. RIGHT TO INDEMNIFICATION. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "Proceeding"), by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an "Indemnitee"), whether the basis of such Proceeding is alleged action in an official capacity as a director, officer, employee or agent or in ay other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only the extent that such amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith and such indemnification shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the Indemnitee's heirs, executors and administrators; PROVIDED, HOWEVER, that, except as provided in paragraph (c) hereof with respect to Proceedings to enforce rights to indemnification, the Corporation shall indemnify any such Indemnitee in connection with a Proceeding (or part thereof) initiated by such Indemnitee only if such Proceeding (or part thereof) was authorized by the Board of Directors of the Corporation.
SECTION 6.2. RIGHT TO ADVANCEMENT OF EXPENSES. The right to indemnification conferred in paragraph (a) of this Section shall include the right to be paid by the Corporation the expenses incurred in defending any Proceeding for which such right to indemnification is applicable in advance of its final disposition (hereinafter an "Advancement of Expenses"); PROVIDED, HOWEVER, that, if the Delaware General Corporation Law requires, an Advancement of Expenses incurred by an Indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such Indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (hereinafter an "Undertaking"), by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a "Final Adjudication") that such Indemnitee is not entitled to be indemnified for such expenses under this Section or otherwise.
SECTION 6.3. RIGHT OF INDEMNITEE TO BRING SUIT. The rights to indemnification and to the Advancement of Expenses conferred in Sections 6.1 and 6.2 of this Article shall be contract rights. If a claim under Sections 6.1 or 6.2 of this Article is not paid in full by the Corporation within sixty days after a written claim has been received by the Corporation, except in the case of a claim for an Advancement of Expenses, in which case the applicable period shall be twenty days, the Indemnitee may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an Advancement of Expenses pursuant to the terms of an Undertaking, the Indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (i) any suit brought by the Indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the Indemnitee to enforce a right to an Advancement of Expenses) it shall be a defense that, and (ii) in any suit by the Corporation to recover an Advancement of Expenses pursuant to the terms of an Undertaking the Corporation shall be entitled to recover such expenses upon a Final Adjudication that, the Indemnitee has not met any applicable standard for indemnification set forth in the Delaware General Corporation Law. Neither the failure of the Corporation (including its board of directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the Indemnitee is proper in the circumstances because the Indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its board of directors, independent legal counsel, or its stockholders) that the Indemnitee has not met such applicable standard of conduct, shall create a presumption that the Indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the Indemnitee, be a defense to such suit. In any suit brought by the Indemnitee to enforce a right to indemnification or to an Advancement of Expenses hereunder, or by the Corporation to recover an Advancement of Expenses pursuant to the terms of an Undertaking, the burden of proving that the Indemnitee is not entitled to be indemnified, or to such Advancement of Expenses, under this Section or otherwise shall be on the Corporation.
SECTION 6.4. NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification and to the Advancement of Expenses conferred in this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the certificate of incorporation, by law, agreement, vote of stockholders or disinterested directors or otherwise.
SECTION 6.5. INDEMNIFICATION CONTRACTS. The board of directors is authorized to enter into a contract with any director, officer, employee or agent of the Corporation, or any person serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including employee benefit plans, providing for indemnification rights equivalent to or, if the Board of Directors so determines, greater than, those provided for in this Article VI.
SECTION 6.6. EFFECT OF AMENDMENT. Any amendment, repeal or modification of any provision of this Article VI by the stockholders and the directors of the Corporation shall not adversely affect any right or protection of a director or officer of the Corporation existing at the time of such amendment, repeal or modification.
ARTICLE VII.
MISCELLANEOUS
SECTION 7.1. CORPORATE SEAL. The corporate seal shall be circular in form and shall contain the name of the Corporation, the year of its creation and the words
"CORPORATE SEAL" and DELAWARE." Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
SECTION 7.2. FISCAL YEAR. The fiscal year of the Corporation shall begin on the 1st day of January in each year and terminate on the 31st day of December in each such year or as shall otherwise be determined from time to time by the Board of Directors.
SECTION 7.3. CHECKS. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, agent or agents of the Corporation, and in such manner as shall be determined from time to time by resolution of the Board of Directors.
SECTION 7.4. NOTICES AND WAIVERS OF NOTICE. Whenever any notice is required by law, the Certificate of Incorporation, or these Bylaws to be given, personal notice is not meant unless expressly so stated, and any notice so required shall be deemed to be sufficient if given by depositing the same in the United States mail, postage prepaid, addressed to the person entitled thereto at his address as it appears on the records of the Corporation, and such notice shall be deemed to have been given on the day of such mailing. Stockholders not entitled to vote shall not be entitled to receive notice of any meetings except as otherwise provided by statute.
Whenever any notice whatever is required to be given under the provisions of any law, or under the provisions of the Certificate of Incorporation of the Corporation or these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the meeting or the time stated therein, shall be deemed equivalent thereto.
SECTION 7.5. STOCK OF OTHER CORPORATIONS OR OTHER INTERESTS. Unless otherwise ordered by the Board of Directors, the President, the Secretary, and such attorneys or agents of the Corporation as may from time to time be authorized by the Board of Directors or the President, shall have full power and authority on behalf of this Corporation to attend and to act and vote in person or by proxy at any meeting of the holders of securities of any corporation or other entity in which this Corporation may own or hold shares or other securities, and at such meetings shall possess and may exercise all the rights and power incident to the ownership of such shares or other securities which this Corporation, as the owner or holder thereof, might have possessed and exercised if present. The President, the Secretary, or such attorneys or agents, may also execute and deliver on behalf of the Corporation powers of attorney, proxies, consents, waivers, and other instruments relating to the shares or securities owned or held by this Corporation.
ARTICLE VIII.
AMENDMENTS
The holders of shares entitled at the time to vote for the election of directors shall have power to adopt, amend, or repeal the Bylaws of the Corporation by vote of not less than two-thirds of such shares, and except as otherwise provided by law, the Board of Directors shall have power equal in all respects to that of the stockholders to adopt, amend, or repeal the Bylaws by
vote of not less than two-thirds of the entire Board of Directors; PROVIDED, HOWEVER, any Bylaws adopted by the Board may be amended or repealed by vote of the holders of two-thirds of the shares entitled at the time to vote for the election of directors.
EXHIBIT 4.18
CREDIT AGREEMENT
DATED AS OF MARCH 10, 2004
AMONG
COVANTA ENERGY CORPORATION
AND
EACH OF ITS SUBSIDIARIES PARTY HERETO,
THE LENDERS LISTED HEREIN,
AS LENDERS,
BANK OF AMERICA, N.A.,
AS ADMINISTRATIVE AGENT,
AND
DEUTSCHE BANK SECURITIES, INC.
AS DOCUMENTATION AGENT
BANK OF AMERICA, N.A.
AND
DEUTSCHE BANK SECURITIES, INC.
AS CO-LEAD ARRANGERS
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS............................................................................... 1
1.1 Certain Defined Terms......................................................................... 1
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement............ 34
1.3 Other Definitional Provisions and Rules of Construction....................................... 35
SECTION 2. AMOUNT OF COMMITMENTS; CERTAIN TERMS OF PAYMENT AND REPAYMENT............................. 35
2.1 Letter of Credit Commitments; Register; Default Rate; Computation of Interest; Maximum
Rate.......................................................................................... 35
2.2 Fees.......................................................................................... 36
2.3 Mandatory Payments, Reductions in Commitments; General Provisions Regarding Payments;
Application of Proceeds of Collateral......................................................... 37
2.4 Increased Costs; Taxes; Capital Adequacy...................................................... 41
2.5 Statement of Lenders; Obligation of Lenders and Issuing Lenders to Mitigate................... 45
2.6 Defaulting Lender............................................................................. 46
2.7 Joint and Several Liability; Payment Indemnifications......................................... 47
2.8 Rights of Subrogation, Contribution, Etc...................................................... 48
SECTION 3. LETTERS OF CREDIT......................................................................... 49
3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations Therein................. 49
3.2 Letter of Credit Fees......................................................................... 51
3.3 Drawings and Reimbursement of Amounts Paid Under Letters of Credit............................ 52
3.4 Obligations Absolute.......................................................................... 54
3.5 Nature of Issuing Lenders' Duties............................................................. 55
3.6 Cash Collateral for Letters of Credit......................................................... 56
SECTION 4. CONDITIONS TO CLOSING DATE................................................................ 57
4.1 Conditions to Closing Date.................................................................... 57
SECTION 5. COMPANY'S REPRESENTATIONS AND WARRANTIES.................................................. 68
5.1 Organization, Powers, Qualification, Good Standing, Business and Subsidiaries................. 68
5.2 Authorization of Borrowing, etc............................................................... 69
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TABLE OF CONTENTS
(continued)
PAGE
5.3 Financial Condition........................................................................... 70
5.4 No Material Adverse Change; No Restricted Payments............................................ 71
5.5 Title to Properties; Liens; Real Property; Intellectual Property.............................. 71
5.6 Litigation; Adverse Facts..................................................................... 72
5.7 Payment of Taxes.............................................................................. 72
5.8 Performance of Agreements; Material Contracts................................................. 72
5.9 Governmental Regulation....................................................................... 73
5.10 Securities Activities......................................................................... 73
5.11 Employee Benefit Plans........................................................................ 73
5.12 Certain Fees.................................................................................. 74
5.13 Environmental Protection...................................................................... 75
5.14 Employee Matters.............................................................................. 75
5.15 Matters Relating to Collateral................................................................ 76
5.16 Disclosure.................................................................................... 77
5.17 Cash Management System........................................................................ 77
5.18 Matters Relating to Credit Parties............................................................ 77
5.19 Investigation................................................................................. 78
5.20 Matters Relating to Bankruptcy Proceedings.................................................... 78
5.21 Subordinated Indebtedness..................................................................... 78
5.22 Reporting to IRS.............................................................................. 78
5.23 Solvency...................................................................................... 79
SECTION 6. COMPANY'S AFFIRMATIVE COVENANTS........................................................... 79
6.1 Financial Statements and Other Reports........................................................ 79
6.2 Existence, etc................................................................................ 84
6.3 Payment of Taxes and Claims; Tax.............................................................. 84
6.4 Maintenance of Properties; Insurance; Application of Net Insurance/ Condemnation
Proceeds...................................................................................... 85
6.5 Inspection Rights; Lender Meeting............................................................. 87
6.6 Compliance with Laws, etc.................................................................... 87
6.7 Environmental Matters........................................................................ 87
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TABLE OF CONTENTS
(continued)
PAGE
6.8 Execution of Borrower Joinder Agreement and Personal Property Collateral Documents
After the Closing Date....................................................................... 89
6.9 Matters Relating to Additional Real Property Collateral...................................... 91
6.10 Deposit Accounts............................................................................. 91
6.11 Further Assurances........................................................................... 92
6.12 High Yield Notes............................................................................. 93
6.13 Most Favored Nations Payments................................................................ 93
SECTION 7. BORROWERS' NEGATIVE COVENANTS............................................................ 93
7.1 Indebtedness................................................................................. 94
7.2 Liens and Related Matters.................................................................... 97
7.3 Investments; Acquisitions.................................................................... 100
7.4 Contingent Obligations; Performance Guaranties............................................... 102
7.5 Restricted Payments.......................................................................... 105
7.6 Financial Covenants.......................................................................... 106
7.7 Restriction on Fundamental Changes; Asset Sales.............................................. 109
7.8 Transactions with Shareholders and Affiliates................................................ 111
7.9 Restriction on Leases........................................................................ 111
7.10 Detroit Project Covenants.................................................................... 112
7.11 Conduct of Business.......................................................................... 112
7.12 Amendments to Related Agreements, Debt Documentation and Organizational Documents............ 112
7.13 End of Fiscal Years; Fiscal Quarters......................................................... 113
7.14 Amendment to Pension Plans................................................................... 113
SECTION 8. EVENTS OF DEFAULT........................................................................ 114
8.1 Failure to Make Payments When Due............................................................ 114
8.2 Default in Other Agreements.................................................................. 114
8.3 Breach of Certain Covenants.................................................................. 114
8.4 Breach of Warranty........................................................................... 115
8.5 Other Defaults Under Credit Documents........................................................ 115
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc......................................... 115
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc........................................... 115
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TABLE OF CONTENTS
(continued)
PAGE
8.8 Judgments and Attachments.................................................................... 116
8.9 Dissolution.................................................................................. 116
8.10 Employee Benefit Plans....................................................................... 116
8.11 Material Adverse Effect...................................................................... 117
8.12 Change in Control............................................................................ 117
8.13 Invalidity of Intercreditor Agreement; Failure of Security; Repudiation of Obligations....... 117
8.14 Termination of Material Contracts............................................................ 117
8.15 NOL Treatment................................................................................ 117
SECTION 9. ADMINISTRATIVE AGENT..................................................................... 118
9.1 Appointment.................................................................................. 118
9.2 Powers and Duties; General Immunity.......................................................... 119
9.3 Independent Investigation by Lenders; No Responsibility For Appraisal of
Creditworthiness............................................................................. 120
9.4 Right to Indemnity........................................................................... 121
9.5 Successor Agents............................................................................. 121
9.6 Intercreditor Agreement...................................................................... 122
9.7 Administrative Agent May File Proofs of Claim................................................ 122
SECTION 10. MISCELLANEOUS............................................................................ 123
10.1 Successors and Assigns; Assignments and Participations in Letters of Credit.................. 123
10.2 Expenses..................................................................................... 127
10.3 Indemnity.................................................................................... 128
10.4 Set-Off...................................................................................... 129
10.5 Ratable Sharing.............................................................................. 129
10.6 Amendments and Waivers....................................................................... 130
10.7 Independence of Covenants.................................................................... 131
10.8 Notices; Effectiveness of Signatures......................................................... 132
10.9 Survival of Representations, Warranties and Agreements....................................... 132
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative........................................ 133
10.11 Marshalling; Payments Set Aside.............................................................. 133
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TABLE OF CONTENTS
(continued)
PAGE
10.12 Severability................................................................................. 133
10.13 Obligations Several; Independent Nature of Lenders' Rights; Damage Waiver.................... 133
10.14 Release of Security Interest................................................................. 134
10.15 Headings..................................................................................... 134
10.16 Applicable Law............................................................................... 134
10.17 Construction of Agreement.................................................................... 135
10.18 Consent to Jurisdiction and Service of Process............................................... 135
10.19 Waiver of Jury Trial......................................................................... 136
10.20 Confidentiality.............................................................................. 136
10.21 Release of Parties; Waivers.................................................................. 137
10.22 No Fiduciary Duty............................................................................ 138
10.23 Counterparts; Effectiveness.................................................................. 138
10.24 No Third Party Beneficiaries................................................................. 138
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EXHIBITS
I [INTENTIONALLY OMITTED]
II [INTENTIONALLY OMITTED]
III FORM OF REQUEST FOR ISSUANCE OF LETTER OF CREDIT
IV FORM OF CLOSING DATE LETTERS OF CREDIT
V FORM OF COMPLIANCE CERTIFICATE
VI FORM OF ASSIGNMENT AGREEMENT
VII FORM OF SECURITY AGREEMENT
VIII FORM OF BORROWER JOINDER AGREEMENT
IX FORM OF SOLVENCY CERTIFICATE
X FORM OF OPINIONS OF CREDIT PARTIES' COUNSEL
XI FORM OF DHC PLEDGE AGREEMENT
XII [INTENTIONALLY OMITTED]
XIII FORM OF INTERCREDITOR AGREEMENT
XIV FORM OF MORTGAGE
XV [INTENTIONALLY OMITTED]
SCHEDULES
1.1A DIP TRANCHE A L/Cs AND DIP TRANCHE B L/Cs 1.1B PRINCIPAL LEASE, SERVICE AND OPERATING AGREEMENTS 1.1C BUDGET 2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES 2.3A(i)(f) RESTRICTED ACCOUNTS 4.1C CORPORATE STRUCTURE 4.1N CLOSING DATE MORTGAGED PROPERTIES 4.1P CASH MANAGEMENT SYSTEM 5.1 COMPANY AND SUBSIDIARIES 5.5B REAL PROPERTY 5.5C INTELLECTUAL PROPERTY 5.6 LITIGATION 5.8A CERTAIN ALLEGED DEFAULTS 5.8C MATERIAL CONTRACTS 5.11 MATTERS RELATING TO EMPLOYEE BENEFIT PLANS 5.13 ENVIRONMENTAL MATTERS 7.1(vi) CERTAIN EXISTING INDEBTEDNESS 7.1(ix) CERTAIN EXISTING CAPITAL LEASES 7.2 CERTAIN EXISTING LIENS 7.3(v) CERTAIN EXISTING INVESTMENTS 7.3(vi) CERTAIN WTE PROJECTS 7.4(iv) CERTAIN EXISTING PERFORMANCE GUARANTIES 7.4(vi) CERTAIN EXISTING CONTINGENT OBLIGATIONS 7.6G STIPULATED ADJUSTED EBITDA 7.8 CERTAIN TRANSACTIONS WITH AFFILIATES |
COVANTA ENERGY CORPORATION
CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of March 10, 2004 and
entered into by and among COVANTA ENERGY CORPORATION, a Delaware corporation
("COMPANY"); EACH OF COMPANY'S SUBSIDIARIES LISTED ON THE SIGNATURE PAGES HEREOF
(each such Subsidiary and Company individually referred to herein as a
"BORROWER" and, collectively (together with any Additional Subsidiary Borrowers
(this and other capitalized terms used in the recitals hereto without definition
being used as defined in subsection 1.1)), on a joint and several basis, as
"BORROWERS"); THE PERSONS IDENTIFIED ON THE SIGNATURE PAGES HEREOF AS LENDERS
(each individually referred to herein as a "LENDER" and collectively as
"LENDERS"); DEUTSCHE BANK SECURITIES, INC. ("DEUTSCHE BANK"), as documentation
agent for Lenders (in such capacity, "DOCUMENTATION AGENT"); and BANK OF
AMERICA, N.A. ("BANK OF AMERICA"), as administrative agent for Lenders (in such
capacity, "ADMINISTRATIVE AGENT").
R E C I T A L S
WHEREAS, on April 1, 2002 (the "PETITION DATE"), Borrowers and certain of their Domestic Subsidiaries (collectively, the "DEBTORS") filed voluntary petitions for relief under the Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York (such proceedings being jointly administered under Case Nos. 02-40826 through 02-40949, 02-16322, 03-13679 through 03-13685, and 03-13687 through 03-13709 are hereinafter referred to as the "CHAPTER 11 CASES"), and each Borrower has operated its businesses and managed its properties as a debtor-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code;
WHEREAS, the Debtors have proposed, their creditors have approved, and the Bankruptcy Court has confirmed, the Plan of Reorganization;
WHEREAS, pursuant to the Plan of Reorganization, the Existing Detroit L/Cs shall be replaced under this Agreement;
NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Borrowers, Lenders and Agents agree as follows:
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS.
The following terms used in this Agreement shall have the
|
following meanings:
"ADDITIONAL SUBSIDIARY BORROWER" has the meaning assigned to that term in subsection 6.8B.
"ADJUSTED EBITDA" means, for any period, (i) without duplication, the aggregate amount derived by combining the amounts for such period of (a) "Operating income
(loss)", plus (b) Net Depreciation and Amortization Expense, plus (c)
"Amortization of premium and discount, net", plus (d) "Unbilled receivables", to
the extent associated with accretion accounting for Limited Recourse Debt
relating to Projects of Company and its Subsidiaries, minus (e) "Equity in
income from unconsolidated investments", minus (ii) without duplication, the
aggregate amount derived by combining the amounts (each expressed as a positive
number) for such period of (a) "Payment of debt", to the extent consisting of
principal payments on Limited Recourse Debt relating to Projects of Company and
its Subsidiaries, plus (b) "Minority interests", plus (c) accretion of principal
on the High Yield Notes, as each such line item referred to in clauses (i)(a),
(i)(e) and (ii)(b) is reflected in Company's consolidated statement of income
prepared in conformity with GAAP and as each such line item referred to in
clauses (i)(c), (i)(d) and (ii)(a) is reflected in Company's consolidated
statement of cash flows prepared in conformity with GAAP, in each case reported
in a manner consistent with Company's reporting of such amount in its quarterly
or annual report (as the case may be) on Form 10Q or 10K, respectively, prior to
the Closing Date, whether such line items are so titled or otherwise titled;
provided, however, that with respect to any such period ending during 2008, each
of the line items referred to above shall be calculated as if the terms of the
service agreement of Company and its Subsidiaries relating to the Alexandria
Project in effect for Fiscal Year 2007 continued in effect during 2008, without
giving effect to any negative impact on Adjusted EBITDA from the terms of any
extension in 2008 of such service agreement.
"ADMINISTRATIVE AGENT" has the meaning assigned to that term in the introduction to this Agreement and also means and includes any successor Administrative Agent appointed pursuant to subsection 9.5.
"AFFILIATE", as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person (other than exclusively as a result of such Person's role as a senior executive of that Person or Project manager or operator), whether through the ownership of voting securities or by contract or otherwise.
"AGENTS" means Administrative Agent and Documentation Agent, and "AGENT" means either one of them.
"AGGREGATE AMOUNTS DUE" has the meaning assigned to that term in subsection 10.5.
"AGREEMENT" means this Credit Agreement dated as of March 10, 2004, as it may be amended, restated, supplemented or otherwise modified from time to time.
"ANNUAL FREE CASH FLOW" means, for any period, (i) the sum for such period of (without duplication) (a) all cash revenue received by Company and its Subsidiaries from Projects and facilities that are not Projects, other than amounts received by Company or such Subsidiary as a "pass through" entity for debt service on Limited Recourse Debt, (b) all amounts previously in reserve with respect to Projects that are released from such reserves to Company or
any of its Subsidiaries, other than amounts that are required to be paid (but
that have not yet been paid) to third parties pursuant to binding Contractual
Obligations of Company or any of its Subsidiaries and that are permitted under
this Agreement to be paid to such third parties, (c) all distributions made to
Company and its Subsidiaries on account of Capital Stock held by Company and its
Subsidiaries, (d) all interest earned by Company and its Subsidiaries on Cash On
Hand of Company and its Subsidiaries, (e) all amounts released to Company and
its Subsidiaries from cash accounts related to Expansions, excluding any portion
of such amounts that are not expended in such period and are required to be (and
are permitted under this Agreement to be) expended by Company and its
Subsidiaries in connection with such Expansions in a subsequent period (provided
that Agents shall have reviewed and approved the exclusion of such portion of
such released amounts from this clause (i)(e) prior to such exclusion), (f) all
reimbursement amounts received by Company and its Subsidiaries under the
Management Services and Reimbursement Agreement, and (g) all cash refunds or
rebates of taxes received by Company and its Subsidiaries (but excluding from
the amounts referred to in clauses (i)(a) through (i)(g) any portion of such
amounts that was previously required to be applied (and was applied) as a
Mandatory Payment), minus, without duplication of amounts already excluded or
deducted from clauses (i)(a) through (i)(g) above, (ii) the sum for such period
of (without duplication) (a) operating disbursements of Company and its
Subsidiaries, (b) Consolidated Facilities Capital Expenditures, (c) corporate
overhead of Company and its Subsidiaries, (d) payments on debt and leases of
Company and its Subsidiaries, to the extent such payments are permitted to be
made under this Agreement, (e) distributions on Capital Stock of Subsidiaries to
Persons other than Company and its Subsidiaries, (f) all payments by Company and
its Subsidiaries to third parties during such period as a result of drawings
under the Existing IPP International Project Guaranties, (g) all payments by
Company and its Subsidiaries to the extent such payments are required to be
reimbursed to Company and its Subsidiaries pursuant to the Management Services
and Reimbursement Agreement, (h) any amounts posted in such period by Company
and its Subsidiaries for credit support to the extent such amounts are required
to be posted during such period pursuant to binding Contractual Obligations of
Company or any of its Subsidiaries, (i) all cash principal, interest and fee
payments (other than Mandatory Payments) by Company and its Subsidiaries that
are not prohibited by the terms of this Agreement, including all payments made
by Borrowers to reimburse amounts drawn under Letters of Credit or letters of
credit issued under the New L/C Facility Agreement, (j) all cash payments of
taxes by Company and its Subsidiaries, (k) all cash payments by Company and its
Subsidiaries during such period under the DHC Corporate Services Reimbursement
Agreement, to the extent such payments are permitted to be made under this
Agreement, and (l) all payments by Company and its Subsidiaries made during such
period into reserves with respect to Projects, to the extent such payments (1)
are required to be placed during such period in such reserves pursuant to
binding Contractual Obligations of Company or any of its Subsidiaries and (2)
are funded from amounts which are included in the amounts described in clause
(i) of this definition for such period; provided, however, that in any Fiscal
Year commencing with Fiscal Year 2005, Annual Free Cash Flow for such Fiscal
Year shall be reduced by the amount, if any, by which the sum of the amounts of
Annual Free Cash Flow for each of the immediately preceding Fiscal Years
(commencing with Fiscal Year 2004) was less than zero.
"APPROVED FUND" means a Fund that is administered or managed by (i) a Lender, (ii) an Affiliate of a Lender or (iii) an entity or an Affiliate of an entity that administers or manages a Lender.
"APPROVED PLAN OF REORGANIZATION" has the meaning assigned to that term in subsection 4.1E.
"ASSET SALE" means the sale by Company or any of its
Subsidiaries to any Person of (i) any of the Capital Stock of any of Company's
Subsidiaries, (ii) substantially all of the assets of any division or line of
business of Company or any of its Subsidiaries, or (iii) any other assets
(whether tangible or intangible) of Company or any of its Subsidiaries (other
than (a) inventory sold in the ordinary course of business and (b) any such
other assets to the extent that the aggregate value of such assets sold in any
single transaction or related series of transactions is equal to $500,000 or
less and the aggregate value of all such other assets since the Closing Date is
equal to $2,000,000 or less, in each case so long as not less than 90% of the
consideration received for such assets shall be cash); provided, however, that
Asset Sales shall not include (1) any sale or discount, in each case without
recourse, of accounts receivable arising in the ordinary course of business, but
only in connection with the compromise or collection thereof (provided, that
sales and discounts of not more than $10,000,000 in face value of accounts
receivable may be excluded from Asset Sales pursuant this clause (1), and the
sole consideration received in connection with any such sale of accounts
receivable shall be cash), (2) any sale or exchange of specific items of
equipment, so long as the purpose of each such sale or exchange is to acquire
(and results within 120 days of such sale or exchange in the acquisition of)
replacement items of equipment which are the functional equivalent of the item
of equipment so sold or exchanged (provided, that any cash received in
connection with any such sale or exchange that is not expended as part of such
sale or exchange to obtain such replacement items of equipment, to the extent in
excess of the amounts set forth in clause (b) of this definition, shall be
deemed cash proceeds of an Asset Sale), (3) disposals of obsolete, worn out or
surplus property in the ordinary course of business (provided, that not less
than 75% of the consideration, if any, received in connection with any such
disposal shall be cash, and any such cash received, to the extent in excess of
the amounts set forth in clause (b) of this definition, shall be deemed cash
proceeds of an Asset Sale), (4) any discount or compromise of notes or accounts
receivable for less than the face value thereof, to the extent Company deems
necessary in order to resolve disputes that occur in the ordinary course of
business, or (5) any IPP International Sale.
"ASSIGNMENT AGREEMENT" means an Assignment Agreement in substantially the form of Exhibit VI annexed hereto.
"ASSUMPTIONS" has the meaning assigned to that term in subsection 5.11D.
"BANK OF AMERICA" has the meaning assigned to that term in the introduction to this Agreement.
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled "Bankruptcy", as now and hereafter in effect, or any successor statute.
"BANKRUPTCY COURT" means the United States Bankruptcy Court for the Southern District of New York and any other court properly exercising jurisdiction over any relevant Chapter 11 Case.
"BANKRUPT SUBSIDIARY" means any of the Warren Subsidiaries, the Lake Subsidiary or the Tampa Subsidiaries, in each case so long as such Debtor remains subject to its Chapter 11 Case before the Bankruptcy Court.
"BASE RATE" means, at any time, the higher of (i) the Prime Rate or (ii) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change.
"BORROWER JOINDER AGREEMENT" means a Borrower Joinder Agreement, substantially in the form of Exhibit VIII annexed hereto.
"BORROWERS" has the meaning assigned to that term in the introduction to this Agreement.
"BUDGET" means (i) with respect to Fiscal Year 2004, the budget delivered by Company to Lenders on or prior to the Closing Date pursuant to subsection 4.1G, setting forth projected cash receipts and expenditures for Company and its Subsidiaries for each calendar month and each Fiscal Quarter from the Closing Date through December 31, 2004, and projected net cash flows for Company and its Subsidiaries for each Fiscal Year thereafter through December 31, 2009, as such budget may be supplemented pursuant to subsection 6.1(i), and (ii) with respect to each Fiscal Year after 2004, the budget delivered by Company to Lenders pursuant to subsection 6.1(xvi), setting forth projected cash receipts and expenditures for Company and its Subsidiaries for each calendar month and Fiscal Quarter during such Fiscal Year and projected net cash flows for Company and its Subsidiaries for each Fiscal Year thereafter through December 31, 2009, as such budget may be supplemented pursuant to subsection 6.1(i).
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York, the State of Texas or the State of California or is a day on which banking institutions located in any such state are authorized or required by law or other governmental action to close.
"CANADIAN LENDERS" means Non-US Lenders, if any, that are (i) Lenders on the Closing Date in addition to being Canadian Loss Sharing Lenders (as defined in the Existing Intercreditor Agreement) immediately prior to the Closing Date or (ii) Non-US Lenders domiciled in Canada that (a) hold Letter of Credit Exposure originally held on the Closing Date by one or more Non-US Lenders referred to in clause (i) and (b) received such Letter of Credit Exposure directly from another Canadian Lender. Each reference herein to Canadian Lenders shall be a reference to such Persons solely with respect to Letter of Credit Commitments and Letter of Credit Exposure held by Canadian Lenders on the Closing Date.
"CAPITAL EXPENDITURES" means cash expenditures by Company and its Subsidiaries that, in conformity with GAAP, would be included in "additions to property, plant or equipment" or comparable items reflected in the consolidated statement of cash flows of Company and its Subsidiaries for the relevant period.
"CAPITAL LEASE", as applied to any Person, means any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person.
"CAPITAL STOCK" means the capital stock or other equity interests of a Person.
"CASH MANAGEMENT SYSTEM" means the cash management system of Borrowers, described in Schedule 4.1P annexed hereto, as such Cash Management System may be modified pursuant to subsection 6.10.
"CASH ON HAND" has the meaning assigned to that term in subsection 2.3A(i)(f).
"CEA" means Covanta Energy Americas, Inc., a Delaware corporation.
"CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Section 9601 et seq.), or any successor statute, and all implementing regulations promulgated thereunder.
"CHANGE IN CONTROL" means the occurrence of any one or more of the following: (i) DHC shall cease to own, directly, 80% or more of the outstanding Capital Stock of Company; or (ii) any "change of control" or "change in control" or event, however titled, shall occur that requires under the High Yield Indenture a prepayment of the High Yield Notes or an offer to prepay High Yield Notes as a result of a change in ownership of all or some portion of the Capital Stock of Company or any of its Subsidiaries or all or substantially all of the assets of Company and its Subsidiaries.
"CHAPTER 11 CASES" has the meaning assigned to that term in the recitals to this Agreement.
"CLOSING DATE" means the date on which each of the conditions described in subsection 4.1 have been satisfied or waived by Agents and Requisite Lenders (or such other Lenders as may be required under subsection 10.6).
"CLOSING DATE MORTGAGED PROPERTY" has the meaning assigned to that term in subsection 4.1N.
"CLOSING DATE MORTGAGES" has the meaning assigned to that term in subsection 4.1N.
"CLOSING DATE RETAINED AMOUNT" has the meaning assigned to that term in subsection 4.1T.
"COLLATERAL" means, collectively, all of the real, personal and mixed property (including Capital Stock) in which Liens are purported to be granted pursuant to the Collateral Documents, as security for the Obligations.
"COLLATERAL ACCOUNT" means the cash collateral account maintained with Collateral Agent pursuant to the Security Agreement to secure the obligations of Borrowers with respect to Letter of Credit Exposure.
"COLLATERAL AGENT" means Bank of America, in its capacity as Collateral Agent under the Intercreditor Agreement and the Collateral Documents.
"COLLATERAL DOCUMENTS" means the Security Agreement, the DHC Pledge Agreement, the Control Agreements, the Mortgages and all other instruments or documents (pursuant to which a Lien to secure all or any portion of the Obligations is purported or intended to be created, granted, evidenced or perfected) delivered from time to time by any Credit Party pursuant to this Agreement or any of the other Credit Documents, as such instruments and documents may be amended, restated, supplemented or otherwise modified from time to time.
"COMMODITIES AGREEMENT" means any long-term or forward purchase contract or option contract to buy, sell or exchange commodities or similar agreement or arrangement to which Company or any of its Subsidiaries is a party unless, under the terms of such contract, option contract agreement or arrangement Company expects to make or take delivery of the commodities which are the subject thereof.
"COMPANY" has the meaning assigned to that term in the introduction to this Agreement.
"COMPETITOR" means any Person (and its Affiliates) primarily engaged in the business of (i) the generation and sale of electricity or (ii) municipal waste management.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form of Exhibit V annexed hereto.
"CONFIRMATION ORDER" means the Findings of Fact, Conclusions of Law and Order under 11 U.S.C. Section 1129 and Rule 3020 of the Federal Rules of Bankruptcy Procedure Confirming Debtors' Second Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code entered by the Bankruptcy Court on March 5, 2004 in the Chapter 11 Cases, without modification, revision or amendment.
"CONSOLIDATED CASH INTEREST EXPENSE" means, for any period,
(i) Consolidated Interest Expense for such period minus (ii) to the extent
included in Consolidated Interest Expense for such period, accretion of
principal on the High Yield Notes, interest paid in kind and not in cash during
such period and any other amounts not paid or payable in cash.
"CONSOLIDATED FACILITIES CAPITAL EXPENDITURES" means, for any period, the aggregate of all cash expenditures by Company and its Subsidiaries during that period that, in conformity with GAAP, would be included in "additions to property, plant or equipment" or comparable items reflected in the consolidated statement of cash flows of Company and its Subsidiaries for that or any other period. Expenditures that are reimbursed by the client (if such client is a Government Authority) of a Project under the principal lease, service or operating agreement relating to such Project pursuant to a Contractual Obligation on the part of such client to reimburse such expenditures shall not constitute Consolidated Facilities Capital Expenditures.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, (i) total interest expense, net of interest income, of Company and its Subsidiaries on a consolidated basis with respect to all outstanding Indebtedness of Company and its Subsidiaries to the extent such Indebtedness is or is required to be reflected on the consolidated balance sheet of Company and its Subsidiaries in conformity with GAAP, but excluding any Indebtedness consisting of Limited Recourse Debt, and (ii) to the extent not included in the calculation of the amount described in clause (i), all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and net costs under Interest Rate Agreements, but excluding, however, from clauses (i) and (ii) any amounts referred to in subsection 2.2 payable to Agents and Lenders on or before the Closing Date and any amounts referred to in subsection 2.3 of the New L/C Facility Agreement payable to the administrative agent and the lenders thereunder on or before the Closing Date.
"CONSOLIDATED LEVERAGE RATIO" means, as at any date of determination, the ratio of (a) Total Debt as at such date to (b) Adjusted EBITDA for the four-Fiscal Quarter period most recently ended prior to such date.
"CONSOLIDATED NET WORTH" means, as at any date of determination, the sum of the capital stock and additional paid-in capital plus retained earnings (or minus accumulated deficits) of Company and its Subsidiaries on a consolidated basis, as such amounts are or are required to be reflected on the consolidated balance sheet of Company and its Subsidiaries in conformity with GAAP.
"CONTINGENT OBLIGATION", as applied to any Person, means any
direct or indirect liability, contingent or otherwise, of that Person (i) with
respect to any Indebtedness, lease, dividend or other obligation of another if
the primary purpose or intent thereof by the Person incurring the Contingent
Obligation is to provide assurance to the obligee of such obligation of another
that such obligation of another will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected (in whole or in part) against loss in respect
thereof, (ii) with respect to any letter of credit issued for the account of
that Person or as to which that Person is otherwise liable for reimbursement of
drawings, or (iii) under Hedge Agreements. Contingent Obligations shall include
(a) the direct or indirect guaranty, endorsement (otherwise than for collection
or deposit in the ordinary course of business), co-making, discounting with
recourse or sale with recourse by such Person of the obligation of another, (b)
the obligation to make take-or-pay or similar payments if required regardless of
non-performance by any other party or parties to an agreement, and (c) any
liability of such Person for the obligation of another through any agreement
(contingent or otherwise) (1) to purchase, repurchase or otherwise acquire such
obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise) or (2) to maintain the solvency
or any balance sheet item, level of income or financial condition of another if,
in the case of any agreement described under subclauses (1) or (2) of this
sentence, the primary purpose or intent thereof is as described in the preceding
sentence. The amount of any Contingent Obligation shall be equal to the amount
(if stated) of the obligation so guaranteed or otherwise supported or, if less,
the amount to which such Contingent Obligation is specifically limited, or, if
the amount of any Contingent Obligation is not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined by
Company in good faith based upon reasonable
assumptions. No obligations under Performance Guaranties shall constitute Contingent Obligations.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any provision of any Security issued by that Person or of any material indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject.
"CONTROL AGREEMENT" means an agreement, satisfactory in form and substance to Administrative Agent and executed by the financial institution or securities intermediary at which a Deposit Account or a Securities Account, as the case may be, is maintained, pursuant to which such financial institution or securities intermediary confirms and acknowledges Collateral Agent's security interest in such account, and agrees that the financial institution or securities intermediary, as the case may be, will comply with instructions originated by Collateral Agent as to disposition of funds in such account, without further consent by Company or any Subsidiary, as such agreement may be amended, restated, supplemented or otherwise modified from time to time.
"CORPORATE SERVICES REIMBURSEMENT AGREEMENT" means the corporate services and expense reimbursement agreement entered into by DHC and Company on the Closing Date, as such agreement may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted thereunder and under subsection 7.12.
"COVANTA ENERGY PENSION PLAN" means the Pension Plan referred to generally by Company on and prior to the Closing Date as the "Covanta Energy Pension Plan".
"CPIH" means Covanta Power International Holdings, Inc., a Delaware corporation, and its successors and assigns.
"CPIH BORROWERS" means CPIH and any additional borrowers under the CPIH Term Loan Agreement from time to time.
"CPIH REVOLVER AGREEMENT" means that certain credit agreement dated as of the date hereof by and among CPIH Borrowers, as borrowers, and the financial institutions listed on the signature pages thereof, as lenders, as such credit agreement may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under subsection 7.12.
"CPIH REVOLVER DOCUMENTS" means the "Loan Documents" as defined in the CPIH Revolver Agreement.
"CPIH STOCK PLEDGE AGREEMENT" means the pledge agreement dated as of the Closing Date pursuant to which CEA pledges the Capital Stock of CPIH to secure the obligations of CPIH Borrowers under the CPIH Revolver Documents and the CPIH Term Loan Documents, as such agreement may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under subsection 7.12.
"CPIH SUBSIDIARIES" means, on and after the Closing Date, CPIH and its Subsidiaries.
"CPIH TERM LOAN AGREEMENT" means that certain credit agreement dated as of the date hereof by and among CPIH Borrowers, the other Persons listed on the signature pages thereof, as lenders, and Bank of America and Deutsche Bank, as agents for such lenders, as such credit agreement may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under subsection 7.12.
"CPIH TERM LOAN DOCUMENTS" means the "Loan Documents" as defined in the CPIH Term Loan Agreement.
"CREDIT DOCUMENTS" means this Agreement, the Letters of Credit (and any applications for, or reimbursement agreements or other documents or certificates executed by Borrowers in favor of an Issuing Lender relating to, the Letters of Credit) and the Collateral Documents, the Intercreditor Agreement and all amendments, waivers and consents relating thereto.
"CREDIT PARTY" means each Borrower and DHC, and "CREDIT PARTIES" means all such Persons, collectively.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap agreement, or option contract to buy, sell or exchange currencies or other similar agreement or arrangement to which Company or any of its Subsidiaries is a party.
"D.E. SHAW" means D.E. Shaw Laminar Portfolios, L.L.C. a Delaware limited liability company.
"DEBTORS" has the meaning assigned to that term in the recitals to this Agreement.
"DEFAULTED PARTICIPATION" has the meaning assigned to that term in subsection 2.6.
"DEFAULT EXCESS" has the meaning assigned to that term in subsection 2.6.
"DEFAULTING LENDER" has the meaning assigned to that term in subsection 2.6.
"DEFAULT PERIOD" has the meaning assigned to that term in subsection 2.6.
"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or similar account maintained with a Person engaged in the business of banking, including a savings bank, savings and loan association, credit union or trust company.
"DETROIT PROJECT SUBSIDIARY" means Michigan Waste Energy, Inc., a Delaware corporation.
"DEUTSCHE BANK" has the meaning assigned to that term in the introduction to this Agreement.
"DEVELOPMENT EXPENSE" means, with respect to any Project, cash expenditures made by Company or any of its Subsidiaries to fund (i) engineering, permitting, legal, environmental and other similar expenses and (ii) fees and expenses of consultants and advisers with respect to engineering, permitting, legal and environmental issues, in each case to the extent such expenses are payable to Persons other than Company and its Subsidiaries in connection with any Expansion permitted under this Agreement, prior to the date of financial closing for such Expansion; provided, that Development Expenses shall exclude payroll expense and reasonable travel expenses of employees of Company and its Subsidiaries.
"DHC" means Danielson Holding Corporation, a Delaware corporation.
"DHC PLEDGE AGREEMENT" means the DHC Pledge Agreement executed and delivered on the Closing Date by DHC, substantially in the form of Exhibit XI annexed hereto, as such DHC Pledge Agreement may thereafter be amended, restated, supplemented or otherwise modified from time to time.
"DHC TAX SHARING AGREEMENT" means the tax sharing agreement entered into by DHC, Company and CPIH on the Closing Date, as such agreement may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted thereunder and under subsection 7.12.
"DIP AGENTS" means the Persons identified as "Agents" under the DIP Credit Agreement, in their capacities as agents for DIP Lenders under the DIP Credit Agreement.
"DIP CREDIT AGREEMENT" means that certain Debtor-In-Possession Credit Agreement dated as April 1, 2002, by and among Company and certain of its Subsidiaries, as debtors and debtors-in-possession, the financial institutions listed on the signature pages thereof, as lenders, and Bank of America and Deutsche Bank, as agents for such lenders, as such agreement is in effect immediately prior to the Closing Date.
"DIP CREDIT DOCUMENTS" means the "Loan Documents" as defined in the DIP Credit Agreement.
"DIP LENDER" means each of the "Lenders" under the DIP Credit Agreement on the Closing Date, in its capacity as a lender under the DIP Credit Agreement.
"DIP TRANCHE A L/C" means each letter of credit outstanding as of the Closing Date that is described on Schedule 1.1A (Part I) annexed hereto (setting forth the expiration date, renewal requirements and other particulars of such letter of credit, including the type of obligation supported thereby), under which the maximum aggregate available amount for drawing is $6,276,500.00, determined as of the Closing Date; and "DIP TRANCHE A L/CS" means all such letters of credit, collectively.
"DIP TRANCHE B L/C" means each letter of credit outstanding as of the Closing Date that is described on Schedule 1.1A (Part II) annexed hereto (setting forth the expiration
date, renewal requirements and other particulars of such letter of credit), under which the maximum aggregate available amount for drawing is $170,074,145.19, determined as of the Closing Date; and "DIP TRANCHE B L/CS" means all such letters of credit, collectively.
"DISTRIBUTABLE CASH" has the meaning assigned to that term in subsection 4.1T.
"DOCUMENTATION AGENT" has the meaning assigned to that term in the introduction to this Agreement and also means and includes any successor Documentation Agent appointed pursuant to subsection 9.5.
"DOLLARS" and the sign "$" mean the lawful money of the United States.
"DOMESTIC CASH EQUIVALENTS" means, as at any date of
determination, (i) marketable securities (a) issued or directly and
unconditionally guaranteed as to interest and principal by the United States
Government or (b) issued by any agency of the United States the obligations of
which are backed by the full faith and credit of the United States, in each case
maturing within 30 days after such date; (ii) marketable direct obligations
issued by any state of the United States or any political subdivision of any
such state or any public instrumentality thereof, in each case maturing within
30 days after such date and having, at the time of the acquisition thereof, the
highest rating obtainable from either Standard & Poor's ("S&P") or Moody's
Investors Service, Inc. ("MOODY'S"); (iii) commercial paper maturing no more
than 30 days from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least "A-1" from S&P or at least "P-1" from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within 30
days after such date and issued or accepted by any Lender or by any commercial
bank organized under the laws of the United States or any state thereof or the
District of Columbia that (a) is at least "adequately capitalized" (as defined
in the regulations of its primary Federal banking regulator) and (b) has Tier 1
capital (as defined in such regulations) of not less than $100,000,000; (v)
shares of any money market mutual fund that (a) has at least 95% of its assets
invested continuously in the types of investments referred to in clauses (i) and
(ii) above, (b) has net assets of not less than $500,000,000, and (c) has the
highest rating obtainable from either S&P or Moody's; and (vi) such other
securities as Company and Agents may agree on from time to time.
"DOMESTIC SUBSIDIARY" means any Subsidiary of any Borrower that is incorporated or organized under the laws of the United States, any state thereof or in the District of Columbia.
"ELIGIBLE ASSIGNEE" means (i) any Person that is (a) a commercial bank organized under the laws of the United States or any state thereof, (b) a savings and loan association or savings bank organized under the laws of the United States or any state thereof, (c) a commercial bank organized under the laws of any other country or a political subdivision thereof, provided that (1) such bank is acting through a branch or agency located in the United States or (2) such bank is organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development or a political subdivision of such country, or (d) any other financial institution that extends credit or buys loans as one of its businesses; (ii) any Person that is a Lender at the time of the relevant assignment; or (iii) any other Person designated as an Eligible Assignee pursuant to the prior written consent of Agents in their sole discretion;
provided that none of Company nor any Affiliate of Company nor any Competitor shall be an Eligible Assignee; and provided further that, in order to be an Eligible Assignee, a Person must have at the time of determination a long term senior unsecured debt rating of "A2" or better from Moody's and/or "A" or better from S&P.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as defined in Section 3(3) of ERISA which is maintained or contributed to by Company, any of its Subsidiaries or any of their respective ERISA Affiliates.
"ENFORCING LENDERS" has the meaning assigned to that term in subsection 10.5B.
"ENVIRONMENTAL CLAIM" means any investigation, notice, notice of violation, claim, action, suit, proceeding, demand, abatement order or other order or directive (conditional or otherwise), by any Government Authority or any other Person, arising (i) pursuant to or in connection with any actual or alleged violation of any Environmental Law, or (ii) in connection with any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment.
"ENVIRONMENTAL LAWS" means any and all current or future statutes, ordinances, orders, rules, regulations, guidance documents, judgments, Governmental Authorizations, or any other requirements of any Government Authority relating to (i) environmental matters, including those relating to any Hazardous Materials Activity, (ii) the generation, use, storage, transportation or disposal of Hazardous Materials, or (iii) occupational safety and health, industrial hygiene, land use or the protection of human, plant or animal health or welfare, in any manner applicable to Company or any of its Subsidiaries (including, solely with respect to periods prior to the Closing Date, CPIH Subsidiaries) or any Facility.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto.
"ERISA AFFILIATE" means, as applied to any Person, (i) any corporation that is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is a member; (ii) any trade or business (whether or not incorporated) that is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member.
"ERISA EVENT" means (i) a "reportable event" within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for 30-day notice to the PBGC has been waived by regulation) that would reasonably be expected to have a Material Adverse Effect; (ii) the failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) of the Internal Revenue Code) or the imposition of a Lien on the property of Company or any of its Subsidiaries pursuant to Section 412(n) of the Internal Revenue Code, except any such failure or imposition
attributable to an error made in good faith which results in the imposition of
liability or a Lien on Company and its Subsidiaries and their respective ERISA
Affiliates of an immaterial amount, so long as such error, failure and
imposition are promptly corrected after discovery of such error by Company or
any of its Subsidiaries, or the failure to make by its due date a required
installment of a material amount under Section 412(m) of the Internal Revenue
Code with respect to any Pension Plan or the failure to make any required
contribution of a material amount to a Multiemployer Plan; (iii) the provision
by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA
of a notice of intent to terminate such plan in a distress termination described
in Section 4041(c) of ERISA; (iv) the withdrawal by Company, any of its
Subsidiaries or any of their respective ERISA Affiliates from any Pension Plan
with two or more contributing sponsors or the termination of any such Pension
Plan resulting in material current liability of Company or any of its
Subsidiaries (including CPIH Subsidiaries, to the extent such CPIH Subsidiaries
are ERISA Affiliates of Company or any of its Subsidiaries) pursuant to Section
4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to
terminate any Pension Plan, or the occurrence of any event or condition that
would reasonably be expected to constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Pension Plan; (vi) the imposition of material current liability on Company, any
of its Subsidiaries or any of their respective ERISA Affiliates pursuant to
Section 4062(e) or 4069 of ERISA or by reason of the application of Section
4212(c) of ERISA; (vii) the withdrawal of Company, any of its Subsidiaries or
any of their respective ERISA Affiliates in a complete or partial withdrawal
(within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer
Plan if it would reasonably be expected that Company or any of its Subsidiaries
will incur material liability therefor (in excess of the contribution that would
otherwise have been due absent such withdrawal), or the receipt by Company, any
of its Subsidiaries or any of their respective ERISA Affiliates of notice from
any Multiemployer Plan that it is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated
under Section 4041A or 4042 of ERISA; (viii) the assertion of a material claim
(other than routine claims for benefits) against any Employee Benefit Plan other
than a Multiemployer Plan or the assets thereof, or against Company, any of its
Subsidiaries or any of their respective ERISA Affiliates in connection with any
Employee Benefit Plan, if such assertion or the liability with respect thereto
would reasonably be expected to have a Material Adverse Effect; (ix) receipt
from the Internal Revenue Service of notice of the failure of any Pension Plan
(or any other Employee Benefit Plan intended to be qualified under Section
401(a) of the Internal Revenue Code) to qualify under Section 401(a) of the
Internal Revenue Code, or of the failure of any trust forming part of any
Pension Plan to qualify for exemption from taxation under Section 501(a) of the
Internal Revenue Code, in either case if such failure would reasonably be
expected to have a Material Adverse Effect; or (x) the imposition of a Lien on
the property of Company or any of its Subsidiaries pursuant to Section
401(a)(29) of the Internal Revenue Code or pursuant to ERISA with respect to any
Pension Plan.
"EVENT OF DEFAULT" has the meaning assigned to that term in
Section 8.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute.
"EXCLUDED SUBSIDIARY" means (i) each Subsidiary of Company for which becoming a Borrower would constitute a material violation of (a) a valid and enforceable Contractual Obligation in favor of a Person other than Company or any of its Subsidiaries for which the required consents have not been obtained or (b) applicable law affecting such Subsidiary, provided that any such Subsidiary of Company shall cease to be covered under this clause at such time as such Subsidiary's becoming a Borrower would no longer constitute a material violation of such Contractual Obligation or applicable law, whether as a result of obtaining the required consents or otherwise, and (ii) each Bankrupt Subsidiary.
"EXISTING DETROIT L/CS" means, collectively, the following DIP
Tranche B L/Cs: (i) Irrevocable Standby Letter of Credit Number SBY501806 issued
by UBS Bank, in the available amount of $96,731,392.81 as of the Closing Date,
for the benefit of PMCC Leasing Corporation and Resource Recovery Business Trust
- A, and (ii) Irrevocable Standby Letter of Credit Number SBY501835 issued by
UBS Bank, in the available amount of $41,460,161.38 as of the Closing Date, for
the benefit of Aircraft Services Corporation and Resource Recovery Business
Trust - B.
"EXISTING INTERCREDITOR AGREEMENT" means the "Intercreditor Agreement" as defined in the DIP Credit Agreement on the Closing Date, as such "Intercreditor Agreement" is in effect on the Closing Date.
"EXISTING IPP INTERNATIONAL PROJECT GUARANTIES" means, collectively, (i) the existing guaranty by Covanta Energy Group of the obligations of the CPIH Subsidiaries under certain agreements relating to the Haripur Project, the Samalpatti Project and the Trezzo Project, (ii) the existing guaranty by Covanta Projects, Inc. of the obligations of the CPIH Subsidiaries under certain agreements relating to the Quezon Project, and (iii) the existing guaranty by Company of the obligations of the CPIH Subsidiaries under certain agreements relating to the Balaji/Madurai Project and the LICA Project, as each such guaranty may be amended, restated, supplemented or otherwise modified to the extent permitted hereunder.
"EXPANSION" means, with respect to any waste-to-energy Project in existence as of the date hereof, additions or improvements to the existing facilities of such Project that involve the addition of a boiler or a turbine generator.
"FACILITIES" means any and all real property (including all buildings, fixtures or other improvements located thereon) now, hereafter or heretofore owned, leased, operated or used by any Borrower or any of its Subsidiaries, by any of their respective predecessors or by any Person who was an Affiliate of Borrower or any of its Subsidiaries prior to the Closing Date.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Administrative Agent from three Federal funds brokers of recognized standing selected by Administrative Agent.
"FIFRA" means the Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. Section 136 et seq.), or any successor statute, and all implementing regulations promulgated thereunder.
"FIRST PRIORITY" means, with respect to any Lien purported to be created in any Collateral pursuant to any Collateral Document, that (i) such Lien is perfected and has priority over any other Lien on such Collateral (other than Liens permitted pursuant to subsections 7.2A(iii) through (xi)) and (ii) such Lien is the only Lien (other than Liens permitted pursuant to subsection 7.2) to which such Collateral is subject.
"FISCAL QUARTER" means a fiscal quarter of any Fiscal Year.
"FISCAL YEAR" means the fiscal year of Company and its Subsidiaries ending on December 31st of each calendar year.
"FLOOD HAZARD PROPERTY" means any real property that is subject to a Mortgage and is located in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards.
"FOREIGN SUBSIDIARY" means any Subsidiary of any Borrower that is not a Domestic Subsidiary.
"FUND" means any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.
"FUNDING AND PAYMENT OFFICE" means (i) the office of Administrative Agent located at 901 Main St., 14th Floor, Mc: TX1-492-14-11, Dallas, Texas 75202 or (ii) such other office of Administrative Agent as may from time to time hereafter be designated as such in a written notice delivered by Administrative Agent to Company and each Lender.
"FUNDING BORROWER" has the meaning assigned to that term in subsection 2.7C.
"FUNDING DEFAULT" has the meaning assigned to that term in subsection 2.6.
"GAAP" means, subject to the limitations on the application thereof set forth in subsection 1.2, accounting principles generally accepted in the United States set forth in opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as are approved by the American Institute of Certified Public Accountants.
"GEOTHERMAL SALE" means (i) the sale or other disposition by Company and its Subsidiaries of all or substantially all of their respective (1) Capital Stock in Heber Geothermal Company, Heber Field Company and Second Imperial Geothermal Company, L.P., and (2) Capital Stock in non-debtor Affiliate Mammoth-Pacific L.P., which entities own or lease geothermal plants and facilities in California (the "GEOTHERMAL BUSINESS"), and (ii) the assumption and/or assignment by Company and its Subsidiaries of certain contracts related to the
Geothermal Business, in the case of both clauses (i) and (ii) occurring prior to or concurrently with the consummation of the Plan of Reorganization.
"GOVERNING BODY" means the board of directors or other body having the power to direct or cause the direction of the management and policies of a Person that is a corporation, partnership, trust or limited liability company.
"GOVERNMENT AUTHORITY" means any political subdivision or department thereof, any other governmental or regulatory body, commission, central bank, board, bureau, organ or instrumentality or any court, in each case whether federal, state, local or foreign.
"GOVERNMENTAL AUTHORIZATION" means any permit, license, registration, authorization, plan, directive, consent, order or consent decree of or from, or notice to, any Government Authority.
"GREENWAY L/C" means, collectively, the letter of credit outstanding on the Closing Date in the stated amount of $820,000 issued under the DIP Credit Agreement as a "Tranche B Letter of Credit" (as defined in the DIP Credit Agreement), and shall not mean or include any amendment, reissuance, renewal or extension of such letter of credit after the Closing Date.
"GROSS RECEIPTS" means, in respect of any Asset Sale, the total cash payments (including any cash received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) received from such Asset Sale minus any repayment of debt related to the assets sold in such Asset Sale which is made in connection therewith and is not prohibited under this Agreement.
"HAVERHILL DEFERRED INCOME" means, for any period, all non-cash income resulting from payments made in 1998 by the counterparty to the power purchase agreement relating to the Haverhill Project in order to "buydown" its obligations under such agreement, to the extent such non-cash income is included in consolidated revenue or consolidated earnings of Company and its Subsidiaries during such period.
"HAZARDOUS MATERIALS" means (i) any chemical, material or
substance at any time defined as or included in the definition of (a) "hazardous
wastes" or "mixed wastes" as defined in RCRA or in any other Environmental Law;
(b) "hazardous substances", "pollutants" or "contaminants" as defined in CERCLA
or in any other Environmental Law; (c) "chemical substances" or "mixtures" as
defined in TSCA or any other substance which is tested pursuant to TSCA or any
other Environmental Law, or the manufacture, processing, distribution, use or
disposal of which is regulated or prohibited pursuant to TSCA or any other
Environmental Law, including without limitation polychlorinated biphenyls and
electrical equipment which contains any oil or dielectric fluid containing
regulated concentrations of polychlorinated biphenyls; (d) "insecticides",
"fungicides", "pesticides" or "rodenticides" as defined in FIFRA or any other
Environmental Law; or (e) "infectious waste" or "biohazardous waste" as defined
in any Environmental Law; (ii) asbestos or any asbestos-containing materials;
(iii) urea formaldehyde foam insulation; (iv) any oil, petroleum, petroleum
fraction or petroleum derived substance; (v) any drilling fluids, produced
waters and other wastes associated with the exploration,
development or production of crude oil, natural gas or geothermal resources;
(vi) any flammable substances or explosives; (vii) any radioactive materials;
and (viii) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any Government Authority or which may or
could pose a hazard to the health and safety of the owners, occupants or any
Persons in the vicinity of any Facility or to the indoor or outdoor environment.
"HAZARDOUS MATERIALS ACTIVITY" means any past, current, proposed or threatened activity, event or occurrence involving any Hazardous Materials, including the use, manufacture, possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, construction, treatment, abatement, removal, remediation, disposal, disposition or handling of any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing.
"HEDGE AGREEMENT" means (i) an Interest Rate Agreement or a Currency Agreement designed to hedge against fluctuations in interest rates or currency values, respectively, or (ii) a forward agreement or arrangement designed to hedge against fluctuation in electricity rates pertaining to electricity produced by a Project, so long as the contractual arrangements relating to such Project contemplate that Company or its Subsidiaries shall deliver such electricity to third parties.
"HIGH YIELD INDENTURE" means (i) the indenture pursuant to which the High Yield Notes are issued and (ii) any replacement indenture entered into in connection with a refinancing, renewal, replacement or extension of the High Yield Notes permitted under subsection 7.1(xiii), in each case as such indenture or replacement indenture may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under subsection 7.12.
"HIGH YIELD NOTES" means (i) the $230,000,000 in aggregate principal amount at maturity of 8.25% Senior Notes due 2010 of Company issued pursuant to the High Yield Indenture, and (ii) any Indebtedness incurred to refinance, renew, replace or extend the High Yield Notes permitted to be incurred under subsection 7.1(xiii); provided, that the initial principal amount (and issue price) of such High Yield Notes on the Closing Date shall be $205,000,000.
"IMMATERIAL FOREIGN SUBSIDIARY" means any of the following Foreign Subsidiaries, in each case so long as such Subsidiary (i) has engaged in substantially no business or operations in the most recent fiscal year of Company and its Subsidiaries, (ii) in the most recent fiscal year of Company and its Subsidiaries, accounted for less than $100,000 of revenues, and (iii) holds at the time of determination less than $100,000 of assets: Covanta Energy Europe, Ltd. (United Kingdom), OPI Carmona Ltd. (Cayman Islands), OPI Carmona One Ltd. (Cayman Islands), and Covanta Waste to Energy Asia Investments (Mauritius).
"INDEBTEDNESS", as applied to any Person, means (i) all
indebtedness for borrowed money, (ii) that portion of obligations with respect
to Capital Leases that is properly classified as a liability on a balance sheet
in conformity with GAAP, (iii) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed money,
(iv) any obligation owed for all or any part of the deferred purchase price of
property or services received by such Person (excluding any such obligations
incurred under ERISA), which purchase price is (a) due more than six months from
the date of incurrence of the obligation in respect thereof or (b) evidenced by
a promissory note or similar written instrument, but excluding in either case
current trade payables incurred in the ordinary course of business and payable
in accordance with customary practices, (v) Synthetic Lease Obligations, and
(vi) all indebtedness secured by any Lien on any property or asset owned by that
Person regardless of whether the indebtedness secured thereby shall have been
assumed by that Person or is nonrecourse to the credit of that Person. Any
obligations under Interest Rate Agreements and Currency Agreements (and Hedge
Agreements that protect against fluctuation in electricity rates) constitute (1)
in the case of Hedge Agreements, Contingent Obligations, and (2) in all other
cases, Investments, and in neither case constitute Indebtedness. For purposes of
this Agreement, the Indebtedness of any Person shall include the Indebtedness of
any partnership or joint venture in which such Person is a general partner or a
joint venturer, unless the Indebtedness of such partnership or joint venture is
expressly Limited Recourse Debt of such partnership or joint venture.
"INDEMNIFIED LIABILITIES" has the meaning assigned to that term in subsection 10.3.
"INDEMNITEE" has the meaning assigned to that term in subsection 10.3.
"INSURANCE PREMIUM FINANCERS" means Persons who are non-Affiliates of Company that advance insurance premiums for Company and its Subsidiaries pursuant to Insurance Premium Financing Arrangements.
"INSURANCE PREMIUM FINANCING ARRANGEMENTS" means, collectively, such agreements as Company and its Subsidiaries shall enter into after the Closing Date with Insurance Premium Financers pursuant to which such Insurance Premium Financers shall advance insurance premiums for Company and its Subsidiaries. Such Insurance Premium Financing Arrangements (i) shall provide for the benefit of such Insurance Premium Financers a security interest in no property of Company or any of its Subsidiaries other than gross unearned premiums for the insurance policies, (ii) shall not purport to prohibit any portion of the Liens created in favor of Collateral Agent (for the benefit of Secured Parties) pursuant to the Collateral Documents, and (iii) shall not contain any provision or contemplate any transaction prohibited by this Agreement and shall otherwise be in form and substance reasonably satisfactory to Agents.
"INTELLECTUAL PROPERTY" means all patents, trademarks, tradenames, copyrights, technology, software, know-how and processes used in or necessary for the conduct of the business of Borrowers and their Subsidiaries as currently conducted that are material to the condition (financial or otherwise), business or operations of Borrowers and their Subsidiaries, taken as a whole.
"INTERCOMPANY MASTER NOTE" means a promissory note evidencing Indebtedness of Company and each of its Subsidiaries which (a) to the extent the Indebtedness evidenced thereby is owed to any Borrower, is pledged pursuant to the Collateral Documents, and (b) to the extent the Indebtedness evidenced thereby is owed by a Subsidiary of Company, is senior Indebtedness of such Subsidiary (except to the extent that requiring such Indebtedness to be
senior would breach a contractual obligation binding on such Subsidiary), except that any such Indebtedness owed by any Borrower to any Subsidiary which is not a Borrower shall be subordinated in right of payment to the payment in full of the Obligations pursuant to the terms of such note.
"INTERCREDITOR AGREEMENT" means that certain Intercreditor Agreement executed and delivered on the Closing Date by Borrowers, Lenders, Agents, Collateral Agent, the agent and the lenders under the New L/C Facility Documents, the Investor Parties, DHC and the trustee under the High Yield Indenture, in the form of Exhibit XIII annexed hereto, as it may thereafter be amended, restated, supplemented or otherwise modified from time to time.
"INTEREST RATE AGREEMENT" means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement to which any Borrower or any of Subsidiary of any Borrower is a party.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter, and any successor statute.
"INVESTMENT" means (i) any direct or indirect purchase or
other acquisition by Company or any of its Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person (including any Subsidiary of
Company), (ii) any direct or indirect redemption, retirement, purchase or other
acquisition for value, by any Subsidiary of Company from any Person other than
Company or any of its Subsidiaries, of any equity Securities of such Subsidiary,
(iii) any direct or indirect loan, advance (other than advances to employees for
moving, entertainment and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business) or capital contribution by
Company or any of its Subsidiaries to any other Person, including all
indebtedness and accounts receivable from that other Person that are not current
assets or did not arise from sales or services to that other Person in the
ordinary course of business, (iv) Interest Rate Agreements or Currency
Agreements not constituting Hedge Agreements, (v) Commodities Agreements not
constituting Hedge Agreements, or (vi) any Expansion of any Project by Company
or any of its Subsidiaries to the extent that the costs of such Expansion are
borne, directly or indirectly, by Company or any of its Subsidiaries. The amount
of any Investment shall be the original cost of such Investment plus the cost of
all additions thereto, without any adjustments for increases or decreases in
value, or write-ups, write-downs or write-offs with respect to such Investment.
No account receivable owed by a Person to Company or any of its Subsidiaries
that on the relevant date of determination constitutes a current asset and arose
from sales or services to such Person in the ordinary course of business shall
constitute an Investment on such date.
"INVESTOR PARTIES" means D.E. Shaw, SZ Investments, L.L.C., a Delaware limited liability company, and Third Avenue Trust, on behalf of the Third Avenue Value Fund Series.
"IP COLLATERAL" means, collectively, the Intellectual Property that constitutes Collateral.
"IPP INTERNATIONAL BUSINESS" means the assets and operations of the business of Company and its Subsidiaries referred to by Company as the "IPP International business" prior to the Closing Date, including the Haripur Project, the Samalpatti Project, the Trezzo Project, the Quezon Project, the Balaji/Madurai Project, the Linasa Project, the Don Pedro Project, the Rio Volcan Project, the Bataan Project, the Magellan Project, the Linan Project, the Huantai Project, the Yanjiang Project and the Island Power Project.
"IPP INTERNATIONAL SALES" means one or more sales or dispositions of (i) the assets and/or operations of CPIH and its Subsidiaries and/or (ii) the Capital Stock of CPIH or any of its Subsidiaries.
"ISSUING LENDER" means (i) in the event UBS Bank executes a counterpart hereof on the Closing Date as Issuing Lender, UBS Bank, in its capacity as Issuing Lender, and (ii) otherwise, Bank of America, in its capacity as Issuing Lender, or any successor Administrative Agent to Bank of America appointed pursuant to subsection 9.5.
"JOINT VENTURE" means a joint venture, partnership or other similar arrangement, whether in corporate, partnership or other legal form.
"LAKE SUBSIDIARY" means Covanta Lake II, Inc., a Florida corporation.
"LANDLORD CONSENT AND ESTOPPEL" means, with respect to any Leasehold Property, a letter, certificate or other instrument in writing from the lessor under the related lease, satisfactory in form and substance to Administrative Agent, pursuant to which such lessor agrees, for the benefit of Administrative Agent, (i) that without any further consent of such lessor or any further action on the part of the Borrower holding such Leasehold Property, such Leasehold Property may be encumbered pursuant to a Mortgage and may be assigned to the purchaser at a foreclosure sale or in a transfer in lieu of such a sale (and to a subsequent third party assignee if Administrative Agent, any Lender, or an Affiliate of either so acquires such Leasehold Property), (ii) that such lessor shall not terminate such lease as a result of a default by such Borrower thereunder without first giving Administrative Agent notice of such default and at least 60 days (or, if such default cannot reasonably be cured by Administrative Agent within such period, such longer period as may reasonably be required) to cure such default, and (iii) to such other matters relating to such Leasehold Property and the Collateral located thereon as Administrative Agent may reasonably request.
"LEASEHOLD PROPERTY" means any leasehold interest of any Borrower as lessee under any lease of real property.
"LENDER" and "LENDERS" means the Persons identified as "Lenders" and listed on the signature pages of this Agreement, together with their successors and permitted assigns pursuant to subsection 10.1.
"LETTER OF CREDIT" or "LETTERS OF CREDIT" means (i) letters of credit issued under this Agreement by the Issuing Lender pursuant to subsection 3.1A and (ii)(a) letters of credit issued by the Issuing Lender to replace Letters of Credit pursuant to subsection 3.1B(i) and (b) amendments to Letters of Credit issued by the Issuing Lender to extend the expiration date of such Letters of Credit.
"LETTER OF CREDIT COMMITMENT" means the commitment of a Lender under subsection 2.1A to purchase and fund participations in Letters of Credit pursuant to Section 3, and "LETTER OF CREDIT COMMITMENTS" means such commitments of all Lenders in the aggregate.
"LETTER OF CREDIT EXPOSURE" means, with respect to any Lender as of any date of determination, the sum of (a) in the event that Lender is an Issuing Lender, the aggregate Letter of Credit Usage in respect of all Letters of Credit issued by that Lender (in each case net of any participations purchased by other Lenders in such Letters of Credit or in any drawings thereunder not theretofore reimbursed by Borrowers) plus (b) the aggregate amount of all participations purchased by that Lender in any other outstanding Letters of Credit or any drawings under any such other Letters of Credit not theretofore reimbursed by Borrowers.
"LETTER OF CREDIT USAGE" means, as at any date of determination, the sum of (i) the maximum aggregate amount which is or at any time thereafter may become available for drawing under all Letters of Credit then outstanding plus (ii) the aggregate amount of all drawings under all Letters of Credit honored by Issuing Lenders and not theretofore reimbursed by Borrowers.
"LIEN" means any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing.
"LIMITED RECOURSE DEBT" means, with respect to any Subsidiary of Company, Indebtedness of such Subsidiary with respect to which the recourse of the holder or obligee of such Indebtedness is limited to (i) assets associated with the Project (which in any event shall not include assets held by any Borrower other than a Borrower, if any, whose sole business is the ownership and/or operation of such Project and substantially all of whose assets are associated with such Project) in respect of which such Indebtedness was incurred and/or (ii) such Subsidiary or the equity interests in such Subsidiary, but in the case of clause (ii) only if such Subsidiary's sole business is the ownership and/or operation of such Project and substantially all of such Subsidiary's assets are associated with such Project. For purposes of this Agreement, Indebtedness of a Subsidiary of Company shall not fail to be Limited Recourse Debt solely by virtue of the fact that the holders of such Limited Recourse Debt have recourse to Company or another Subsidiary of Company pursuant to a Contingent Obligation supporting such Limited Recourse Debt or a Performance Guaranty, so long as such Contingent Obligation or Performance Guaranty is permitted under subsection 7.4 of this Agreement.
"MANAGEMENT SERVICES AND REIMBURSEMENT AGREEMENT" means the management services and reimbursement agreement entered into by CPIH, Company and certain of their respective Subsidiaries on the Closing Date, in form and substance satisfactory to the Agents as such agreement may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted thereunder and under subsection 7.12.
"MANDATORY PAYMENT" means any amount described in subsections 2.3A(i)(a)-(f) to be applied to repay funded amounts under Letters of Credit or to cash collateralize Letter of Credit Exposure, as determined pursuant to subsection 2.3A.
"MARGIN STOCK" has the meaning assigned to that term in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect upon the business, operations, properties, assets, condition (financial or otherwise) or prospects of Borrowers, taken as a whole, or Company and its Subsidiaries, taken as a whole, or (ii) the impairment of the ability of Credit Parties taken as a whole to perform, or of Administrative Agent or Lenders to enforce, the Obligations.
"MATERIAL CONTRACT" means (i) the principal lease agreement, if any, and the principal service or operating agreement, if any, with respect to each waste-to-energy Project and the principal lease agreement, if any, with respect to each independent power plant Project to which Company or any of its Subsidiaries is a party, each of which is in existence as of the Closing Date and is described on Schedule 1.1B annexed hereto, and (ii) any other contract or other arrangement to which Company or any of its Subsidiaries is a party (other than the Credit Documents) for which breach, nonperformance, cancellation or failure to renew would reasonably be expected to have a Material Adverse Effect.
"MATERIAL LEASEHOLD PROPERTY" means a Leasehold Property reasonably determined by Administrative Agent to be of material value as Collateral or of material importance to the operations of Company or any of its Subsidiaries.
"MATERIAL SUBSIDIARY" means, with respect to any Person, any
Subsidiary of such Person now existing or hereafter acquired or formed by such
Person which, on a consolidated basis for such Subsidiary and all of its
Subsidiaries, (i) for the most recent fiscal year of such Person accounted for
more than 1% of the consolidated revenues of such Person and its Subsidiaries,
(ii) as at the end of such fiscal year, was the owner of more than 1% of the
consolidated assets of such Person and its Subsidiaries, or (iii) is capitalized
with more than $500,000 of equity.
"MATURITY DATE" means March 10, 2009.
"MORTGAGE" means (i) a security instrument (whether designated as a deed of trust or a mortgage or by any similar title) executed and delivered by any Borrower, substantially in the form of Exhibit XIV annexed hereto or in such other form as may be approved by Administrative Agent in its sole discretion, in each case with such changes thereto as may be recommended by Administrative Agent's local counsel based on local laws or customary local mortgage or deed of trust practices, or (ii) at Administrative Agent's option, in the case of any real property or Material Leasehold Property that is the subject of subsection 6.9, an amendment to an existing Mortgage, in form satisfactory to Administrative Agent, in either case as such security instrument or amendment may be amended, restated, supplemented or otherwise modified from time to time. "MORTGAGES" means all such instruments collectively, whether executed as of or subsequent to the Closing Date.
"MULTIEMPLOYER PLAN" means any Employee Benefit Plan that is a "multiemployer plan" as defined in Section 3(37) of ERISA.
"NET ASSET SALE PROCEEDS" means, with respect to any Asset Sale, Gross Receipts received from such Asset Sale, net of any bona fide direct costs incurred in connection with such Asset Sale, including (i) income taxes reasonably estimated to be actually payable prior to the earlier of (a) the date which is eighteen months from the date of such Asset Sale and (b) the Maturity Date as a result of any gain recognized in connection with such Asset Sale, (ii) additional Taxes actually payable upon the closing of such Asset Sale (including any transfer Taxes or Taxes on gross receipts), (iii) actual, reasonable and documented out-of-pocket fees and expenses (including reasonable legal fees, reasonable fees to advisors and severance costs that are due (pursuant to a Contractual Obligation, or written employment policy applicable to terminated employees generally, of Company or any of its Subsidiaries in effect prior to such Asset Sale or pursuant to applicable law) and payable immediately upon consummation of such Asset Sale to employees of Company and its Subsidiaries that are terminated as a result thereof) paid to Persons other than Company and its Subsidiaries and their respective Affiliates in connection with such Asset Sale (including fees necessary to obtain any required consents of such Persons to such Asset Sale), and (iv) payment of the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness that is (x) secured by a valid, enforceable and perfected Lien on the stock or assets in question that is permitted under subsection 7.2 and (y) required to be repaid under the terms of such Indebtedness as a result of such Asset Sale (without duplication of amounts deducted in calculating the Gross Receipts from such Asset Sale) and is permitted to be paid under the Credit Documents.
"NET DEPRECIATION AND AMORTIZATION EXPENSE" means, for any period, (i) the sum of the amounts (each expressed as a positive number) for such period of "Depreciation" and "Amortization", as each such line item is reflected in Company's consolidated statement of cash flows prepared in conformity with GAAP and reported in a manner consistent with Company's reporting of such amount in its quarterly or annual report (as the case may be) on Form 10Q or 10K, respectively, prior to the Closing Date, whether such line items are so titled or otherwise titled, minus (iii) Haverhill Deferred Income.
"NET INSURANCE/CONDEMNATION PROCEEDS" means any cash payments
or proceeds received by Company or any of its Subsidiaries (i) under any
business interruption or casualty insurance policy in respect of a covered loss
thereunder or (ii) as a result of the taking of any assets of Company or any of
its Subsidiaries by any Person pursuant to the power of eminent domain,
condemnation or otherwise, or pursuant to a sale of any such assets to a
purchaser with such power under threat of such a taking, in each case net of (a)
income taxes reasonably estimated to be actually payable prior to the earlier of
(1) the date which is eighteen months from the date of such receipt and (2) the
Maturity Date as a result of the receipt of such payments or proceeds and (b)
any actual, reasonable and documented out-of-pocket fees and expenses (including
reasonable legal fees, reasonable fees to advisors and severance costs that are
due (pursuant to a Contractual Obligation, or written employment policy
applicable to terminated employees generally, of Company or any of its
Subsidiaries in effect prior to the event causing or relating to the payment
referred to in clause (i) or (ii) above or pursuant to applicable law) and
payable on or prior to the receipt of such payment or proceeds to employees of
Company and its Subsidiaries that have been terminated as a result of the
relevant loss, taking or sale) paid to
Persons other than Company and its Subsidiaries and their respective Affiliates in connection with the relevant loss, taking or sale or the adjustment or settlement of any claims of Company or such Subsidiary in respect thereof; provided, however, that Net Insurance/Condemnation Proceeds shall be reduced in an amount equal to the amount of proceeds Subsidiaries of Company are legally bound or required, pursuant to agreements in effect on the Closing Date, or which were entered into after the Closing Date with respect to the financing or acquisition of a Project, to use for purposes other than a Mandatory Payment.
"NET INDEBTEDNESS PROCEEDS" means the cash proceeds (net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith (including reasonable legal fees and expenses)) from the incurrence of Indebtedness by Company or any of its Subsidiaries.
"NEW L/C FACILITY AGREEMENT" means (i) that certain credit
agreement dated as of the date hereof by and among Borrowers, as borrowers, and
the financial institutions listed on the signature pages thereof, as lenders,
and (ii) any credit agreement entered into by Borrowers to refinance, replace,
renew or extend, in whole or in part, the credit agreement referenced in clause
(i) and the Indebtedness and letters of credit issued thereunder (provided, that
(a) the terms of such credit agreement, such Indebtedness and such letters of
credit as so refinanced, replaced, renewed or extended shall not be more
disadvantageous to Company and its Subsidiaries and the Lenders (in a manner
deemed material by Agents) than the New L/C Facility Agreement in effect on the
Closing Date (it being understood and agreed that any refinancing, replacement,
renewal or extension having the effect of (1) increasing the maximum amount of
any commitment to extend loans (as opposed to letters of credit) under the New
L/C Facility Documents, or (2) reducing, delaying or waiving any otherwise
required reduction in the amount of any commitment to extend loans or letters of
credit under the New L/C Facility Documents, shall be deemed to be more
disadvantageous for purposes of this clause (a) without further notice or other
action by Agents), (b) the aggregate amount of Indebtedness and letters of
credit outstanding, and additional commitments to extend credit, if any, under
the New L/C Facility Agreement as refinanced, replaced, renewed or extended,
shall not exceed the aggregate amount of the commitments to extend credit in
effect under the New L/C Facility Agreement on the Closing Date, plus
$5,000,000, (c) the obligations under (and the Liens securing) such credit
agreement as refinanced, replaced, renewed or extended shall be subject to the
Intercreditor Agreement on terms substantively identical to the terms applicable
to the obligations in effect under the New L/C Facility Agreement on the Closing
Date, and (d) Company shall provide to Agents reasonable prior advance written
notice of such proposed refinancing, replacement, renewal or extension and
copies of all material contracts or other agreements being entered into in
connection therewith), in the case of clause (i) or (ii) as such credit
agreement may be amended, restated, supplemented or otherwise modified from time
to time to the extent permitted under subsection 7.12.
"NEW L/C FACILITY DOCUMENTS" means (i) the New L/C Facility Agreement and (ii) the other "Credit Documents" as defined in the New L/C Facility Agreement.
"9.25% DEBENTURES" means the "9.25% Debenture Claims" as such term is defined in the Plan of Reorganization.
"NON-BORROWER CASH FLOW" means, for any period with respect to Subsidiaries of Company that are not Borrowers, (i) the aggregate amount of cash from such Subsidiaries paid as dividends or otherwise distributed to Borrowers, minus (ii) the aggregate amount of cash expenditures made by such Subsidiaries from amounts received from Borrowers to fund operations and capital expenditures of such Subsidiaries (whether such amounts are received from Borrowers as the proceeds of Indebtedness incurred by such non-Borrower Subsidiary or as the proceeds of equity contributions or both). Amounts included in the calculation of the Development Expenses with respect to a Project shall not be included in the calculation of clause (ii) of Non-Borrower Cash Flow.
"NON-US LENDER" means a Lender that is organized under the laws of any jurisdiction other than the United States or any state or other political subdivision thereof.
"OBLIGATIONS" means all obligations of every nature of Credit Parties under the Credit Documents, including any liability of such Credit Party on any claim arising out of or relating to the Credit Documents, whether or not the right to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed or contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any bankruptcy, insolvency, reorganization or other similar proceeding. Without limiting the generality of the foregoing, the Obligations of the Credit Parties under the Credit Documents include (a) the obligation to pay principal, interest (including all interest which accrues after the commencement of any case or proceeding in bankruptcy after the insolvency of, or for the reorganization of, any Credit Party, whether or not allowed in such case or proceeding), charges, expenses, fees, attorneys' fees and disbursements, indemnities and other amounts payable by any Borrower and any other Credit Party under any Credit Document and (b) the obligation to reimburse any amount in respect of any of the foregoing that any Agent or any Lender, in its sole discretion, may elect to pay or advance on behalf of such Borrower or other Credit Party; provided, that nothing in this definition shall be construed as creating any obligations of DHC under the Credit Documents that are not expressly set forth in such Credit Documents.
"OFFICER" means the president, chief executive officer, a vice president, chief financial officer, treasurer, general partner (if an individual), managing member (if an individual) or other individual appointed by the Governing Body or the Organizational Documents of a corporation, partnership, trust or limited liability company to serve in a similar capacity as the foregoing.
"OFFICER'S CERTIFICATE" means, as applied to any Person that is a corporation, partnership, trust or limited liability company, a certificate executed on behalf of such Person by one or more Officers of such Person or one or more Officers of a general partner or a managing member if such general partner or managing member is a corporation, partnership, trust or limited liability company; provided, that any Officer's Certificate delivered pursuant to subsection 2.3A(i)(h) or 6.1(v) shall be executed by a senior financial officer of Company reasonably acceptable to Administrative Agent.
"ORGANIZATIONAL DOCUMENTS" means the documents (including Bylaws, if applicable) pursuant to which a Person that is a corporation, partnership, trust or limited liability company is organized.
"PARTICIPANT" means a purchaser of a participation in the rights and obligations under this Agreement pursuant to subsection 10.1C.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto.
"PENSION PLAN" means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to section 412 of the Internal Revenue Code or section 302 of ERISA.
"PERFORMANCE GUARANTY" means any agreement entered into by Company or any of its Subsidiaries under which Company or any such Subsidiary guarantees the performance of a Subsidiary of Company under a principal lease, service or operating agreement relating to a Project. The Existing IPP International Project Guaranties shall not constitute Performance Guaranties.
"PERMANENT L/C OBLIGATION REDUCTION" means a cancellation, termination or reduction in the amount of any Letter of Credit (including any such reduction, cancellation or termination resulting from a drawing under such Letter of Credit), other than such a cancellation, termination or reduction concurrently with a reissuance of the relevant cancelled, terminated or reduced portion of the applicable Letter of Credit pursuant to subsection 3.1B(i). Notwithstanding the foregoing, any scheduled reduction in the stated amount of any Letter of Credit shall be a Permanent L/C Obligation Reduction only to the extent the maximum amount available for drawing at any time thereafter under such Letter of Credit is permanently reduced.
"PERMITTED ENCUMBRANCES" means the following types of Liens (excluding any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or by ERISA, any such Lien relating to or imposed in connection with any Environmental Claim, and any such Lien expressly prohibited by any applicable terms of any of the Collateral Documents):
(i) Liens for taxes, assessments or governmental charges or claims the payment of which is not, at the time, required by subsection 6.3;
(ii) statutory Liens of landlords, statutory Liens and rights of set-off of banks, statutory Liens of carriers, warehousemen, mechanics, repairmen, workmen and materialmen, and other Liens imposed by law, in each case incurred in the ordinary course of business (a) for amounts not yet overdue or (b) for amounts that are overdue and that (in the case of any such amounts overdue for a period in excess of 5 days) are being contested in good faith by appropriate proceedings, so long as (1) such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts, and (2) in the case of a Lien with respect to any portion of the Collateral, such contest proceedings conclusively operate to stay the sale of any portion of the Collateral on account of such Lien;
(iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money), so long as no foreclosure, sale or similar proceedings have been commenced with respect to any portion of the Collateral on account thereof;
(iv) any attachment or judgment Lien not constituting an Event of Default under subsection 8.8;
(v) leases or subleases granted to third parties in accordance with any applicable terms of the Collateral Documents and not interfering in any material respect with the ordinary conduct of the business of Company or any of its Subsidiaries or resulting in a material diminution in the value of any Collateral as security for the Secured Obligations;
(vi) easements, rights-of-way, restrictions, encroachments, and other minor defects or irregularities in title to the real property of Company and its Subsidiaries, in each case which do not and will not interfere in any material respect with the ordinary conduct of the business of Company or any of its Subsidiaries or result in a material diminution in the value of any Collateral as security for the Secured Obligations;
(vii) any (a) interest or title of a lessor or sublessor under any lease not prohibited by this Agreement, (b) restriction or encumbrance that the interest or title of such lessor or sublessor may be subject to, or (c) subordination of the interest of the lessee or sublessee under such lease to any restriction or encumbrance referred to in the preceding clause (b), so long as the holder of such restriction or encumbrance agrees to recognize the rights of such lessee or sublessee under such lease;
(viii) Liens arising from filing UCC financing statements relating solely to leases not prohibited by this Agreement;
(ix) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;
(x) any zoning or similar law or right reserved to or vested in any governmental office or agency to control or regulate the use of any real property;
(xi) Liens securing obligations (other than obligations representing Indebtedness for borrowed money) under operating, reciprocal easement or similar agreements entered into in the ordinary course of business of Company and its Subsidiaries; and
(xii) licenses of Intellectual Property granted by Company or any of its Subsidiaries in the ordinary course of business and not interfering in any material respect with the ordinary conduct of the business of Company or such Subsidiary.
Other Liens on assets of Borrowers and their Subsidiaries permitted under this Agreement (which are not Permitted Encumbrances) are described in subsection 7.2A.
"PERSON" means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, Joint Ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments (whether federal, state or local, domestic or foreign, and including political subdivisions thereof) and agencies or other administrative or regulatory bodies thereof.
"PETITION DATE" has the meaning assigned to that term in the recitals to this Agreement.
"PLAN OF REORGANIZATION" means the Debtors' Second Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code as filed with the Bankruptcy Court on January 14, 2004 (and as revised and amended through March 2, 2004), together with the Reorganization Plan Supplement to Debtors' Second Joint Plan of Reorganization filed with the Bankruptcy Court on February 18, 2004 in connection therewith.
"PLEDGED COLLATERAL" means the "Pledged Collateral" as defined in the Security Agreement.
"POTENTIAL EVENT OF DEFAULT" means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default.
"PREPETITION CREDIT AGREEMENT" means the Revolving Credit and Participation Agreement dated as of March 14, 2001, among Company, certain of its Subsidiaries, the financial institutions listed on the signature pages thereof, Deutsche Bank, as Documentation Agent, and Bank of America, as Administrative Agent, as amended, restated, supplemented or otherwise modified through the Closing Date and as it may hereafter be amended, restated, supplemented or otherwise modified.
"PREPETITION CREDIT DOCUMENTS" means all "Loan Documents" as defined in the Prepetition Credit Agreement.
"PREPETITION LENDERS" means the Persons identified as "Lenders" under the Prepetition Credit Agreement, in their capacities as lenders under the Prepetition Credit Agreement, together with their successors and permitted assigns.
"PREPETITION OBLIGATIONS" means all "Obligations" as defined in the Prepetition Credit Agreement.
"PREPETITION SECURED CLAIMS" means, collectively, the "Secured Bank Claims" and the "9.25% Debenture Claims", as such terms are defined in the Plan of Reorganization.
"PREPETITION UNSECURED CLAIMS" means "Parent and Holding Company Unsecured Claims" that are "Allowed," as such terms are defined in the Plan of Reorganization.
"PRIME RATE" means the rate that Bank of America announces from time to time as its prime lending rate in effect for commercial borrowers in the United States, as in effect from time to time. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Bank of America or any other Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Rate.
"PROCEEDINGS" means any action, suit, proceeding (whether administrative, judicial or otherwise), governmental investigation or arbitration.
"PROJECT" means any waste-to-energy facility, electrical generation plant, cogeneration plant, water treatment facility or other facility for the generation of electricity or engaged in another line of business in which Company and its Subsidiaries are permitted to be engaged hereunder for which a Subsidiary or Subsidiaries of Company (including CPIH Subsidiaries) was, is or will be (as the case may be) an owner, operator, manager or builder, and shall also mean any two or more of such plants or facilities in which an interest has been acquired in a single transaction, so long as such interest constitutes an existing Investment on the Closing Date permitted under this Agreement; provided, however, that a Project shall cease to be a Project of Company and its Subsidiaries at such time that Company or any of its Subsidiaries ceases to have any existing or future rights or obligations (whether direct or indirect, contingent or matured) associated therewith.
"PRO RATA SHARE" means, with respect to any Lender, the percentage obtained by dividing (i) the Letter of Credit Exposure of that Lender by (ii) the aggregate Letter of Credit Exposure of all Lenders, in any such case as the applicable percentage may be adjusted by assignments permitted pursuant to subsection 10.1. The initial Pro Rata Share of each Lender is set forth opposite the name of that Lender in Schedule 2.1 annexed hereto.
"PTO" means the United States Patent and Trademark Office or any successor or substitute office in which filings are necessary or, in the opinion of Administrative Agent, desirable in order to create or perfect Liens on any IP Collateral.
"PURPA" means the Public Utility Regulatory Policies Act of 1978, as amended.
"RCRA" means the Resource Conservation and Recovery Act, as amended (42 U.S.C. Section 6901 et seq.), or any successor statute, and all implementing regulations promulgated thereunder.
"REAL PROPERTY ASSET" means, at any time of determination, any interest then owned by any Borrower in any real property.
"RECORDED LEASEHOLD INTEREST" means a Leasehold Property with respect to which a Record Document (as hereinafter defined) has been recorded in all places necessary or desirable, in Administrative Agent's reasonable judgment, to give constructive notice of such Leasehold Property to third-party purchasers and encumbrancers of the affected real property. For purposes of this definition, the term "RECORD DOCUMENT" means, with respect to any Leasehold Property, (a) the lease evidencing such Leasehold Property or a memorandum thereof, executed and acknowledged by the owner of the affected real property, as lessor, or (b) if such Leasehold Property was acquired or subleased from the holder of a Recorded Leasehold Interest,
the applicable assignment or sublease document, executed and acknowledged by such holder, in each case in form sufficient to give such constructive notice upon recordation and otherwise in form reasonably satisfactory to Administrative Agent.
"REGISTER" has the meaning assigned to that term in subsection 2.1B.
"REIMBURSEMENT DATE" has the meaning assigned to that term in subsection 3.3B.
"RELATED AGREEMENTS" means the New L/C Facility Documents, the High Yield Indenture, the High Yield Notes, the Corporate Services Reimbursement Agreement, the Management Services and Reimbursement Agreement and the DHC Tax Sharing Agreement, as such agreements and instruments may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under subsection 7.12.
"RELEASE" means any releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing or migrating of Hazardous Materials into the indoor or outdoor environment (including the abandonment, discarding or disposal of any barrels, containers or other closed receptacles containing any Hazardous Materials), including the movement of any Hazardous Materials through the air, soil, surface water or groundwater.
"REQUEST FOR ISSUANCE" means a request substantially in the form of Exhibit III annexed hereto.
"REQUISITE DIP LENDERS" means DIP Lenders having or holding more than 50% of the aggregate credit exposure under the DIP Tranche A L/Cs and the DIP Tranche B L/Cs.
"REQUISITE LENDERS" means Lenders having or holding more than 50% of the aggregate Letter of Credit Exposure of all Lenders, provided, however, that prior to the Closing Date, for purposes of this definition the Letter of Credit Exposure of each Lender shall equal the original Letter of Credit Commitment of such Lender on the Closing Date.
"RESTRICTED ACCOUNT" means any account that is either (i) a collateral account, debt service reserve account or other Deposit Account to which the access of Company and its Subsidiaries is restricted pursuant to a valid and enforceable Contractual Obligation, so long as such account is (a) related to a Project of Company and its Subsidiaries, (b) is required to be opened or maintained by Company or any of its Subsidiaries pursuant to a Contractual Obligation binding on such Person and (c) is permitted to be maintained under this Agreement, or (ii) a reserve account established in accordance with the Approved Plan of Reorganization.
"RESTRICTED PAYMENT" means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of Company now or hereafter outstanding, except a dividend payable solely in shares of that class of stock to the holders of that class, (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of Company now or hereafter outstanding, (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock of Company
now or hereafter outstanding, and (iv) any payment or prepayment of principal
of, premium, if any, or interest on, or redemption, purchase, retirement,
defeasance (including in-substance or legal defeasance), sinking fund or similar
payment with respect to, any Indebtedness of Company and its Subsidiaries other
than (a) the Obligations, (b) Indebtedness owed by a Subsidiary to a Borrower,
(c) Indebtedness under the New L/C Facility Documents or the High Yield Notes,
and (d) other amounts required to be paid under this Agreement.
"SECURED OBLIGATIONS" means the obligations secured by the Collateral pursuant to the Collateral Documents.
"SECURED PARTIES" means the "Secured Parties" as defined in the Intercreditor Agreement.
"SECURITIES" means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated, certificated or uncertificated, or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to time, and any successor statute.
"SECURITIES ACCOUNT" means an account to which a financial asset is or may be credited in accordance with an agreement under which the Person maintaining the account undertakes to treat the Person for whom the account is maintained as entitled to exercise the rights that comprise the financial asset.
"SECURITY AGREEMENT" means the Security Agreement executed and delivered on the Closing Date by Credit Parties (except as otherwise contemplated in subsection 5.18) other than DHC, substantially in the form of Exhibit VII annexed hereto, as such Security Agreement may thereafter be amended, restated, supplemented or otherwise modified from time to time.
"SEIU PENSION PLAN" means the Pension Plan referred to generally by Company on and prior to the Closing Date as the "Service Employees International Union Pension Trust for Employees of Allied Plant Maintenance Company, Inc. Defined Benefit Pension Plan".
"SOLVENT" means, with respect to any Person, that as of the
date of determination, in light of all of the facts and circumstances existing
at such time, (i) the then fair saleable value of the property of such Person is
(a) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (b) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and due considering all financing alternatives and
potential asset sales reasonably available to such Person; (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due. For purposes of this
definition, the amount of any contingent liability at any
time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.
"SUBORDINATED INDEBTEDNESS" means, collectively, (i) Indebtedness under the Unsecured Creditor Notes and the Unsecured Creditor Notes Indenture, and (ii) any other Indebtedness of Company or any of its Subsidiaries incurred from time to time and subordinated by its terms in right of payment to the Obligations.
"SUBSIDIARY" means, with respect to any Person, any corporation, partnership, trust, limited liability company, association, joint venture or other business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the members of the Governing Body is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof. Any reference contained herein to one or more Subsidiaries of Company or of Company's Domestic Subsidiaries shall, unless otherwise expressly indicated, not include any CPIH Subsidiaries and Greenway Insurance Company of Vermont.
"SWEEP DATE" has the meaning assigned to that term in subsection 2.3A(i)(f).
"SYNTHETIC LEASE OBLIGATION" means the monetary obligation of a Person under (i) a so-called synthetic, off-balance sheet or tax retention lease, or (ii) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).
"TAMPA SUBSIDIARIES" means Covanta Tampa Construction, Inc., a Delaware corporation, and Covanta Tampa Bay, Inc., a Florida corporation.
"TAX" or "TAXES" means any present or future tax, levy, impost, duty, charge, fee, deduction or withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed, including interest, penalties, additions to tax and any similar liabilities with respect thereto; except that, in the case of a Lender, there shall be excluded franchise taxes and all taxes that are imposed on the overall income or profits of such Lender by the United States or by any other Government Authority under the laws of which Lender is organized or has its principal office or maintains its applicable lending office.
"TAX NOTE" has the meaning assigned to that term in subsection 4.1F(iv).
"TOTAL DEBT" means, as at any date of determination, (i) the
aggregate stated balance sheet amount of all Indebtedness of Company and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP, minus
(ii) the amounts of "Current portion of project debt" and "Project Debt",
whether such line items are so titled or otherwise titled, as such line items
are or would be reflected in Company's consolidated balance sheet as at such
date prepared in conformity with GAAP and reported in a manner consistent with
Company's reporting of such amounts in its quarterly or annual report (as the
case may be) on Form 10Q or
10K, respectively, prior to the Closing Date, minus (iii) any portion of Indebtedness of Company and its Subsidiaries under the CPIH Stock Pledge Agreement or the Corporate Services Reimbursement Agreement included in the amount described in clause (i) above, minus (iv) any portion of the amount described in clause (i) above that represents a funded drawing under a letter of credit (otherwise permitted to be outstanding under this Agreement) supporting obligations of Company and its Subsidiaries (including CPIH Subsidiaries) in respect of the Quezon Project.
"TREASURY REGULATIONS" means the Treasury Regulations promulgated under the Internal Revenue Code.
"TSCA" means the Toxic Substances Control Act of 1976, as amended (15 U.S.C. Section 2601 et seq.), or any successor statute, and all implementing regulations promulgated thereunder.
"UBS BANK" means UBS AG, Stamford Branch.
"UCC" means the Uniform Commercial Code (or any similar or equivalent legislation) as in effect in any applicable jurisdiction.
"UNDERWRITING LENDER" means Merrill Lynch, Pierce, Fenner & Smith Incorporated.
"UNITED STATES" means the United States of America.
"UNSECURED CREDITOR NOTES" has the meaning assigned to that term in subsection 4.1F(iv).
"UNSECURED CREDITOR NOTES INDENTURE" means the Indenture pursuant to which the Unsecured Creditor Notes are issued.
"WARREN SUBSIDIARIES" means Covanta Warren Energy Resource Co. LP, a Delaware limited partnership, Covanta Warren Holdings I, Inc., a Virginia corporation, and Covanta Warren Holdings II, Inc., a California corporation.
1.2 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS UNDER AGREEMENT.
Except as otherwise expressly provided in this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP. Financial statements and other information
required to be delivered by Company to Lenders pursuant to clauses (iii) and
(iv) of subsection 6.1 shall be prepared in accordance with GAAP as in effect at
the time of such preparation (and delivered together with the reconciliation
statements provided for in subsection 6.1(vi)). Except as otherwise permitted by
this Agreement, calculations in connection with the definitions, covenants and
other provisions of this Agreement shall utilize GAAP as in effect on the date
of determination, applied in a manner consistent with that used in preparing the
financial statements referred to in subsection 5.3. If at any time any change in
GAAP would affect the computation of any financial ratio or requirement set
forth in
any Credit Document, and Company, Administrative Agent or Requisite Lenders shall so request, Administrative Agent, Lenders and Company shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of Requisite Lenders), provided that, until so amended, such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and Company shall provide to Administrative Agent and Lenders reconciliation statements provided for in subsection 6.1(vi).
1.3 OTHER DEFINITIONAL PROVISIONS AND RULES OF CONSTRUCTION.
A. Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference.
B. References to "Sections" and "subsections" shall be to Sections and subsections, respectively, of this Agreement unless otherwise specifically provided.
C. The use in any of the Credit Documents of the word "include" or "including", when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation" or "but not limited to" or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter.
SECTION 2. AMOUNT OF COMMITMENTS; CERTAIN TERMS OF PAYMENT AND REPAYMENT
2.1 LETTER OF CREDIT COMMITMENTS; REGISTER; DEFAULT RATE; COMPUTATION OF INTEREST; MAXIMUM RATE.
A. LETTER OF CREDIT COMMITMENTS. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Borrowers herein set forth, each Lender agrees to purchase in accordance with subsection 3.1C participations in each Letter of Credit and any drawings honored thereunder, in an aggregate amount not exceeding its Pro Rata Share of the Letter of Credit Commitments. The original amount of each Lender's Letter of Credit Commitment is set forth opposite its name on Schedule 2.1 annexed hereto and the aggregate original amount of the Letter of Credit Commitments is $138,191,554.19; provided, however, that the Letter of Credit Commitments of Lenders shall be adjusted to give effect to any assignments of the Letter of Credit Commitments pursuant to subsection 10.1B and shall be reduced from time to time by the amount of any reductions thereto made pursuant to subsection 2.3. Each Lender's Letter of Credit Commitment shall expire on the Maturity Date.
B. THE REGISTER. Administrative Agent, acting for these purposes solely as an agent of Borrowers (it being acknowledged that Administrative Agent, in such capacity, and its officers, directors, employees, agent and affiliates shall constitute Indemnitees under subsection 10.3), shall maintain (and make available for inspection by Borrowers and Lenders upon reasonable prior notice at reasonable times) at its address referred to in subsection 10.8 a register for the recordation of, and shall record, the names and addresses of Lenders and the
Letter of Credit Commitment and participations in Letters of Credit of each Lender from time to time (the "REGISTER"). Borrowers, Administrative Agent and Lenders shall deem and treat the Persons listed as Lenders in the Register as the holders and owners of the corresponding Letter of Credit Commitments and participations listed therein for all purposes hereof; all amounts owed with respect to any Letter of Credit Commitment or participation shall be owed to the Lender listed in the Register as the owner thereof; and any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is listed in the Register as a Lender shall be conclusive and binding on any subsequent holder, assignee or transferee of the corresponding Letter of Credit Commitment or participation. Each Lender shall record on its internal records the amount of its participations and Letter of Credit Commitment and each payment in respect hereof, and any such recordation shall be conclusive and binding on Borrowers, absent manifest error, subject to the entries in the Register, which shall, absent manifest error, govern in the event of any inconsistency with any Lender's records. Failure to make any recordation in the Register or in any Lender's records, or any error in such recordation, shall not affect any participations or Letter of Credit Commitments or any Obligations in respect of any participations.
C. DEFAULT RATE. Upon the occurrence and during the continuation of any Event of Default, any fees and other amounts then due and payable hereunder (but not including amounts drawn under any Letter of Credit that are not reimbursed by Borrowers when required under subsection 3.3) shall thereafter bear interest (including post petition interest in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws) payable upon demand at a rate equal to the Base Rate plus 5.00% per annum. Payment or acceptance of the increased rates of interest provided for in this subsection 2.1C is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Administrative Agent or any Lender.
D. COMPUTATION OF INTEREST. Interest on amounts bearing interest with reference to the Base Rate shall be computed on the basis of a 360-day year, for the actual number of days elapsed in the period during which it accrues. In computing interest on any amount funded in a drawing under a Letter of Credit, the date of the funding of such drawing shall be included; and the date of payment of such funded drawing shall be excluded; provided that if a funded drawing is repaid on the same day on which it is made, one day's interest shall be paid on that funded drawing.
E. MAXIMUM RATE. Notwithstanding the foregoing provisions of this subsection 2.1, in no event shall the rate of interest payable by Borrowers with respect to any funded drawing under any Letter of Credit exceed the maximum rate of interest permitted to be charged under applicable law.
2.2 FEES.
A. FACILITY FEES. Borrowers, jointly and severally, agree to pay to Administrative Agent on the Closing Date, for distribution to each Lender, a facility fee in an amount equal to 1.0% of the Letter of Credit Commitment of such Lender as of the Closing Date.
B. OTHER FEES. Borrowers, jointly and severally, agree to pay to Agents such fees in the amounts and at the times separately agreed upon between Company and Agents. All fees referenced in this subsection 2.2 shall be earned when payable and shall be non-refundable.
2.3 MANDATORY PAYMENTS, REDUCTIONS IN COMMITMENTS; GENERAL PROVISIONS REGARDING PAYMENTS; APPLICATION OF PROCEEDS OF COLLATERAL.
A. PREPAYMENTS AND REDUCTIONS IN COMMITMENTS.
(i) Mandatory Payments. Mandatory Payments shall be made in the amounts and under the circumstances set forth below, all such Mandatory Payments to be applied as set forth below or as more specifically provided in subsection 2.3A(ii), except to the extent the Intercreditor Agreement requires application thereof in a different manner than as set forth in this subsection 2.3A(i) or subsection 2.3A(ii):
(a) Net Asset Sale Proceeds. No later than two days after the date of receipt by Company or any of its Subsidiaries of any Net Asset Sale Proceeds in respect of any Asset Sale, Company shall make a Mandatory Payment in an aggregate amount equal to (1) to the extent that aggregate Net Asset Sale Proceeds in respect of all Asset Sales made on or prior to such date is $7,500,000 or less, 33.33% of such Net Asset Sale Proceeds, or (2) to the extent that aggregate Net Asset Sale Proceeds in respect of all Asset Sales made on or prior to such date exceeds $7,500,000, 100% of such excess (without duplication).
(b) Net Insurance/Condemnation Proceeds. No later than the fifth Business Day following the date of receipt by Administrative Agent or by Company or any of its Subsidiaries of any Net Insurance/Condemnation Proceeds that are required to be used for a Mandatory Payment pursuant to the provisions of subsection 6.4C, Company shall make a Mandatory Payment in an aggregate amount equal to the amount of such Net Insurance/Condemnation Proceeds.
(c) Issuance of Indebtedness. On the date of receipt of the Net Indebtedness Proceeds from the issuance of any Indebtedness of Company or any of its Subsidiaries after the Closing Date, other than Indebtedness permitted pursuant to subsections 7.1(i) through (xvi), Company shall make a Mandatory Payment in an aggregate amount equal to such Net Indebtedness Proceeds.
(d) Tax Refunds. If after the Closing Date, Company or any of its Subsidiaries receives any payment of a cash refund or rebate of any Tax, the Borrowers shall no later than the Business Day following the date of receipt of such refund or rebate make a Mandatory Payment in the amount of such Tax refund or rebate, except to the extent such application would constitute a material violation of a valid Contractual Obligation in connection with a Project of Company or any of its Subsidiaries to remit such refund or rebate to the client of such Project.
(e) Annual Free Cash Flow. In the event that there shall be Annual Free Cash Flow for any Fiscal Year (commencing with Fiscal Year 2004),
Company shall, no later than 60 days after the end of such Fiscal Year, make a Mandatory Payment in an aggregate amount equal to 50% (or, during the continuance of an Event of Default, 100%) of such Annual Free Cash Flow; provided, however, that the amount of such Mandatory Payment shall be reduced by the amount of cash, if any, applied to cash collateralize Letter of Credit Exposure pursuant to subsection 2.3A(i)(f) during the four Fiscal Quarters most recently preceding the date of such Mandatory Payment.
(f) Excess Cash. Any amounts on deposit in the Cash Management System (such amounts, in any event, not to include amounts, if any, on deposit in the Collateral Accounts or required to be held in Deposit Accounts which are Restricted Accounts described on Schedule 2.3A(i)(f) annexed hereto, as said Schedule 2.3A(i)(f) may be supplemented from time to time pursuant to the provisions of subsection 6.1(xvii)) (the aggregate of such amounts on deposit at any time (excluding any amounts on deposit in accounts set forth on said Schedule at such time) being referred to herein as "CASH ON HAND") in excess of $60,000,000 (plus the Closing Date Retained Amount) for each Sweep Date (as defined below) in 2004 and 2005, $70,000,000 (plus the Closing Date Retained Amount) for each Sweep Date in 2006, $75,000,000 (plus the Closing Date Retained Amount) for each Sweep Date in 2007 and $80,000,000 (plus the Closing Date Retained Amount) for each Sweep Date in 2008, on June 30 and December 31 of each of the aforementioned years (each such date, a "SWEEP DATE"), shall be applied on the next succeeding Business Day to repay funded amounts, if any, under the Letters of Credit and then to cash collateralize the Letters of Credit and the Letter of Credit Commitments under the Collateral Account Agreement in an amount, taken together with all then existing cash collateral for the Letter of Credit Commitments, equal to 105% of the Letter of Credit Commitments.
(g) Prepayments Due to Certain Changes of Control. Upon the date on which any "change of control" or "change in control" or event, however titled, shall occur that requires under the High Yield Indenture a repurchase of the High Yield Notes or an offer to repurchase High Yield Notes as a result of a change in ownership of all or some portion of the Capital Stock of Company or any of its Subsidiaries or all or substantially all of the assets of Company and its Subsidiaries, (1) Borrowers shall repay all funded amounts, if any, under the Letters of Credit, then deposit into the Collateral Account an amount equal to 105% of the maximum amount that may at any time be drawn under all Letters of Credit then outstanding (whether or not any beneficiary under any such Letter of Credit shall have presented, or shall be entitled at such time to present, the drafts or other documents or certificates required to draw under such Letter of Credit), and (2) the right or obligation of any Issuing Lender to issue, renew or extend any Letter of Credit hereunder shall terminate.
(h) Calculations of Net Proceeds Amounts; Additional Prepayments and Reductions Based on Subsequent Calculations. Concurrently with the receipt of any amount which would require a Mandatory Payment pursuant to
subsections 2.3A(i)(a) - (f), Company shall deliver to Administrative Agent an Officer's Certificate demonstrating the calculation of the amount of the applicable Net Asset Sale Proceeds, Net Insurance/Condemnation Proceeds, Net Indebtedness Proceeds, cash in the Cash Management System, Annual Free Cash Flow or Tax refund or rebate, as the case may be, that gave rise to such Mandatory Payment. In the event that Company shall subsequently determine that the actual amount was greater than the amount set forth in such Officer's Certificate, Company shall promptly make an additional Mandatory Payment in an amount equal to the amount of such excess, and Company shall concurrently therewith deliver to Administrative Agent an Officer's Certificate demonstrating the derivation of the additional amount resulting in such excess.
(ii) Application of Prepayments.
(a) Application of Prepayments. Except as
provided in subsection 2.3C and the last sentence of this
subsection 2.3A(ii)(a) and to the extent the Intercreditor
Agreement requires application of such Mandatory Payment in a
different manner than as set forth in this sentence, any
Mandatory Payments made pursuant to subsections 2.3A(i)(a) -
(e) shall be applied to repay funded amounts, if any, under
the Letters of Credit and then to cash collateralize the
Letters of Credit and the Letter of Credit Commitments under
the Collateral Account Agreement in an amount, taken together
with all then existing cash collateral for the Letter of
Credit Commitments, equal to 105% of the Letter of Credit
Commitments. Notwithstanding the foregoing, Borrowers and
Lenders hereby agree that any cash applied to collateralize
Letter of Credit Exposure pursuant to subsection 2.3A(i)(f)
with respect to a cash balance on June 30 or December 31 of
any Fiscal Year (the "SUBJECT FISCAL YEAR") shall, in the
event that the amount of such cash applied to collateralize
Letter of Credit Exposure exceeds 50% of the Annual Free Cash
Flow for the Subject Fiscal Year, be released to Borrowers to
the extent of such excess (but in no event shall more cash be
so released than the aggregate amount applied pursuant to
subsection 2.3A(i)(f) with respect to the Subject Fiscal Year)
after the 60th day of the following Fiscal Year, promptly
following Borrowers' certification of such excess; provided,
however, that such release shall not be required if, at the
time such release would otherwise be required, an Event of
Default shall have occurred and be continuing; and provided,
further, that to the extent the Intercreditor Agreement
requires application of such amounts in a different manner
than as set forth in this sentence, such amounts shall be
applied in accordance with the Intercreditor Agreement.
(iii) Mandatory Reduction of Letter of Credit Commitments. Immediately upon the occurrence of any Permanent L/C Obligation Reduction, the Letter of Credit Commitments shall be permanently reduced in an amount equal to the amount of such Permanent L/C Obligation Reduction, and such reduction of the Letter of Credit Commitments shall reduce each Lender's Letter of Credit Commitment ratably.
B. GENERAL PROVISIONS REGARDING PAYMENTS.
(i) Manner and Time of Payment. All payments by Borrowers of principal, interest, fees and other Obligations shall be made in Dollars in same day funds, without defense, setoff or counterclaim, free of any restriction or condition, and delivered to Administrative Agent not later than 12:00 Noon (New York City time) on the date due at the Funding and Payment Office for the account of Lenders; funds received by Administrative Agent after that time on such due date shall be deemed to have been paid by Borrowers on the next succeeding Business Day. Each Borrower hereby authorizes Administrative Agent to charge its accounts with Administrative Agent in order to cause timely payment to be made to Administrative Agent of all principal, interest, fees and expenses due hereunder (subject to sufficient funds being available in its accounts for that purpose). Anything contained herein to the contrary notwithstanding, Borrowers jointly and severally promise to repay all honored drawings under the Letters of Credit when due in accordance with the terms hereof and agree that, to the extent any Letters of Credit have not been returned and cancelled, on the Maturity Date (a) the unpaid principal amount of, and accrued interest on, any funded amounts under such Letters of Credit, (b) an amount equal to the maximum available amount that may at any time on or after such date be drawn under all such Letters of Credit then outstanding (whether or not any beneficiary under any such Letter of Credit shall have presented, or shall be entitled at such time to present, the drafts or other documents or certificates required to draw under such Letter of Credit), and (c) all other Obligations shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by Borrowers, and any amounts so due and payable with respect to Letters of Credit shall be cash collateralized in an amount equal to 105% of the amount thereof.
(ii) Application of Payments to Principal and Interest. All payments in respect of any honored drawing under a Letter of Credit shall include payment of accrued interest on the principal amount being repaid or prepaid, and all such payments shall be applied to the payment of interest before application to principal.
(iii) Payments on Business Days. Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest hereunder or of the commitment fees hereunder, as the case may be.
C. APPLICATION OF PROCEEDS OF COLLATERAL AND PAYMENTS AFTER EVENT OF DEFAULT. Except to the extent the Intercreditor Agreement requires application in a different manner than as set forth in this subsection 2.3C, upon the occurrence and during the continuation
of an Event of Default, either if requested by Requisite Lenders or upon termination of the Letter of Credit Commitments (a) all Mandatory Payments or other payments received on account of the Obligations, whether from any Borrower or otherwise, shall be applied by Administrative Agent against the Obligations and (b) all proceeds received by Administrative Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the discretion of Administrative Agent, be held by Administrative Agent as Collateral for, and/or (then or at any time thereafter) applied in full or in part by Administrative Agent against, the applicable Secured Obligations (as defined in the Collateral Documents), in each case in the following order of priority:
(i) to the payment of all costs and expenses of such sale, collection or other realization, all other expenses, liabilities and advances made or incurred by Administrative Agent in connection therewith, and all amounts for which Agents are entitled to compensation (including the fees described in subsection 2.2), reimbursement and indemnification under any Credit Document and all advances made by Administrative Agent thereunder for the account of the applicable Credit Party, and to the payment of all costs and expenses paid or incurred by Administrative Agent in connection with the Credit Documents, all in accordance with subsections 9.4, 10.2 and 10.3 and the other terms of this Agreement and the Credit Documents;
(ii) thereafter, to the extent of any excess such proceeds, first, to repay owed and outstanding amounts (subject to the provisions of subsection 2.3B(ii) hereof) with respect to Letter of Credit Exposure, with the remainder applied to cash collateralize Letter of Credit Exposure and unutilized Letter of Credit Commitments (it being understood that for purposes of this clause (ii), the portion of such Letter of Credit Exposure that consists of unutilized Letter of Credit Commitments or undrawn amounts under outstanding Letters of Credit shall be measured at 105% of the amount thereof), for the ratable benefit of the holders thereof; and
(iii) thereafter, to the extent of any excess such proceeds, to the payment to or upon the order of such Credit Party or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.
2.4 INCREASED COSTS; TAXES; CAPITAL ADEQUACY.
A. COMPENSATION FOR INCREASED COSTS. Subject to the provisions of subsection 2.4B (which shall be controlling with respect to the matters covered thereby), in the event that any Lender (including any Issuing Lender) shall determine (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or other Government Authority, in each case that becomes effective after the date hereof, or compliance by such Lender with any guideline, request or directive issued or made after the date hereof by any central bank or other Government Authority (whether or not having the force of law):
(i) subjects such Lender to any additional Tax (other than any withholding tax with respect to which subsection 2.4B applies) with respect to this Agreement or any of its obligations hereunder (including with respect to issuing or maintaining any Letters of Credit or purchasing or maintaining any participations therein or maintaining any Letter of Credit Commitment hereunder) or any payments to such Lender of principal, interest, fees or any other amount payable hereunder;
(ii) imposes, modifies or holds applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets held by, or deposits or other liabilities in or for the account of, or advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Lender; or
(iii) imposes any other condition (other than with respect to Taxes) on or affecting such Lender or its obligations hereunder;
and the result of any of the foregoing is to increase the cost to such Lender of agreeing to make, making or maintaining its Letter of Credit Commitments or agreeing to issue, issuing or maintaining any Letter of Credit or agreeing to purchase, purchasing or maintaining any participation therein or to reduce any amount received or receivable by such Lender with respect thereto; then, in any such case, Borrowers shall promptly pay, on a joint and several basis, to such Lender, upon receipt of the statement referred to in subsection 2.5A, such additional amount or amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall determine) as may be necessary to compensate such Lender on an after-tax basis for any such increased cost or reduction in amounts received or receivable hereunder.
B. TAXES.
(i) Payments to Be Free and Clear. All sums payable by Borrowers under this Agreement and the other Credit Documents shall be paid free and clear of, and without any deduction or withholding on account of, any Tax imposed, levied, collected, withheld or assessed by or within the United States or any political subdivision in or of the United States or any other jurisdiction from or to which a payment is made by or on behalf of Borrowers or by any federation or organization of which the United States or any such jurisdiction is a member at the time of payment.
(ii) Grossing-up of Payments. If any Borrower or any other Person is required by law to make any deduction or withholding on account of any such Tax from any sum paid or payable by Borrowers to Administrative Agent or any Lender under any of the Credit Documents:
(a) Borrowers shall notify Administrative Agent of any such requirement or any change in any such requirement as soon as Borrowers become aware of it (it being understood and agreed that no such notice shall be required with respect to Canadian Lenders, if any);
(b) Borrowers shall pay any such Tax when such Tax is due, such payment to be made (if the liability to pay is imposed on any Borrower) for their
own account or (if that liability is imposed on Administrative Agent or such Lender, as the case may be) on behalf of and in the name of Administrative Agent or such Lender;
(c) the sum payable by Borrowers in respect of which the relevant deduction, withholding or payment is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, Administrative Agent or such Lender, as the case may be, receives on the due date a net sum equal to what it would have received had no such deduction, withholding or payment been required or made; and
(d) within 30 days after paying any sum from which any or all of them are required by law to make any deduction or withholding, and within 30 days after the due date of payment of any Tax which any or all of them are required by clause (b) above to pay, Borrowers shall deliver to Administrative Agent evidence satisfactory to the other affected parties of such deduction, withholding or payment and of the remittance thereof to the relevant taxing or other authority.
(iii) Evidence of Exemption from U.S. Withholding Tax.
(a) Each Lender that is organized under the laws of any jurisdiction other than the United States or any state or other political subdivision thereof (for purposes of this subsection 2.4B(iii), a "NON-US LENDER") shall (1) to the extent such Non-US Lender is not a Canadian Lender, deliver to Administrative Agent and to Company, on or prior to the Closing Date (in the case of each Lender listed on the signature pages hereof) or on or prior to the date of the Assignment Agreement pursuant to which it becomes a Lender (in the case of each other Lender), and at such other times as may be necessary in the determination of Company or Administrative Agent (each in the reasonable exercise of its discretion), two original copies of Internal Revenue Service Form W-8BEN or W-8ECI (or any successor forms) properly completed and duly executed by such Lender, together with any other certificate or statement of exemption required under the Internal Revenue Code or the regulations issued thereunder to establish that such Lender is not subject to United States withholding tax with respect to any payments to such Lender of interest payable under any of the Credit Documents, and (2) to the extent such Non-US Lender is a Canadian Lender, deliver to Administrative Agent and to Company, on or prior to the Closing Date (in the case of each Canadian Lender listed on the signature pages hereof) or on or prior to the date of the Assignment Agreement pursuant to which it becomes a Canadian Lender (in the case of each other Canadian Lender), and at such other times as may be necessary in the determination of Company or Administrative Agent (each in the reasonable exercise of its discretion), two original copies of any forms, properly completed and duly executed by such Lender, required under the Internal Revenue Code or the regulations issued thereunder to establish that such Canadian Lender is eligible for a reduced withholding tax rate under the "Convention Between the United States of America and Canada with Respect to Taxes on Income and Capital" or any successor thereto.
(b) Each Non-US Lender hereby agrees, from time to time after the initial delivery by such Lender of such forms, whenever a lapse in time or change in circumstances renders such forms, certificates or other evidence so delivered obsolete or inaccurate in any material respect, that such Lender shall promptly (1) deliver to Administrative Agent and to Company two original copies of renewals, amendments or additional or successor forms, properly completed and duly executed by such Lender, together with any other certificate or statement of exemption required in order to confirm or establish that such Lender is not subject to United States withholding tax with respect to payments to such Lender under the Credit Documents (or, if such Lender is a Canadian Lender, to confirm or establish that such Lender is eligible for the relevant reduced withholding tax rate) or (2) notify Administrative Agent and Company of its inability to deliver any such forms, certificates or other evidence.
(c) Borrowers shall not be required to pay any additional amount to any Non-US Lender under clause (c) of subsection 2.4B(ii) if such Lender shall have failed to satisfy the requirements of clause (a) or (b)(1) of this subsection 2.4B(iii); provided that if such Lender shall have satisfied the requirements of subsection 2.4B(iii)(a) on the date such Lender became a Lender, nothing in this subsection 2.4B(iii)(c) shall relieve Borrowers of their obligation to pay any amounts pursuant to subsection 2.4B(ii)(c) in the event that, as a result of any change in any applicable law, treaty or governmental rule, regulation or order, or any change in the interpretation, administration or application thereof, such Lender is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent date establishing the fact that such Lender is not subject to withholding as described in subsection 2.4B(iii)(a) (or, if such Lender is a Canadian Lender, establishing the fact that such Lender is eligible for the relevant reduced withholding tax rate).
(d) Notwithstanding anything contained in this subsection to the contrary, Borrowers shall be required to pay additional amounts to each Canadian Lender under clause (c) of subsection 2.4B(ii) with respect to any Credit Exposure held by such Canadian Lender in its capacity as a Canadian Lender notwithstanding that such Lender fails to deliver forms, certificates or other evidence establishing the fact that such Lender is not subject to withholding as described in subsection 2.4B(iii)(a)(1).
(iv) Indemnity for Withheld Amounts. Borrowers hereby agree to indemnify Lenders and Agents for the full amount of any deduction or withholding on account of any Taxes imposed, levied, collected, withheld or assessed by or within the United States or any political subdivision in or of the United States or any other jurisdiction from or to which a payment is made by or on behalf of Borrowers or by any federation or organization of which the United States or any such jurisdiction is a member at the time of payment (including any such Taxes imposed by any jurisdiction on amounts payable under this subsection 2.4B) that Borrowers are required to pay pursuant to subsection 2.4B(ii) but were paid by Agents or Lenders with respect to sums payable by Borrowers under this Agreement and the other Credit Documents and any liability
(including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made promptly, and in any event within 10 days after, the relevant Lender or Agent makes demand therefor in writing.
C. CAPITAL ADEQUACY ADJUSTMENT. If any Lender shall have determined that the adoption, effectiveness, phase-in or applicability after the date hereof of any law, rule or regulation (or any provision thereof) regarding capital adequacy, or any change therein or in the interpretation or administration thereof by any Government Authority charged with the interpretation or administration thereof, or compliance by any Lender with any guideline, request or directive regarding capital adequacy (whether or not having the force of law) of any such Government Authority, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of, or with reference to, such Lender's Letter of Credit Commitments, Letters of Credit, participations therein or other Obligations to a level below that which such Lender or such controlling corporation could have achieved but for such adoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of such Lender or such controlling corporation with regard to capital adequacy), then from time to time, within five Business Days after receipt by Borrowers from such Lender of the statement referred to in subsection 2.5A, Borrowers shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling corporation on an after-tax basis for such reduction.
2.5 STATEMENT OF LENDERS; OBLIGATION OF LENDERS AND ISSUING LENDERS TO MITIGATE.
A. STATEMENTS. Each Lender claiming compensation or reimbursement pursuant to subsection 2.4 or 2.5B shall deliver to Company (with a copy to Administrative Agent) a written statement, setting forth in reasonable detail the basis of the calculation of such compensation or reimbursement, which statement shall be conclusive and binding upon all parties hereto absent manifest error; provided that a Lender claiming compensation or reimbursement pursuant to subsection 2.4B(ii) due to circumstances in effect as of the Closing Date shall not be required to deliver more than one such statement to Borrowers or Administrative Agent, and such statement shall remain effective with respect to this Agreement until all Obligations have been paid in full.
B. MITIGATION. Each Lender (including any Issuing Lender) agrees that, as promptly as practicable after the officer of such Lender or Issuing Lender responsible for administering the Letters of Credit of such Lender or Issuing Lender, as the case may be, becomes aware of the occurrence of an event or the existence of a condition that would entitle such Lender or Issuing Lender to receive payments under subsection 2.4 (other than subsection 2.4B(ii)), it will use reasonable efforts to make, issue, fund or maintain the Letter of Credit Commitments of such Lender or the Letters of Credit of such Lender or Issuing Lender through another lending or letter of credit office of such Lender or Issuing Lender, if (i) as a result thereof the additional amounts which would otherwise be required to be paid to such Lender or Issuing Lender pursuant to subsection 2.4 would be materially reduced and (ii) as determined by such Lender or Issuing Lender in its sole discretion, such action would not otherwise be disadvantageous to such Lender or Issuing Lender; provided that such Lender or Issuing Lender will not be obligated to utilize such other lending or letter of credit office
pursuant to this subsection 2.5B unless Borrowers agree to pay, on a joint and several basis, all incremental expenses incurred by such Lender or Issuing Lender as a result of utilizing such other lending or letter of credit office as described above.
2.6 DEFAULTING LENDER.
Anything contained herein to the contrary notwithstanding, in the event that any Lender (any such Lender being a "DEFAULTING LENDER") defaults (a "FUNDING DEFAULT") in its obligation to fund its participation in any Letter of Credit (a "DEFAULTED PARTICIPATION") in accordance with the terms of this Agreement or defaults in its obligation to comply with the agreements contained in subsection 10.1H, then (i) during any Default Period (as defined below) with respect to such Defaulting Lender, such Defaulting Lender shall not be deemed a "Lender" for purposes of voting on any matters (including the granting of any consents or waivers) with respect to any of the Credit Documents (provided, however, that nothing in this clause (i) shall be construed as permitting, without the consent of the relevant Defaulting Lender, a reduction in the principal amount of such Defaulting Lender's outstanding funded Obligations, an increase in the amount of such Lender's Letter of Credit Commitment or participation in any Letters of Credit, a reduction or postponement of the due date of any amount funded by such Defaulting Lender and payable in respect of any Letter of Credit, an extension of the expiration date of any Letter of Credit beyond the Maturity Date, or an extension of the Maturity Date), (ii) solely in the case of a Funding Default, to the extent permitted by applicable law, until such time as the Default Excess (as defined below) with respect to such Defaulting Lender shall have been reduced to zero, any payment or reimbursement of amounts with respect to a drawing under a Letter of Credit shall be applied first, to amounts funded by Agents, Issuing Lenders or other Lenders (together with unpaid interest accrued thereon) in lieu of such amounts required to be funded by Defaulting Lenders and second, to the Letter of Credit participations of other Lenders (other than any other Defaulting Lenders) as if such Defaulting Lender (and any other Defaulting Lenders) had no participations outstanding and the Letter of Credit Exposure of such Defaulting Lender were zero, (iii) except to the extent that the immediately preceding clause (ii) applies, during any Default Period with respect to such Defaulting Lender any payment or reimbursement of amounts funded by such Defaulting Lender with respect to a drawing under a Letter of Credit shall be applied first, to cash collateralize, to the full extent thereof, the maximum amount of the Letter of Credit Commitment of such Defaulting Lender pursuant to documentation and arrangements reasonably satisfactory to Administrative Agent and Issuing Lenders, second, to reimburse fees and expenses of the type described in the last sentence of subsection 10.1H in connection with such cash collateralization, and third, to reimburse amounts funded by such Defaulting Lender with respect to its participations in Letters of Credit, and (iv) such Defaulting Lender's Letter of Credit Commitment and Pro Rata Share with respect thereto shall be excluded for purposes of calculating the letter of credit fees under subsection 3.2 in respect of any day during any Default Period with respect to such Defaulting Lender, and such Defaulting Lender shall not be entitled to receive any such letter of credit fee with respect to such Defaulting Lender's Letter of Credit Commitments in respect of any Default Period with respect to such Defaulting Lender.
For purposes of this Agreement, (I) "DEFAULT PERIOD" means (i) with respect to any default in any Defaulting Lender's obligations under subsection 10.1H, the period commencing on the date of the applicable default in such obligations and ending on the earliest
of the following dates: (A) the date on which all Letter of Credit Commitments and participations are cancelled or terminated and/or the Obligations are paid in full and all Letters of Credit have been returned to the Issuing Lenders cancelled, (B) the date on which such Defaulting Lender shall have complied with its obligations under subsection 10.1H, and (C) the date on which Administrative Agent and all Issuing Lenders waive all such defaults of such Defaulting Lender in writing; and (ii) with respect to any Funding Default of any Defaulting Lender, the period commencing on the date of the applicable Funding Default and ending on the earliest of the following dates: (A) the date on which all Letter of Credit Commitments and participations are cancelled or terminated and/or the Obligations are paid in full and all Letters of Credit have been returned to the Issuing Lenders cancelled, (B) the date on which (1) the Default Excess with respect to such Defaulting Lender shall have been reduced to zero (whether by the funding by such Defaulting Lender of any Defaulted Participations of such Defaulting Lender or by the non-pro rata application of any payments of amounts with respect to any payments or reimbursements of amounts with respect to drawings under Letters of Credit in accordance with the terms hereof or any combination thereof), and (2) such Defaulting Lender shall have delivered to Company and Agents a written reaffirmation of its intention to honor its obligations under this Agreement with respect to its Letter of Credit Commitments, and (C) the date on which Company, Administrative Agent and all Issuing Lenders waive all Funding Defaults of such Defaulting Lender in writing, and (II) "DEFAULT EXCESS" means, with respect to any Defaulting Lender, the excess, if any, of (x) such Defaulting Lender's applicable Pro Rata Share of all funded participations in Letters of Credit (calculated as if all Defaulting Lenders (other than such Defaulting Lender) had funded all of their respective Defaulted Participations) over (y) the aggregate funded amount of such Defaulting Lender's participations in Letters of Credit.
No Commitment of any Lender shall be increased or otherwise affected, and, except as otherwise expressly provided in this subsection 2.6, performance by any Borrower of its obligations under this Agreement and the other Credit Documents shall not be excused or otherwise modified, as a result of any Funding Default or the operation of this subsection 2.6. The rights and remedies against a Defaulting Lender under this subsection 2.6 are in addition to other rights and remedies that Borrowers may have against such Defaulting Lender with respect to any Funding Default and that Agents, any Issuing Lender or any Lender may have against such Defaulting Lender with respect to any Funding Default.
2.7 JOINT AND SEVERAL LIABILITY; PAYMENT INDEMNIFICATIONS.
A. JOINT AND SEVERAL OBLIGATIONS. All Obligations of Borrowers under the Credit Documents shall be the joint and several Obligations of each Borrower.
B. NO IMPAIRMENT OR RELEASE. The Obligations of and the Liens granted by any Borrower under the Credit Documents shall not be impaired or released by any action or inaction on the part of Administrative Agent or any Lender with respect to any other Credit Party, including any action or inaction which would otherwise release a surety.
C. CONTRIBUTION RIGHTS. In order to provide for just and equitable contribution among Borrowers if any payment is made by a Borrower (a "FUNDING BORROWER") in discharging any of the Obligations, that Funding Borrower shall be entitled to a contribution from the other Borrowers for all payments, damages and expenses incurred by that Funding
Borrower in discharging the Obligations, in the manner and to the extent required to allocate liabilities in an equitable manner among Borrowers on the basis of the relative benefits received by Borrowers. If and to the extent that a Funding Borrower makes any payment to any Lender or any other Person in respect of the Obligations, any claim which said Funding Borrower may have against the other Borrowers by reason thereof shall be subject and subordinate to the prior cash payment in full of the Obligations. The parties hereto acknowledge that the right to contribution hereunder shall constitute an asset of the party to which such contribution is owing and shall be subject to the Liens and security interests of the Administrative Agent. Notwithstanding any of the foregoing to the contrary, such contribution arrangements shall not limit in any manner the joint and several nature of the Obligations, limit, release or otherwise impair any rights of Administrative Agent or any Lender under the Credit Documents, or alter, limit or impair the obligation of each Borrower, which is absolute and unconditional, to repay the Obligations.
2.8 RIGHTS OF SUBROGATION, CONTRIBUTION, ETC.
Except as prohibited under applicable law, Company hereby waives any claim, right or remedy, direct or indirect, that Company now has or may hereafter have against any other Borrower or any guarantor of the Obligations in connection with this Agreement or the performance by Company of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including (a) any right of subrogation, reimbursement or indemnification that Company now has or may hereafter have against any other Borrower or guarantor of the Obligations, (b) any right to enforce, or to participate in, any claim, right or remedy that any Agent or Lender now has or may hereafter have against any other Borrower or guarantor of the Obligations, and (c) any benefit of, and any right to participate in, any collateral or security now or hereafter held by any Agent or Lender. In addition, until the Obligations shall have been indefeasibly paid in full and the Letter of Credit Commitments shall have terminated and all Letters of Credit shall have expired or been cancelled, Company shall withhold exercise of any right of contribution Company may have against any other Borrower or Credit Party. Company further agrees that, to the extent the waiver or agreement to withhold the exercise of its rights of subrogation, reimbursement, indemnification and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification Company may have against any other Borrower or Credit Party or against any collateral or security shall be junior and subordinate to any rights any Agent or Lender may have against any other Borrower, to all right, title and interest any Agent or Lender may have in any such collateral or security, and to any right any Agent or Lender may have against such Credit Party. If any amount shall be paid to Company on account of any such subrogation, reimbursement, indemnification or contribution rights at any time when all Obligations shall not have been paid in full, such amount shall be held in trust for Administrative Agent on behalf of Agents and Lenders and shall forthwith be paid over to Administrative Agent for the benefit of Agents and Lenders to be credited and applied against the Obligations, whether matured or unmatured, in accordance with the terms hereof.
SECTION 3. LETTERS OF CREDIT
3.1 ISSUANCE OF LETTERS OF CREDIT AND LENDERS' PURCHASE OF PARTICIPATIONS THEREIN.
A. INITIAL ISSUANCE. In the event that UBS Bank executes and delivers a counterpart of this Agreement as Issuing Lender on or prior to the Closing Date, UBS Bank shall, on the Closing Date upon receiving evidence satisfactory to it that the Existing Detroit L/Cs are concurrently therewith being returned undrawn and cancelled, issue a Letter of Credit or Letters of Credit in substantially the form attached hereto as Exhibit IV to replace the Existing Detroit L/Cs. In the event that UBS Bank does not execute and deliver a counterpart of this Agreement as Issuing Lender on or prior to the Closing Date, Bank of America shall, on the Closing Date upon receiving evidence satisfactory to it that the Existing Detroit L/Cs are concurrently therewith being returned undrawn and cancelled, issue a Letter of Credit or Letters of Credit in substantially the form attached hereto as Exhibit IV to replace the Existing Detroit L/Cs.
B. MECHANICS OF ADDITIONAL ISSUANCES.
(i) Request for Issuance of Letters of Credit. After the issuance of any Letter of Credit on the Closing Date pursuant to subsection 3.1A, whenever Borrowers desire to have the Issuing Lender issue a Letter of Credit to extend or replace such outstanding Letter of Credit, or Agents request (with a copy of such request to Company) that the Issuing Lender issue a Letter of Credit to extend or to replace such outstanding Letter of Credit, Borrowers shall deliver to Administrative Agent a Request for Issuance no later than 12:00 Noon (New York City time) at least 10 Business Days (or in each case such shorter period as may be agreed to by Administrative Agent in any particular instance) in advance of the proposed date of issuance, which Request for Issuance shall describe the relevant Letter of Credit and the verbatim text of the Letter of Credit proposed to be issued or of such extension, as the case may be, and shall specify such proposed date of issuance or extension; provided, that Borrowers shall not request that Issuing Lender issue or extend (and Issuing Lender shall not issue or extend) any Letter of Credit:
(a) if the underlying Contractual Obligation to provide any such Letter of Credit or a replacement thereto to the beneficiary thereof has terminated, and/or the beneficiary of such Letter of Credit has otherwise returned the same for cancellation without the expectation that a Letter of Credit will be issued contemporaneously with such cancellation in substitution therefor;
(b) unless the terms of such Letter of Credit as so replaced or extended (other than the stated amount and expiration date thereof) are substantially identical to the terms of the corresponding Letter of Credit being replaced or extended;
(c) unless the stated amount of such Letter of Credit as so replaced or extended is identical to the stated amount of the corresponding Letter of Credit being replaced or extended, as the case may be, in effect at the time of such
extension (and the formula in effect on the Closing Date for calculating required reductions in the stated amount of any Letter of Credit shall apply to such Letter of Credit as so replaced or extended), and is denominated in Dollars;
(d) if such Letter of Credit as so replaced or extended has an expiration date later than the earlier of (y) the 5th Business Day prior to the Maturity Date and (z) the date which is three years from the date of issuance of such Letter of Credit; or
(e) if, after giving effect to such issuance or extension, the Letter of Credit Usage would exceed the Letter of Credit Commitments.
(ii) Recertification. Borrowers shall notify the Issuing Lender (and Administrative Agent, if Administrative Agent is not such Issuing Lender) prior to the issuance or extension of any Letter of Credit in the event that any of the matters to which Borrowers are required to certify in the relevant Request for Issuance is no longer true and correct as of the proposed date of issuance or extension of such Letter of Credit (provided that no Request for Issuance shall require Borrowers to make representations or warranties other than those referenced in subsection 3.1B(iii)(b)), and upon the issuance or extension of such Letter of Credit Borrowers shall be deemed to have re-certified, as of the date of such issuance or extension, as to the matters to which Borrowers are required to certify in such Request for Issuance (except to the extent such requirement to re-certify as to such matters shall have been waived in accordance with subsection 10.6 hereof).
(iii) Issuance of Letter of Credit. Subject to subsections 3.1B(i) and 3.1B(ii), unless the Maturity Date shall have occurred, upon satisfaction or waiver (in accordance with subsection 10.6) of the following conditions on the date of issuance or extension, the applicable Issuing Lender shall issue the requested Letter of Credit (in the form set forth in such notice) to replace (or shall extend, as the case may be) the relevant outstanding Letter of Credit, in accordance with such Issuing Lender's standard operating procedures:
(a) On or before the date of issuance or extension of such Letter of Credit, Administrative Agent shall have received, in accordance with the provisions of subsection 3.1B(i), an originally executed Request for Issuance (or a facsimile copy thereof), signed by a duly authorized Officer of Borrowers, together with all other information specified in subsection 3.1B(i) and such other documents or information as Issuing Lender may reasonably require in connection with the issuance or extension of such Letter of Credit;
(b) The representations and warranties contained in subsections 5.1, 5.2, 5.15, 5.16 and 5.18 shall be true, correct and complete in all material respects on and as of the date of issuance or extension of such Letter of Credit to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true, correct and complete in all material respects on and as of such earlier date; and
(c) No event shall have occurred and be continuing or would result from the issuance or extension of such Letter of Credit that would constitute an Event of Default or a Potential Event of Default.
(iv) Notification to Lenders. No later than 10 Business Days prior to the decision to extend or reissue any Letter of Credit, the Issuing Lender thereof shall notify Agents in writing of the date on which such Issuing Lender expects such decision will be made and of the date by which such decision must be made in order to avoid a drawing under such Letter of Credit. Promptly after the issuance, amendment or extension of any Letter of Credit the applicable Issuing Lender shall promptly notify Administrative Agent and each Lender of such issuance, amendment or extension in writing. Upon receipt of such notice (or, if Administrative Agent is the Issuing Lender, together with such notice), Administrative Agent shall notify each Lender in writing of the amount of such Lender's respective participation in such Letter of Credit, determined in accordance with subsection 3.1C and, if so requested by a Lender, Administrative Agent shall provide such Lender with a copy of such Letter of Credit, amendment or extension.
C. LENDERS' PURCHASE OF PARTICIPATIONS IN LETTERS OF CREDIT. Immediately upon the issuance of any Letter of Credit (including any issuance of a Letter of Credit pursuant to subsection 3.1A), each Lender shall be deemed to, and hereby agrees to, have irrevocably purchased from the Issuing Lender a participation in such Letter of Credit and any drawings honored thereunder in an amount equal to such Lender's Pro Rata Share of the maximum amount which is or at any time may become available to be drawn thereunder. Each Borrower, with respect to the Existing Detroit L/Cs and the Letters of Credit, hereby (1) represents, warrants, agrees, covenants and reaffirms that it has no (and it permanently and irrevocably waives and releases Agents and Lenders from any, to the extent arising on or prior to the Closing Date with respect to the Existing Detroit L/Cs) defense, set off, claim or counterclaim against Agents or any Lender in regard to its obligations in respect of any such participation in a Letter of Credit or any drawings honored thereunder, and (2) affirms its obligation to pay such participations, and any amounts owed (whether or not then due and payable, and including all interest and fees accrued under the DIP Credit Documents to the Closing Date with respect to the Existing Detroit L/Cs) with respect to each Letter of Credit in accordance with the terms and conditions of this Agreement and the other Credit Documents.
3.2 LETTER OF CREDIT FEES.
Borrowers jointly and severally agree to pay the following amounts with respect to each Letter of Credit:
(i) a fronting fee, payable directly to the applicable Issuing Lender for its own account, equal to (a) the greater of (X) $500 and (Y) 0.25% per annum of the daily amount available to be drawn under such Letter of Credit, plus (b) an annual fee of $1,500, and
(ii) a letter of credit fee, payable to Administrative Agent for the account of Lenders, equal to 2.50% per annum (expressed as a daily rate) multiplied by the daily amount available to be drawn under such Letter of Credit,
each such fronting fee and letter of credit fee to be payable in arrears on and
to (but excluding) the last day of each month and computed on the basis of a
360-day year, for the actual number of days elapsed, except that the annual fee
referred to in clause (i)(b) shall be payable in advance on the date of issuance
of such Letter of Credit and on each anniversary thereof; and with respect to
the issuance, amendment or transfer of each Letter of Credit and each payment of
a drawing made thereunder (without duplication of the fees payable under clauses
(i) and (ii) above), Borrowers jointly and severally agree to pay documentary
and processing charges payable directly to the applicable Issuing Lender for its
own account in accordance with such Issuing Lender's standard schedule for such
charges in effect at the time of such issuance, amendment, transfer or payment,
as the case may be.
For purposes of calculating any fees payable under this subsection 3.2, the daily amount available to be drawn under any Letter of Credit shall be determined as of the close of business on any date of determination. Promptly upon receipt by Administrative Agent of any amount described in clause (ii) of this subsection 3.2 with respect to a Letter of Credit, Administrative Agent shall distribute to each Lender its Pro Rata Share of such amount. All fees referenced in this subsection 3.2 shall be earned when payable and shall be non-refundable. Upon the occurrence and during the continuation of any Event of Default, all fees set forth in this subsection 3.2 shall accrue at a rate that is 2.00% per annum in excess of the rate otherwise set forth in this subsection and shall, if Requisite Lenders so request, be payable upon demand. Payment or acceptance of the increased rates provided for in this paragraph shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Administrative Agent or any Lender.
3.3 DRAWINGS AND REIMBURSEMENT OF AMOUNTS PAID UNDER LETTERS OF CREDIT.
A. RESPONSIBILITY OF ISSUING LENDER WITH RESPECT TO DRAWINGS. In determining whether to honor any drawing under any Letter of Credit by the beneficiary thereof, the Issuing Lender shall be responsible only to examine the documents delivered under such Letter of Credit with reasonable care so as to ascertain whether they appear on their face to be in compliance with the terms and conditions of such Letter of Credit.
B. REIMBURSEMENT OF AMOUNTS PAID UNDER LETTERS OF CREDIT. In the event an Issuing Lender has determined to honor a drawing under a Letter of Credit issued by it, such Issuing Lender shall immediately notify Borrowers and Borrowers shall reimburse such Issuing Lender on or before the Business Day immediately following the date on which such drawing is honored (the "REIMBURSEMENT DATE") in an amount in Dollars and in same day funds equal to the amount of such payment.
C. PAYMENT BY LENDERS OF UNREIMBURSED AMOUNTS PAID UNDER
LETTERS OF CREDIT.
(i) Payment by Lenders. In the event that Borrowers shall fail for any reason to reimburse any Issuing Lender as provided in subsection 3.3B in an amount equal to the amount of any payment by such Issuing Lender under a Letter of Credit issued by it, such Issuing Lender shall promptly notify Administrative Agent of the unreimbursed amount of such drawing and upon receipt of such notice, Administrative Agent shall promptly
notify each Lender (other than such Issuing Lender) of such unreimbursed amount and of such Lender's respective participation therein based on such Lender's Pro Rata Share; provided that no Lender's funding of its participation in any such drawing shall exceed its Pro Rata Share of the amount of such drawing, and the aggregate principal amount of all participations funded by a Lender with respect to Letters of Credit shall in no event exceed the amount of such Lender's Letter of Credit Commitment. Each Lender shall make available to such Issuing Lender an amount equal to its respective participation, in Dollars and in same day funds, at the office of such Issuing Lender specified in such notice, not later than 12:00 Noon (New York City time) on the first Business Day (under the laws of the jurisdiction in which such office of such Issuing Lender is located) after the date notified by Administrative Agent. In the event that any Lender fails to make available to such Issuing Lender on such Business Day the amount of such Lender's participation in such Letter of Credit as provided in this subsection 3.3C, such Issuing Lender shall be entitled to recover such amount on demand from such Lender together with interest thereon at the rate customarily used by such Issuing Lender for the correction of errors among banks for three Business Days and thereafter at the Base Rate. Nothing in this subsection 3.3C shall be deemed to prejudice the right of any Lender to recover from any Issuing Lender any amounts made available by such Lender to such Issuing Lender pursuant to this subsection 3.3C in the event that it is determined by the final judgment of a court of competent jurisdiction that the payment with respect to a Letter of Credit by such Issuing Lender in respect of which payment was made by such Lender constituted gross negligence or willful misconduct on the part of such Issuing Lender.
(ii) Distribution to Lenders of Reimbursements Received From Borrowers. In the event any Issuing Lender shall have been reimbursed by other Lenders pursuant to subsection 3.3C(i) for all or any portion of any payment by such Issuing Lender under a Letter of Credit issued by it, such Issuing Lender shall deliver to Administrative Agent for distribution to any other Lender that has paid all amounts payable by it under subsection 3.3C(i) with respect to such payment such other Lender's Pro Rata Share of all payments subsequently received by such Issuing Lender from Borrowers in reimbursement of such payment under the Letter of Credit when such payments are received. Any such distribution shall be made to a Lender at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Lender may request.
D. INTEREST ON AMOUNTS PAID UNDER LETTERS OF CREDIT.
(i) Payment of Interest by Borrowers. Borrowers agree to pay to each Issuing Lender, with respect to payments under any Letters of Credit issued by it, interest on the amount paid by such Issuing Lender in respect of each such payment from the date a drawing is honored to but excluding the date such amount is reimbursed by Borrowers at a rate equal to (1) for the period from the date such drawing is honored to but excluding the Reimbursement Date, the Base Rate plus 3.00% per annum and (2) thereafter, a rate which is 2% per annum in excess of the rate of interest set forth in the foregoing clause (i)(1). Interest payable pursuant to this subsection 3.3D(i) shall be computed on the basis of a 365-day or 366-day year, as the case may be, for the actual number of days
elapsed in the period during which it accrues and shall be payable on demand or, if no demand is made, on the date on which the related drawing under a Letter of Credit is reimbursed in full. All payments by Borrowers in respect of payments made by an Issuing Lender under a Letter of Credit issued by it shall include payment of accrued interest on the principal amount being repaid or prepaid, and all such payments shall be applied to the payment of interest before application to principal. Payment or acceptance of the increased rates of interest provided for in this subsection 3.3D is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Administrative Agent or any Lender.
(ii) Distribution of Interest Payments by Issuing Lender. Promptly upon receipt by any Issuing Lender of any payment of interest pursuant to subsection 3.3D(i) with respect to a payment under a Letter of Credit issued by it, (a) such Issuing Lender shall distribute to Administrative Agent for distribution to each other Lender, out of the interest received by such Issuing Lender in respect of the period from the date such drawing is honored to but excluding the date on which such Issuing Lender is reimbursed for the amount of such payment, the amount that such other Lender would have been entitled to receive in respect of the letter of credit fee that would have been payable in respect of such Letter of Credit for such period pursuant to subsection 3.2 if no drawing had been honored under such Letter of Credit, and (b) in the event such Issuing Lender shall have been reimbursed by other Lenders pursuant to subsection 3.3C(i) for all or any portion of such payment, such Issuing Lender shall distribute to Administrative Agent for distribution to each other Lender that has paid all amounts payable by it under subsection 3.3C(i) with respect to such payment such other Lender's Pro Rata Share of any interest received by such Issuing Lender in respect of that portion of such payment so reimbursed by other Lenders for the period from the date on which such Issuing Lender was so reimbursed by other Lenders to but excluding the date on which such portion of such payment is reimbursed by Borrowers. Any such distribution shall be made to a Lender at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Lender may request.
3.4 OBLIGATIONS ABSOLUTE.
The obligation of Borrowers to reimburse each Issuing Lender for payments under the Letters of Credit issued by it and the obligations of Lenders under subsection 3.3C(i) shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances including any of the following circumstances:
(i) any lack of validity or enforceability of any Letter of Credit;
(ii) the existence of any claim, set-off, defense or other right which any Borrower or any Lender may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Persons for whom any such transferee may be acting), any Issuing Lender or other Lender or any other Person or, in the case of a Lender, against any Borrower, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between any
Borrower or one of its Subsidiaries and the beneficiary for which any Letter of Credit was procured);
(iii) any draft or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;
(iv) payment by the applicable Issuing Lender under any Letter of Credit against presentation of a draft or other document which does not substantially comply with the terms of such Letter of Credit;
(v) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company or any of its Subsidiaries (including CPIH Subsidiaries);
(vi) any breach of this Agreement or any other Credit Document by any party thereto;
(vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing; or
(viii) the fact that an Event of Default or a Potential Event of Default shall have occurred and be continuing;
provided, in each case, that payment by the applicable Issuing Lender under the applicable Letter of Credit shall not have constituted gross negligence or willful misconduct of such Issuing Lender under the circumstances in question (as determined by a final judgment of a court of competent jurisdiction).
3.5 NATURE OF ISSUING LENDERS' DUTIES.
A. INDEMNIFICATION. In addition to amounts payable as provided in subsection 2.4, Borrowers hereby jointly and severally agree to protect, indemnify, pay and save harmless each Issuing Lender from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of outside counsel and allocated costs of internal counsel) which such Issuing Lender may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit by such Issuing Lender, other than as a result of (a) the gross negligence or willful misconduct of such Issuing Lender as determined by a final judgment of a court of competent jurisdiction or (b) subject to the following clause (ii), the wrongful dishonor by such Issuing Lender of a proper demand for payment made under any Letter of Credit issued by it or (ii) the failure of such Issuing Lender to honor a drawing under any such Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto Government Authority.
B. NATURE OF ISSUING LENDERS' DUTIES. As between Borrowers and any Issuing Lender, Borrowers assume all risks of the acts and omissions of, or misuse of the Letters of Credit issued by such Issuing Lender by, the respective beneficiaries of such Letters of Credit.
In furtherance and not in limitation of the foregoing, such Issuing Lender shall
not be responsible for: (i) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in connection
with the application for and issuance of any such Letter of Credit, even if it
should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (ii) the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
such Letter of Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part, which may prove to be invalid or ineffective for any
reason; (iii) failure of the beneficiary of any such Letter of Credit to comply
fully with any conditions required in order to draw upon such Letter of Credit;
(iv) errors, omissions, interruptions or delays in transmission or delivery of
any messages, by mail, cable, telegraph, telex or otherwise, whether or not they
be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or
delay in the transmission or otherwise of any document required in order to make
a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing under such Letter of Credit; or (viii) any consequences arising
from causes beyond the control of such Issuing Lender, including any act or
omission by a Government Authority specified in subsection 3.5A, and none of the
above shall affect or impair, or prevent the vesting of, any of such Issuing
Lender's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific provisions set forth in the first paragraph of this subsection 3.5B, any action taken or omitted by any Issuing Lender under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted in good faith, shall not put such Issuing Lender under any resulting liability to any Borrower.
Notwithstanding anything to the contrary contained in this subsection 3.5, Borrowers shall retain any and all rights they may have against any Issuing Lender for any liability arising solely out of the gross negligence or willful misconduct of such Issuing Lender, as determined by a final judgment of a court of competent jurisdiction.
3.6 CASH COLLATERAL FOR LETTERS OF CREDIT.
A. RELEASES OF CASH COLLATERAL. If (i) (a) the underlying Contractual Obligation to provide a Letter of Credit or a replacement thereto to the beneficiary thereof has terminated (other than by drawing under such Letter of Credit), and/or (b) the beneficiary of such Letter of Credit has otherwise returned the same for cancellation without the expectation that a Letter of Credit will be issued contemporaneously with such cancellation in substitution for such cancelled Letter of Credit, and/or the maximum amount available for drawing under a Letter of Credit is permanently reduced (other than such a reduction concurrently with a reissuance or replacement of the relevant reduced portion of such Letter of Credit pursuant to subsection 3.1B(iii)), and (ii) the Letter of Credit Commitments are permanently reduced by the amount of such Letter of Credit or such reduction in the stated amount of such Letter of Credit, as the case may be, then, to the extent that the amount of cash collateral securing the Letter of Credit Exposure pursuant to the Collateral Account Agreement exceeds 105% of the Letter of Credit Commitments then in effect after such permanent reduction, the excess cash collateral shall be applied to the payment to or upon the order of Borrowers or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, except to
the extent the Intercreditor Agreement requires application in a different manner than as set forth in this subsection 3.6.
B. CASH COLLATERAL ON THE MATURITY DATE. On the Maturity Date, any outstanding Letter of Credit Exposure shall be cash collateralized in an amount equal to 105% of the amount thereof by Borrowers or otherwise supported, in either case in a manner satisfactory to the Lenders.
SECTION 4. CONDITIONS TO CLOSING DATE
The initial issuance of Letters of Credit hereunder is subject to the satisfaction of the following conditions.
4.1 CONDITIONS TO CLOSING DATE.
The obligations of Lenders with respect to their respective Letter of Credit Commitments, and the issuance of any Letters of Credit to be issued on the Closing Date, are subject to prior or concurrent satisfaction of the following conditions:
A. CREDIT PARTY DOCUMENTS. On or before the Closing Date, Borrowers shall, and shall cause each other Credit Party to, deliver to Lenders (or to Administrative Agent with sufficient originally executed copies, where appropriate, for each Lender) the following with respect to Borrowers or such Credit Party, as the case may be, each, unless otherwise noted, dated the Closing Date:
(i) Copies of the Organizational Documents of such Person, certified by the Secretary of State of its jurisdiction of organization or, if such document is of a type that may not be so certified, certified by the secretary or similar officer of the applicable Credit Party, together with a good standing certificate from the Secretary of State of its jurisdiction of organization and each other state in which such Person is qualified to do business and, to the extent generally available, a certificate or other evidence of good standing as to payment of any applicable franchise or similar taxes from the appropriate taxing authority of each of such jurisdictions, each dated a recent date prior to the Closing Date;
(ii) Resolutions of the Governing Body of such Person approving and authorizing the execution, delivery and performance of the Credit Documents to which it is a party certified as of the Closing Date by the secretary or similar officer of such Person as being in full force and effect without modification or amendment;
(iii) Signature and incumbency certificates of the officers of such Person executing the Credit Documents to which it is a party;
(iv) Executed originals of the Credit Documents to which such Person is a party; and
(v) Such other documents as Administrative Agent may reasonably request.
B. FEES. Borrowers shall have paid out of Debtors' estates to Administrative Agent, (i) for distribution (as appropriate) to Agents and Lenders, the fees payable on the Closing Date referred to in subsection 2.2 and all reasonable and documented costs and expenses (including legal fees, due diligence fees, recordation expenses, other out-of-pocket expenses and taxes) of Agents incurred in connection with the negotiation, preparation, recordation, execution and completion of the Credit Documents and the transactions contemplated thereby, including such fees and expenses of O'Melveny & Myers LLP, counsel to Agents, and Ernst & Young Corporate Finance LLC, and (ii) for distribution (as appropriate) to DIP Lenders and DIP Agents, all unpaid interest and fees accrued under the DIP Credit Agreement on or before the Closing Date, and all reasonable and documented costs and expenses of Agents and Lenders owed pursuant to subsection 10.2 of the DIP Credit Agreement. Borrowers shall have paid out of Debtors' estates to Merrill Lynch Pierce Fenner & Smith Incorporated the underwriting fee of $1,381,915.54 required pursuant to the "Commitment Letter" (as defined in the Order Pursuant to Section 363 of the Bankruptcy Code Authorizing Debtors to Enter into Letter Agreement with Merrill Lynch Pierce Fenner & Smith Incorporated, on Behalf of D.E. Shaw Laminar Portfolios, L.L.C. and Quantum Partners LDC, in Connection with Exit Financing and Make Certain Payments in Connection Therewith entered by the Bankruptcy Court on February 27, 2004).
C. CORPORATE AND CAPITAL STRUCTURE; MANAGEMENT; OWNERSHIP.
(i) Corporate Structure. DHC shall own all of the issued and outstanding Capital Stock of Company. The corporate organizational structure of Company and its Subsidiaries (including CPIH Subsidiaries) on the Closing Date, after giving effect to the Plan of Reorganization, shall be satisfactory to Requisite Lenders, shall be consistent in all material respects with the Plan of Reorganization and the Disclosure Statement related thereto.
(ii) Capital Structure and Ownership. DHC shall have made a cash equity contribution to Company of not less than $30,000,000 (including cash equity contributed in connection with the "Lake Transaction" (as defined in the DIP Credit Agreement). The capital structure and ownership of Company and its Subsidiaries (including CPIH Subsidiaries) on the Closing Date, after giving effect to the Plan of Reorganization, shall be satisfactory to Requisite Lenders, shall be consistent in all material respects with the Plan of Reorganization and the Disclosure Statement related thereto.
(iii) Management. The Governing Bodies, officers and management structure of Company and its Subsidiaries (including CPIH Subsidiaries) on the Closing Date, after giving effect to the Plan of Reorganization, shall be satisfactory to Requisite Lenders, shall be consistent in all material respects with the Plan of Reorganization and the Disclosure Statement related thereto and shall be as set forth on Schedule 4.1C annexed hereto. Lenders shall have received copies of, and Requisite Lenders shall be satisfied with the form and substance of any employment agreements with and any incentive arrangements for senior management of Company and its Subsidiaries.
D. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENTS. Company shall have delivered to Agents an Officer's Certificate, in form and substance satisfactory to Agents, to the effect that the representations and warranties in Section 5 are true,
correct and complete in all material respects on and as of the Closing Date to the same extent as though made on and as of that date (or, to the extent such representations and warranties specifically relate to an earlier date, that such representations and warranties were true, correct and complete in all material respects on and as of such earlier date) and that Borrowers shall have performed in all material respects all agreements and satisfied all conditions which this Agreement provides shall be performed or satisfied by it on or before the Closing Date.
E. PLAN OF REORGANIZATION; CONFIRMATION ORDER; DISCHARGE OF
EXISTING CREDIT FACILITIES.
(i) Plan of Reorganization. The Plan of Reorganization and all amendments, modifications, revisions and restatements thereof, if any, shall have been approved by the creditors of Borrowers (including the DIP Lenders and the Prepetition Lenders) in requisite number and percentage and confirmed by the Bankruptcy Court pursuant to the Confirmation Order and delivered to Agents (the "APPROVED PLAN OF Reorganization"). Except as set forth in modifications filed with the Bankruptcy Court and approved by Agents, there shall have been no modifications, amendments, revisions or restatements of the Approved Plan of Reorganization. Any representation and warranty made by Company or any of its Subsidiaries in the Approved Plan of Reorganization shall be accurate, true, correct and complete in all material respects as of the Closing Date. The Approved Plan of Reorganization (a) shall provide for the payments on the Closing Date described in subsection 4.1T, the corporate reorganization described in subsection 4.1S, and the issuance of the Letters of Credit under this Agreement and the Indebtedness described in subsection 4.1F; and (b) upon satisfaction of all conditions to the effectiveness of this Agreement, shall become effective in accordance with its terms without waiver of any condition to such effectiveness that, in Agents' reasonable judgment, is material.
(ii) Confirmation Order. The Confirmation Order shall have been delivered to Lenders, shall address the matters set forth in subsections 4.1F, 4.1S and 4.1T, the issuance of the Letters of Credit under this Agreement and the terms hereof and the granting of all Liens and consents required under this Agreement and the other Credit Documents and otherwise be in form and substance satisfactory to Requisite Lenders. The Confirmation Order shall be in full force and effect and no portion thereof shall have been stayed pending any appeal or petition for review or for rehearing, and Agents shall have received evidence satisfactory to each demonstrating such facts. Debtors' Second Joint Plan of Liquidation under Chapter 11 of the Bankruptcy Code and the Liquidation Plan Supplement to Debtors' Second Joint Plan of Liquidation, as filed with the Bankruptcy Court on December 18, 2003 and February 18, 2004, respectively, and as amended, supplemented or otherwise modified from time to time thereafter to the extent permitted under the DIP Credit Agreement, shall have been confirmed by the Bankruptcy Court pursuant to an order in form and substance satisfactory to Requisite Lenders.
(iii) Approval of Fees Related to Exit Financing. The Bankruptcy Court order approving the fees payable to Agents and the Lenders described in subsection 4.1B shall be in full force and effect, without modification or amendment except to the extent approved by Agents.
(iv) Material Agreements. The terms and conditions of any Material Contracts to be entered into by the Borrowers or any of their Subsidiaries pursuant to the Approved Plan of Reorganization shall be in form and substance satisfactory to Requisite Lenders and Agents.
F. MATTERS RELATING TO EXISTING INDEBTEDNESS.
(i) Termination of DIP Credit Agreement and Related Liens. (a) Indebtedness consisting of funded amounts outstanding under the DIP Credit Agreement on the Closing Date shall have been repaid in full in cash, (b) all undrawn DIP Tranche A L/Cs and DIP Tranche B L/Cs (other than the Existing Detroit L/Cs) shall be replaced (or any further drawings thereunder shall be fully supported pursuant to arrangements satisfactory to DIP Lenders and the issuers thereof) with letters of credit issued under the New L/C Facility Agreement, (c) the Existing Detroit L/Cs shall be replaced with Letters of Credit, (d) each letter of credit (if any) issued or deemed issued under the DIP Credit Agreement other than the DIP Tranche A L/Cs and DIP Tranche B L/Cs shall have been cash collateralized pursuant to arrangements reasonably satisfactory to the issuer of such letter of credit, or cancelled and returned undrawn, or reimbursed, (e) all commitments to lend or make other extensions of credit under the DIP Credit Agreement shall have terminated (except that the participations of DIP Lenders purchased in the letters of credit, if any, referred to in clause (d) above shall continue), and (f) all documents or instruments necessary to release all Liens securing Indebtedness or other obligations of Borrowers and their Subsidiaries (including CPIH Subsidiaries) under the DIP Credit Agreement shall have been delivered to Administrative Agent to the extent required by Administrative Agent.
(ii) Termination of Prepetition Credit Agreement, 9.25% Debentures and Related Liens. (a) Indebtedness consisting of the 9.25% Debentures and the Prepetition Obligations on the Closing Date shall be satisfied by application of the High Yield Notes and the CPIH Term Loans and by application of Cash On Hand of Borrowers (as described in subsection 4.1T), and (b) all documents or instruments necessary to release all Liens securing Indebtedness or other obligations of Borrowers and their Subsidiaries (including CPIH Subsidiaries) under the Prepetition Credit Agreement and the 9.25% Debentures shall have been delivered to Administrative Agent to the extent required by the Administrative Agent.
(iii) CPIH Facilities. Indebtedness under the CPIH Revolver Agreement and Indebtedness under the CPIH Term Loan Agreement shall be secured as set forth in the CPIH Revolver Documents and the CPIH Term Loan Documents and shall be non-recourse to the Borrowers or their assets other than pursuant to the CPIH Stock Pledge Agreement. The CPIH Revolver Documents and the CPIH Term Loan Documents shall be in full force and effect, the "Closing Date" as defined in each of the CPIH Revolver Documents and the CPIH Term Loan Documents shall have occurred, and the CPIH Revolver Documents and the CPIH Term Loan Documents shall provide for $10,000,000 in revolving loan commitments and $90,000,000 in term loans (subject to increase to up to $95,000,000 pursuant to and in accordance with the Approved Plan of
Reorganization), respectively, and shall otherwise be in form and substance satisfactory to Requisite Lenders.
(iv) Existing Indebtedness to Remain Outstanding. After giving effect to the Approved Plan of Reorganization, the Indebtedness and Contingent Obligations of Borrowers (other than Indebtedness under the Credit Documents) shall consist of (a) the New L/C Facility Documents, which shall provide for maximum aggregate commitments of $118,000,000 for the issuance of letters of credit to be issued on the Closing Date to replace all DIP Tranche A L/Cs and DIP Tranche B L/Cs (other than the Existing Detroit L/Cs) and for other specified uses, shall have a final maturity date of 5 years from the Closing Date, shall provide for fees on undrawn outstanding letters of credit at a rate no greater than 6.5% per annum, fees on unused letter of credit commitments at a rate no greater than .50% per annum and upfront fees not greater than 2.00% of the entire amount of letter of credit commitments, and shall be secured by a junior Lien on the Collateral, (b) $205,000,000 in aggregate initial principal amount of High Yield Notes, (c) a note issued by Company in a principal amount not to exceed $35,000,000 (the "TAX NOTE"), representing the back tax liability of Company and its Subsidiaries as of the Closing Date, which Tax Note shall be unsecured and unguarantied, shall have a final maturity date of 6 years from the Closing Date, shall bear interest payable in arrears at a rate no greater than 7.5% per annum, and shall amortize on a 30-year schedule for the first 5 years after the issuance thereof with the balance due at maturity, (d) "Class 6 Unsecured Notes" (as defined in the Approved Plan of Reorganization) in the aggregate principal amount of $4,000,000 and subordinated notes issued by Company (the "UNSECURED CREDITOR NOTES") in an aggregate principal amount equal to the amount of "Operating Company Unsecured Claims" that are "Allowed" (as such terms are defined in the Approved Plan of Reorganization), which Unsecured Creditor Notes shall be unsecured and unguarantied, shall have a final maturity date of 8 years from the Closing Date, shall bear interest payable in arrears at a rate no greater than 7.5% per annum, and shall amortize in an amount not to exceed $3,900,000 annually commencing on the second anniversary of the Closing Date with the remainder due at final maturity, (e) outstanding Indebtedness described in Schedule 7.1(vi) and Schedule 7.1(ix) annexed hereto, and (f) Indebtedness and Contingent Obligations under the CPIH Stock Pledge Agreement, and outstanding Contingent Obligations described in Schedule 7.4(iv) and Schedule 7.4(vi) annexed hereto. The terms and conditions of all such Indebtedness and Contingent Obligations (including payment terms, covenants, representations and warranties, defaults and, in the case of the Unsecured Notes, payment subordination provisions), and the definitive documentation therefor, shall be in form and in substance satisfactory to Requisite Lenders.
(v) Related Agreements in Full Force and Effect. Lenders shall have received a fully executed or conformed copy of the New L/C Facility Documents, the CPIH Revolver Documents, the CPIH Term Loan Documents, the CPIH Stock Pledge Agreement, the High Yield Indenture and the High Yield Notes, the Tax Note, the Unsecured Creditor Notes, the Unsecured Creditor Notes Indenture, the Intercreditor Agreement and any documents executed in connection therewith, each such Related Agreement, the Unsecured Creditor Notes, the CPIH Term Loan Documents, the CPIH Revolver Documents, the Intercreditor Agreement and the Unsecured Creditor Notes
Indenture shall be in full force and effect and no provision thereof shall have been modified or waived in any respect determined by either Agent to be material.
G. FINANCIAL STATEMENTS; PROJECTIONS. On or before the Closing Date, Lenders shall have received the unaudited consolidated financial statements of Company and its Subsidiaries for the Fiscal Quarters ended June 30, 2003 and September 30, 2003, all in reasonable detail and certified by the chief executive officer or chief financial officer of Company that they fairly present, in all material respects, the financial condition of Company and its Subsidiaries as of the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments. Company shall have delivered to Agents and Lenders such projected financial statements as Agents may reasonably request for the period from the Closing Date through December 31, 2009, including the budget of monthly and quarterly cash receipts and expenditures for Fiscal Year 2004 and annual net cash flow for Fiscal Years 2005, 2006, 2007, 2008 and 2009 attached hereto as Schedule 1.1C, which budget and other projections shall be satisfactory to Agents and Requisite Lenders and shall be accompanied by a certificate from the chief executive officer or chief financial officer of Company certifying that they are based upon good faith estimates and assumptions believed by Company to be reasonable at the time made.
H. SOLVENCY ASSURANCES. On the Closing Date, Administrative Agent and Lenders shall have received an Officer's Certificate dated the Closing Date, substantially in the form of Exhibit IX annexed hereto and with appropriate attachments, demonstrating that, after giving effect to the consummation of the transactions contemplated by the Credit Documents, Borrowers, taken as a whole, and Company will be Solvent.
I. OPINIONS OF COUNSEL TO CREDIT PARTIES. Lenders shall have
received originally executed copies of one or more favorable written opinions of
(a) Cleary, Gottlieb, Steen & Hamilton, (b) LeBoeuf, Lamb, Greene & McRae, (c)
Morris, James, Hitchens & Williams LLP and (d) Nixon Peabody, LLP, counsel for
Borrowers, and of Skadden, Arps, Slate, Meagher & Flom LLP and affiliates,
counsel for DHC, in form and substance reasonably satisfactory to Agents and
their counsel, dated as of the Closing Date and setting forth substantially the
matters in the opinions designated in Exhibit X annexed hereto and as to such
other matters as Agents acting on behalf of Lenders may reasonably request (this
Agreement constituting a written request by Borrowers to such counsel to deliver
such opinions to Agents and Lenders).
J. OPINIONS OF COUNSEL DELIVERED UNDER RELATED AGREEMENTS AND OTHER DOCUMENTS. Administrative Agent and its counsel shall have received copies of the opinions of counsel delivered to the parties under the Related Agreements, the CPIH Revolver Documents, the CPIH Term Loan Documents, the Unsecured Creditor Notes and the Unsecured Creditor Notes Indenture, and Borrowers shall have made reasonable efforts to obtain from each such counsel letters authorizing Lenders to rely on such opinions to the same extent as though such opinions were addressed to Lenders.
K. EVIDENCE OF INSURANCE. Administrative Agent shall have received a certificate from Company's insurance broker or other evidence satisfactory to it that all insurance required to be maintained pursuant to subsection 6.4 is in full force and effect and that Collateral
Agent and/or Administrative Agent on behalf of Lenders has been named as additional insured and/or loss payee thereunder to the extent required under subsection 6.4.
L. NECESSARY GOVERNMENTAL AUTHORIZATIONS AND CONSENTS. Borrowers shall have obtained all Governmental Authorizations and all consents of other Persons, in each case that are necessary or advisable in connection with the transactions contemplated by the Credit Documents and the continued operation of the business conducted by Company and its Subsidiaries in substantially the same manner as conducted prior to the Closing Date. Each such Governmental Authorization or consent shall be in full force and effect, except in a case where the failure to obtain or maintain a Governmental Authorization or consent, either individually or in the aggregate, should not reasonably be expected to have a Material Adverse Effect. Administrative Agent shall have received an Officer's Certificate of Company in form and substance reasonably satisfactory to Administrative Agent certifying as to the foregoing matters and any other evidence reasonably requested by Agents in support thereof. All applicable waiting periods shall have expired without any action being taken or threatened by any competent authority that would restrain, prevent or otherwise impose adverse conditions on the transactions contemplated by the Credit Documents or the financing thereof. No action, request for stay, petition for review or rehearing, reconsideration, or appeal with respect to any of the foregoing shall be pending, and the time for any applicable Government Authority to take action to set aside its consent on its own motion shall have expired.
M. SECURITY INTERESTS IN PERSONAL AND MIXED PROPERTY. To the extent not otherwise satisfied pursuant to subsection 4.1N, Administrative Agent shall have received evidence satisfactory to it that Credit Parties (except as otherwise contemplated in subsection 5.18 hereof) shall have taken or caused to be taken all such actions, executed and delivered or caused to be executed and delivered all such agreements, documents and instruments, and made or caused to be made all such filings and recordings (other than the filing or recording of items described in clauses (ii) and (iii) below) that Administrative Agent may reasonably request in order to evidence, in favor of Collateral Agent, for the benefit of Secured Parties, a valid and perfected security interest in the entire personal and mixed property Collateral, with the priority set forth in the Collateral Documents (it being understood that such actions by DHC shall relate solely to its pledge of the Capital Stock of Company). Such actions shall include the following:
(i) Stock Certificates and Instruments. Delivery to Collateral Agent of (a) certificates (which certificates shall be accompanied by irrevocable undated stock powers, duly endorsed in blank and otherwise satisfactory in form and substance to Collateral Agent) representing all capital stock included in the Collateral and (b) all promissory notes or other instruments (duly endorsed, where appropriate, in a manner satisfactory to Collateral Agent) evidencing any Collateral;
(ii) Lien Searches and UCC Termination Statements. Delivery to Collateral Agent of (a) the results of a recent search, by a Person satisfactory to Collateral Agent, of all effective UCC financing statements and fixture filings and all judgment and tax lien filings which may have been made with respect to any personal or mixed property of any Borrower and of all effective UCC financing statements which may have been made with respect to Capital Stock of Borrowers or any Subsidiary of any Borrower, in each case
together with copies of all such filings disclosed by such search, and
(b) UCC termination statements duly executed by all applicable Persons
for filing in all applicable jurisdictions as may be necessary to
terminate any effective UCC financing statements or fixture filings
disclosed in such search (other than any such financing statements or
fixture filings in respect of Liens permitted to remain outstanding
pursuant to the terms of this Agreement);
(iii) UCC Financing Statements and Fixture Filings. Delivery to Collateral Agent of UCC financing statements and, where appropriate, fixture filings, duly executed by each applicable Borrower with respect to all personal and mixed property Collateral of such Borrower and by DHC with respect to the Capital Stock of Company, in each case for filing in all jurisdictions as may be necessary or in the opinion of Collateral Agent desirable to perfect the security interests in favor of Collateral Agent created in such Collateral pursuant to the Collateral Documents;
(iv) PTO Cover Sheets, Etc. Delivery to Collateral Agent of all cover sheets or other documents or instruments Collateral Agent may reasonably request to be filed with the PTO in order to evidence Liens in favor of Collateral Agent in respect of any IP Collateral;
(v) Control Agreements. Delivery to Collateral Agent of such Control Agreements with financial institutions and other Persons in order to perfect Liens in respect of Deposit Accounts, Securities Accounts and other Collateral pursuant to the Collateral Documents; and
(vi) Certificate. Delivery to Agents and Collateral Agent of an Officer's Certificate certifying that, as of the Closing Date, the foreign patent registrations held by Company and its Subsidiaries are not, individually or in the aggregate, material to the business of Company and its Subsidiaries as a whole.
N. CLOSING DATE MORTGAGES; CLOSING DATE MORTGAGE POLICIES;
ETC. Collateral Agent shall have received from each applicable Borrower:
(i) Closing Date Mortgages. Fully executed and notarized Mortgages (each a "CLOSING DATE MORTGAGE" and, collectively, the "CLOSING DATE MORTGAGES"), in proper form for recording in all appropriate places in all applicable jurisdictions, encumbering each Real Property Asset listed in Schedule 4.1N annexed hereto (each a "CLOSING DATE MORTGAGED PROPERTY" and, collectively, the "CLOSING DATE MORTGAGED PROPERTIES" (it being understood and agreed that (a) no Leasehold Property that is not a Material Leasehold Property shall be required to be a Closing Date Mortgaged Property, and (b) no Real Property Asset the pledge of which would constitute a material violation of (1) a valid and enforceable Contractual Obligation in favor of or for the benefit of a Person other than Company or any of its Subsidiaries and their respective Affiliates for which the required consents have not been obtained or (2) applicable law affecting the Borrower holding such Real Property Asset, shall be required to be a Closing Date Mortgaged Property));
(ii) Opinions of Local Counsel. An opinion of counsel (which counsel shall be reasonably satisfactory to Administrative Agent) in each state in which a Closing Date Mortgaged Property is located with respect to the enforceability of the form(s) of Closing Date Mortgages to be recorded in such state and such other matters as Administrative Agent may reasonably request, in each case in form and substance reasonably satisfactory to Administrative Agent;
(iii) Landlord Consents and Estoppels; Recorded Leasehold Interests. In the case of each Closing Date Mortgaged Property consisting of a Leasehold Property, (a) a Landlord Consent and Estoppel with respect thereto, and (b) evidence that such Leasehold Property is a Recorded Leasehold Interest;
(iv) Title Insurance. (a) ALTA mortgagee title insurance policies or unconditional commitments therefor (the "CLOSING DATE MORTGAGE POLICIES") issued by the Title Company with respect to the Closing Date Mortgaged Properties listed in Part A of Schedule 4.1N annexed hereto, in amounts not less than the respective amounts designated therein with respect to any particular Closing Date Mortgaged Properties, insuring fee simple title to, or a valid leasehold interest in, each such Closing Date Mortgaged Property vested in such Borrower and assuring Collateral Agent that the applicable Closing Date Mortgages create valid and enforceable First Priority mortgage Liens on the respective Closing Date Mortgaged Properties encumbered thereby, subject only to a standard survey exception, which Closing Date Mortgage Policies (1) shall include an endorsement for mechanics' liens, for future advances under this Agreement and for any other matters reasonably requested by Collateral Agent and (2) shall provide for affirmative insurance and such reinsurance as Collateral Agent may reasonably request, all of the foregoing in form and substance reasonably satisfactory to Collateral Agent; and (b) evidence satisfactory to Collateral Agent that such Borrower has (i) delivered to the Title Company all certificates and affidavits required by the Title Company in connection with the issuance of the Closing Date Mortgage Policies and (ii) paid to the Title Company or to the appropriate governmental authorities all expenses and premiums of the Title Company in connection with the issuance of the Closing Date Mortgage Policies and all recording and stamp taxes (including mortgage recording and intangible taxes) payable in connection with recording the Closing Date Mortgages in the appropriate real estate records;
(v) Title Reports. With respect to each Closing Date Mortgaged Property listed in Part B of Schedule 4.1N annexed hereto, a title report issued by the Title Company with respect thereto, dated not more than 30 days prior to the Closing Date and satisfactory in form and substance to Administrative Agent;
(vi) Copies of Documents Relating to Title Exceptions. Copies of all recorded documents listed as exceptions to title or otherwise referred to in the Closing Date Mortgage Policies or in the title reports delivered pursuant to subsection 4.1N(iv); and
(vii) Matters Relating to Flood Hazard Properties. (a) Evidence, which may be in the form of a letter from an insurance broker or a municipal engineer, as to whether (1) any Closing Date Mortgaged Property is a Flood Hazard Property and (2) the
community in which any such Flood Hazard Property is located is
participating in the National Flood Insurance Program, (b) if there are
any such Flood Hazard Properties, such Borrower's written
acknowledgement of receipt of written notification from Administrative
Agent (1) as to the existence of each such Flood Hazard Property and
(2) as to whether the community in which each such Flood Hazard
Property is located is participating in the National Flood Insurance
Program, and (c) in the event any such Flood Hazard Property is located
in a community that participates in the National Flood Insurance
Program, evidence that Company has obtained flood insurance in respect
of such Flood Hazard Property to the extent required under the
applicable regulations of the Board of Governors of the Federal Reserve
System.
O. NO MATERIAL ADVERSE CHANGE. Agents (in their sole discretion) shall be satisfied that there has been no material adverse change (other than as disclosed in reports delivered pursuant to subsection 6.1(i) of the DIP Credit Agreement) since December 31, 2002 in the business, property, assets, operations, financial condition or prospects of Company and its Subsidiaries taken as a whole, and Company shall have delivered to Agents an Officer's Certificate to the foregoing effect.
P. CASH MANAGEMENT SYSTEM. The cash management system of Company and its Subsidiaries shall be as set forth on Schedule 4.1P annexed hereto.
Q. [INTENTIONALLY OMITTED]
R. GEOTHERMAL SALE. Company shall have consummated the Geothermal Sale on terms and conditions and pursuant to documentation in form and substance satisfactory to the Requisite DIP Lenders.
S. CPIH REORGANIZATION. On the Closing Date, (i) Company shall own, directly or indirectly, 100% of the outstanding Capital Stock of CEA, (ii) CEA shall own 100% of the outstanding common stock of CPIH, which shall own the Capital Stock of all Persons (including Persons holding the equity interests in other Persons) holding the assets and operations of the IPP International Business to the extent described in the Approved Plan of Reorganization and the Disclosure Statement related thereto, (iii) all relevant operating and administrative expenses associated with the IPP International Business shall be transferred into CPIH in accordance with the Management Services and Reimbursement Agreement, and (iv) not less than $5,000,000 of cash for working capital shall have been transferred from Company and its Subsidiaries to the CPIH Borrowers as an equity contribution.
T. DISTRIBUTION. All unrestricted Cash On Hand (including,
without limitation, net sale proceeds from the Geothermal Sale) of Borrowers
remaining prior to the equity contribution referred to in subsection 4.1C(ii)
but after (i) the transfer of working capital amounts to CPIH as described in
subsection 4.1S, (ii) the payment of the fees referred to in subsection 4.1B,
(iii) the disposition of those letters of credit referred to in subsection
4.1F(i)(d), (iv) the payment of allowed administrative expenses, (v) the
reimbursement of reasonable accrued fees and expenses of DHC not to exceed
$4,000,000 in the aggregate and reasonable accrued fees and expenses of D.E.
Shaw not to exceed $350,000 in the aggregate, and (vi) the payment of funded
outstanding obligations under the DIP Credit Agreement (if any) and (without
duplication of clauses (i) through
(vi)) the payment of other "Exit Costs" (as defined in the Approved Reorganization Plan), subject to an amount of cash (which amount shall be determined in accordance with terms set forth in the draft Plan of Reorganization attached (on the date of execution thereof) to the Investment and Purchase Agreement dated as of December 2, 2003 between DHC and Company) to be retained in the domestic Cash Management System by Company and its Subsidiaries (collectively, such Cash On Hand, net of such transferred amount, such payments and reimbursements, such retained amount and such reserves, is referred to herein as "DISTRIBUTABLE CASH"), shall have been distributed as follows: first, to the extent of the first $60,000,000 of such Distributable Cash, for the benefit of the holders of Prepetition Secured Claims that are Lenders on the Closing Date, on account of their allowed pre-petition exposure, in accordance with the Approved Plan of Reorganization, second, to the extent of the next $7,200,000 of such Distributable Cash, for the benefit of those holders of Prepetition Secured Claims that are not Lenders on the Closing Date, on account of any remaining allowed pre-Petition Date exposure, in accordance with the Approved Plan of Reorganization, and third, to the extent of 25% of any remaining Distributable Cash, to Company (the amount of Distributable Cash so distributed to Company being referred to herein as the "CLOSING DATE RETAINED AMOUNT"), and to the extent of the remaining 75%, for the benefit of the holders of Prepetition Secured Claims, on account of any remaining allowed pre-Petition Date exposure, in accordance with the Approved Plan of Reorganization.
U. NOL AVAILABILITY. Company, its independent advisers, Agents and Agents' counsel shall have determined to their respective sole satisfaction that the net operating losses disclosed to Agents and Lenders prior to the Closing Date as being held by DHC are available and accessible to Company and its Subsidiaries.
V. LITIGATION. On the Closing Date, there shall be no action, suit, investigation, litigation or proceeding pending or threatened in any court or before any arbitrator or governmental instrumentality that purports to affect the Approved Plan of Reorganization, any of the Credit Documents or any of the CPIH Term Loan Documents that could reasonably be expected to have a Material Adverse Effect or a material adverse effect on the Approved Plan of Reorganization, any of the Credit Documents or any of the CPIH Term Loan Documents.
W. COMPLETION OF PROCEEDINGS. All corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Agents, acting on behalf of Lenders, and their counsel shall be satisfactory in form and substance to Agents and such counsel, and Agents and such counsel shall have received all such counterpart originals or certified copies of such documents as Agents may reasonably request.
X. LENDER REQUIREMENTS. Each Person that is a Lender on the Closing Date (each such Lender being a "CLOSING DATE LENDER"), at its own expense, either (i) shall have provided Issuing Lenders with evidence satisfactory to Issuing Lenders that such Closing Date Lender has long term senior unsecured debt ratings in effect on the Closing Date of (a) if such Closing Date Lender is not a DIP Lender, "A2" or better from Moody's and "A" or better from S&P, and (b) if such Closing Date Lender is a DIP Lender, "Baa3" or better from Moody's and "BBB-" or better from S&P, or (ii) shall have delivered to Issuing Lenders, at such Closing Date Lender's option, either (a) evidence satisfactory to Issuing Lenders that the Letter of Credit Commitment of such Closing Date Lender is irrevocably guaranteed or similarly supported
pursuant to arrangements (and by Persons) reasonably satisfactory to Administrative Agent and Issuing Lenders, or (b) cash collateral supporting the maximum amount of the Letter of Credit Commitment of such Closing Date Lender pursuant to documentation and arrangements reasonably satisfactory to Administrative Agent and Issuing Lenders.
Each Lender, by delivering to Agents a signed counterpart to this Agreement, shall be deemed (unless such Lender indicates otherwise in writing to Agents and Company) to have acknowledged receipt of, and to have consented to, approved and be satisfied with, the documents, agreements, instruments or information which require approval, consent or satisfaction of the Lenders or Requisite Lenders, as applicable, in order for the conditions precedent contained in this subsection 4.1 to be satisfied.
Notwithstanding anything in this Section 4 to the contrary, it
is understood and agreed that the conditions of subsection 4.1A(i) shall be
deemed satisfied notwithstanding (i) failure to deliver all of the certificates
or other evidence of good standing described in subsection 4.1A(i), so long as
(a) Administrative Agent is notified which certificates or other evidence shall
not have been delivered and, in its sole discretion, agrees that such
certificates or other evidence may be delivered with respect to the relevant
Persons after the Closing Date, (b) failure to deliver all of the certificates
or other evidence of good standing described in subsection 4.1A(i) on or prior
to the date which is 90 days after the Closing Date shall constitute an
immediate Event of Default on such date (unless such failure is due to failure
to pay franchise taxes full payment of which has been tendered by such date), or
(ii) failure to deliver all or any portion of the title insurance-related
documents and instruments described in subsection 4.1N with respect to the Real
Property Asset located in Lassen County, California, provided, that failure to
deliver all of such documents and instruments with respect to such property on
or prior to the date which is 360 days after the Closing Date shall constitute
an immediate Event of Default on such date.
SECTION 5. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement, to induce Issuing Lenders to issue Letters of Credit and to induce Lenders to purchase participations therein, Company represents and warrants to each Lender, on the date of this Agreement, on the Closing Date and (in the case of the representations and warranties referenced in subsection 3.1B(iii)(b)) on the date of issuance of a replacement or extension of any Letter of Credit, that the following statements are true, correct and complete:
5.1 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS AND SUBSIDIARIES.
A. ORGANIZATION AND POWERS. Each Credit Party is a corporation, partnership, trust or limited liability company duly organized, validly existing and in good standing under the laws of its jurisdiction of organization as specified in Schedule 5.1 annexed hereto (provided, however, that failure of any Credit Party to be in good standing in the relevant jurisdiction shall not be deemed a breach of this representation if (x) such failure is due solely to failure to pay franchise taxes and (y) full payment of such franchise taxes has been tendered no later than the date which is 90 days after the Closing Date). Each Credit Party has all requisite
power and authority to own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to enter into the Credit Documents to which it is a party and to carry out the transactions contemplated thereby. Each Credit Party is in compliance with all material terms of its Organizational Documents.
B. QUALIFICATION AND GOOD STANDING. Each Credit Party is qualified to do business and in good standing in every jurisdiction necessary to carry out its business and operations, except in jurisdictions where the failure to be so qualified or in good standing has not had and could not reasonably be expected to have a Material Adverse Effect.
C. CONDUCT OF BUSINESS. Company and its Subsidiaries are engaged only in the businesses permitted to be engaged in pursuant to subsection 7.12.
D. SUBSIDIARIES. All of the Subsidiaries of Company as of the Closing Date and their jurisdictions of organization are identified in Schedule 5.1 annexed hereto. The Capital Stock of each of the Subsidiaries of Company identified in Schedule 5.1 annexed hereto is duly authorized, validly issued, fully paid and nonassessable and none of such Capital Stock constitutes Margin Stock. Each of the Subsidiaries of Company identified in Schedule 5.1 annexed hereto is a corporation, partnership, trust or limited liability company duly organized, validly existing and in good standing under the laws of its respective jurisdiction of organization set forth therein, has all requisite power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted, and is qualified to do business and in good standing in every jurisdiction necessary to carry out its business and operations, in each case except where failure to be so qualified or in good standing or a lack of such power and authority has not had and could not reasonably be expected to have a Material Adverse Effect. Schedule 5.1 annexed hereto correctly sets forth, as of the Closing Date, the ownership interest of Company and each of its Subsidiaries in each of the Subsidiaries of Company identified therein.
5.2 AUTHORIZATION OF BORROWING, ETC.
A. AUTHORIZATION OF BORROWING. The execution, delivery and performance of the Credit Documents have been duly authorized by all necessary action on the part of each Credit Party that is a party thereto.
B. NO CONFLICT. The execution, delivery and performance by Credit Parties of the Credit Documents to which they are parties and the consummation of the transactions contemplated by the Credit Documents do not and will not (i) violate any provision of any law or any governmental rule or regulation applicable to Company or any of its Subsidiaries, the Organizational Documents of Company or any of its Subsidiaries or any order, judgment or decree of any court or other Government Authority binding on Company or any of its Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of Company or any of its Subsidiaries, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of Company or any of its Subsidiaries, other than any Liens created under any of the Credit Documents in favor of Collateral Agent on behalf of Secured Parties, or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of
Company or any of its Subsidiaries, except for (x) such approvals or consents which will be obtained on or before the Closing Date and disclosed in writing to Lenders.
C. GOVERNMENTAL CONSENTS. The execution, delivery and performance by Credit Parties of the Credit Documents to which they are parties and the consummation of the transactions contemplated by the Credit Documents do not and will not require any Governmental Authorization, except for the entry of the Confirmation Order and except for filings expressly contemplated by the Credit Documents and those Governmental Authorizations which have been obtained.
D. BINDING OBLIGATION. Each of the Credit Documents has been duly executed and delivered by each Credit Party that is a party thereto and is the legally valid and binding obligation of such Credit Party, enforceable against such Credit Party in accordance with its respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability.
E. RESTRICTIONS ON TRANSFER. There are no restrictions on any Borrower or any of its Subsidiaries which prohibit or otherwise restrict the transfer of cash or other assets from one to another, other than (i) prohibitions or restrictions existing under or by reason of (a) this Agreement and the other Credit Documents, (b) applicable law, (c) customary non-assignment provisions entered into in the ordinary course of business and consistent with past practices, and (d) any documents or instruments governing the terms of any Indebtedness or other obligations secured by Liens permitted by subsection 7.2A, provided that such prohibitions or restrictions apply only to the assets subject to such Liens, and (ii) restrictions described in clauses (a) through (d) of subsection 7.2D.
5.3 FINANCIAL CONDITION.
Company has heretofore delivered to Lenders, at Lenders' request, (i) the audited consolidated financial statements of Company and its Subsidiaries for the Fiscal Year ended December 31, 2002 and (ii) the unaudited consolidated financial statements of Company and its Subsidiaries for the Fiscal Quarters ended March 31, 2003, June 30, 2003 and September 30, 2003. All such statements were prepared in conformity with GAAP and fairly present, in all material respects, the financial position (on a consolidated and, where applicable, consolidating basis) of the entities described in such financial statements as at the respective dates thereof and the results of operations and cash flows (on a consolidated and, where applicable, consolidating basis) of the entities described therein for each of the periods then ended, subject, in the case of any such unaudited financial statements, to changes resulting from audit and normal year-end adjustments. No Borrower has, as of the Closing Date, any Contingent Obligation, contingent liability or unusual long-term commitment that is not reflected in the foregoing financial statements or the notes thereto and, as of any Funding Date subsequent to the Closing Date, is not reflected in the most recent financial statements delivered to Lenders pursuant to subsection 6.1 or the notes thereto (other than (a) those liabilities reflected on the Schedules to this Agreement and (b) Performance Guaranties and Contingent Obligations that are permitted to be incurred under subsection 7.4) and that, in any such case, is material in relation to the
business, operations, properties, assets or financial condition of Company or any of its Subsidiaries taken as a whole.
5.4 NO MATERIAL ADVERSE CHANGE; NO RESTRICTED PAYMENTS.
Since December 31, 2002, no event or change has occurred (other than as disclosed in reports delivered pursuant to subsection 6.1(i) of the DIP Credit Agreement) that has resulted in or evidences, either in any case or in the aggregate, a Material Adverse Effect. Since the Petition Date, neither Company nor any of its Subsidiaries has directly or indirectly declared, ordered, paid or made, or set apart any sum or property for, any Restricted Payment or agreed to do so except (i) as permitted by subsection 7.5, and (ii) as was permitted by subsection 7.5 of the DIP Credit Agreement.
5.5 TITLE TO PROPERTIES; LIENS; REAL PROPERTY; INTELLECTUAL PROPERTY.
A. TITLE TO PROPERTIES; LIENS. Company and its Subsidiaries have (i) good, sufficient and legal title to (in the case of fee interests in real property), (ii) valid leasehold interests in (in the case of leasehold interests in real or personal property), or (iii) good title to (in the case of all other personal property), all of their respective material properties and assets reflected in the financial statements referred to in subsection 5.3 or in the most recent financial statements delivered pursuant to subsection 6.1, in each case except for assets disposed of since the date of such financial statements in the ordinary course of business or as otherwise permitted under subsection 7.7. Except as permitted by this Agreement, all such properties and assets are free and clear of Liens.
B. REAL PROPERTY. As of the Closing Date, Schedule 5.5B annexed hereto contains a true, accurate and complete list of (i) all fee interests in any Real Property Assets and (ii) all leases, subleases or assignments of leases (together with all amendments, modifications, supplements, renewals or extensions of any thereof) affecting each Real Property Asset, regardless of whether a Borrower is the landlord or tenant (whether directly or as an assignee or successor in interest) under such lease, sublease or assignment. Except as specified in Schedule 5.5B annexed hereto, each agreement listed in clause (ii) of the immediately preceding sentence is in full force and effect and no Borrower has knowledge of any material default that has occurred and is continuing thereunder, and each such agreement constitutes the legally valid and binding obligation of each applicable Borrower, enforceable against such Borrower in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles.
C. INTELLECTUAL PROPERTY. As of the Closing Date, Schedule 5.5C annexed hereto contains a true, accurate and complete list of all material Intellectual Property. Each of Company and its Subsidiaries owns or has the right to use all material Intellectual Property used in the conduct of its business, and none of such Intellectual Property conflicts with a right of any other Person to the extent such conflict could reasonably be expect to result in a Material Adverse Effect.
5.6 LITIGATION; ADVERSE FACTS.
Except as set forth in Schedule 5.6 annexed hereto, there are no Proceedings (whether or not purportedly on behalf of Company or any of its Subsidiaries) at law or in equity, or before or by any court or other Government Authority (including any Environmental Claims) that are pending or, to the knowledge of any Borrower, threatened against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries and that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. Neither Company nor any of its Subsidiaries (i) is in violation of any applicable laws (including Environmental Laws) that, individually or in the aggregate (together with all such Proceedings with respect to substantially similar or related matters), would reasonably be expected to result in a Material Adverse Effect, or (ii) is subject to or in default with respect to any final judgments, writs, injunctions, decrees, rules or regulations of any court or other Government Authority that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.
5.7 PAYMENT OF TAXES.
Except to the extent permitted by subsection 6.3, all material tax returns and reports of Company and its Subsidiaries required to be filed by any of them have been timely filed, and all taxes shown on such tax returns to be due and payable (other than taxes represented by the Tax Note) and all assessments, fees and other governmental charges upon Company and its Subsidiaries and upon their respective properties, assets, income, businesses and franchises that are due and payable have been paid when due and payable. No Borrower knows of any proposed tax assessment against Company or any of its Subsidiaries, that Company or its Subsidiaries dispute or disagree with, that is not being actively contested by Company or such Subsidiary in good faith and by appropriate proceedings; provided that such reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made or provided therefor.
5.8 PERFORMANCE OF AGREEMENTS; MATERIAL CONTRACTS.
A. Except as set forth on Schedule 5.8A annexed hereto, after giving effect to the Approved Plan of Reorganization, neither Company nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any of its Contractual Obligations, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default except where the consequences, direct or indirect, of such default or defaults, if any, could not reasonably be expected to have a Material Adverse Effect.
B. Neither Company nor any of its Subsidiaries is a party to or is otherwise subject to (i) any agreements or instruments the performance of which, in the ordinary course, would reasonably be expected to result in a Material Adverse Effect, or (ii) any charter or other internal restrictions which, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.
C. Schedule 5.8C contains a true, correct and complete list of all the Material Contracts in effect on the Closing Date after giving effect to the Approved Plan of Reorganization. Except as described on Schedule 5.8C, all such Material Contracts are in full force and effect and no material defaults currently exist thereunder.
5.9 GOVERNMENTAL REGULATION.
Neither Company nor any of its Subsidiaries is subject to regulation under (i) the Public Utility Holding Company Act of 1935, (ii) the Federal Power Act (other than as a "qualifying small power production facility", as such term is defined in PURPA), (iii) the Interstate Commerce Act, (iv) the Investment Company Act of 1940, or (v) any other federal or state statute or regulation which may limit its ability to incur Indebtedness or which may otherwise render all or any portion of the Obligations unenforceable.
5.10 SECURITIES ACTIVITIES.
A. Neither Company nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock.
B. Not more than 25% of the value of the assets (either of Company only or of Company and its Subsidiaries on a consolidated basis) subject to the provisions of subsection 7.2 or 7.7 or subject to any restriction contained in any agreement or instrument, between Company and any Lender or any Affiliate of any Lender, relating to Indebtedness and within the scope of subsection 8.2, will be Margin Stock.
5.11 EMPLOYEE BENEFIT PLANS.
A. Company, each of its Subsidiaries and, with respect to Pension Plans and Multiemployer Plans, each of their respective ERISA Affiliates are in material compliance with all applicable provisions and requirements of ERISA, the regulations and published interpretations thereunder and other applicable law with respect to each Employee Benefit Plan, and have performed all of their material obligations under each Employee Benefit Plan. Company and each of its Subsidiaries are in material compliance with all applicable laws and orders of foreign Government Authorities with respect to each of its pension plans and employee benefit plans for foreign employees, and have performed all of their material obligations under each such pension plan and employee benefit plan. Each Employee Benefit Plan that is intended to qualify under Section 401(a) of the Internal Revenue Code has received, or has timely taken all action necessary to receive, a favorable determination letter from the Internal Revenue Service to such effect and no event has occurred (other than the enactment of legislation for which the remedial amendment period has not expired) that would reasonably be expected to affect adversely such Plan's qualification.
B. No ERISA Event has occurred or is reasonably expected to occur.
C. Except to the extent required under Section 4980B of the Internal Revenue Code or except as set forth in Schedule 5.11 annexed hereto or in the financial statements delivered to Lenders pursuant to subsection 4.1 or 6.1 hereof, as applicable, no Employee Benefit
Plan provides health or welfare benefits (through the purchase of insurance or otherwise) for any retired or former employee of Company or any of its Subsidiaries (including CPIH Subsidiaries, to the extent such CPIH Subsidiaries are ERISA Affiliates of Company or any of its Subsidiaries).
D. As of January 1 of each year (based on, with respect to the Covanta Energy Pension Plan, the actuarial valuation as of such January 1 and, with respect to the SEIU Pension Plan, the actuarial valuation as of the immediately preceding June 1), the amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA, but determined on the basis of the actuarial assumptions used for funding purposes with respect to a Pension Plan (as set forth in Section 412 of the Internal Revenue Code, including, where applicable, the interest rate assumptions set forth in Section 412(l) of the Internal Revenue Code)), in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities), does not exceed (i) $20,000,000, in the event the applicable law (including statutorily prescribed actuarial assumptions) used in determining such unfunded benefit liabilities (the "ASSUMPTIONS") is generally as favorable as the Assumptions used in the 2003 plan year valuations with respect to such Pension Plans, or (ii) $26,000,000, in the event the Assumptions are generally less favorable than the Assumptions used in the 2003 plan year valuations with respect to such Pension Plans.
E. To each Borrower's knowledge, as of the most recent valuation date for each Multiemployer Plan for which the actuarial report (or an estimate provided pursuant to Section 4221(e) of ERISA) is reasonably available to Company, the potential withdrawal liability of Company, its Subsidiaries and their respective ERISA Affiliates for a complete withdrawal from such Multiemployer Plan (within the meaning of Section 4203 of ERISA), when aggregated with the potential liability for a complete withdrawal from all other Multiemployer Plans for which such actuarial report (or an estimate provided pursuant to Section 4221(e) of ERISA) is reasonably available to Company, based on the information contained in such reports, would not reasonably be expected to exceed $7,500,000.
F. Neither Company nor any Subsidiary has incurred or is reasonably expected to incur any material liability pursuant to Title IV of ERISA with respect to any employee benefit plan of an entity that was formerly an ERISA Affiliate of Company or any of its Subsidiaries or with respect to any employee benefit plan that was previously maintained by Company or any of its Subsidiaries (including CPIH Subsidiaries, to the extent such CPIH Subsidiaries are ERISA Affiliates of Company or any of its Subsidiaries).
5.12 CERTAIN FEES.
No broker's or finder's fee or commission will be payable with respect to this Agreement or any of the transactions contemplated hereby, and each Borrower hereby indemnifies Lenders against, and agrees that it will hold Lenders harmless from, any claim, demand or liability for any such broker's or finder's fees alleged to have been incurred in connection herewith or therewith and any expenses (including reasonable fees, expenses and disbursements of counsel) arising in connection with any such claim, demand or liability.
5.13 ENVIRONMENTAL PROTECTION.
A. Except as set forth in Schedule 5.13 annexed hereto, neither Company nor any of its Subsidiaries (including, solely with respect to periods prior to the Closing Date, CPIH Subsidiaries) nor any of their respective Facilities or operations are subject to any outstanding written order, consent decree or settlement agreement with any Person relating to (a) any Environmental Law, (b) any Environmental Claim, or (c) any Hazardous Materials Activity that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or impose liability on any Lender or Agent;
B. Except as set forth in Schedule 5.13 annexed hereto, neither Company nor any of its Subsidiaries (including, solely with respect to periods prior to the Closing Date, CPIH Subsidiaries) has received any letter or request for information under Section 104 of CERCLA or any comparable state law regarding any condition, occurrence or activity that could reasonably be expected to form the basis of an Environmental Claim against Company or any of its Subsidiaries (including, solely with respect to periods prior to the Closing Date, CPIH Subsidiaries) that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or impose liability on any Lender or Agent;
C. Except as set forth in Schedule 5.13 annexed hereto, there are and, to Company's knowledge, have been no conditions, occurrences, or Hazardous Materials Activities that could reasonably be expected to form the basis of an Environmental Claim against Company or any of its Subsidiaries (including, solely with respect to periods prior to the Closing Date, CPIH Subsidiaries) that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or impose liability on any Lender or Agent;
D. Except as set forth in Schedule 5.13 annexed hereto, (i) neither Company nor any of its Subsidiaries (including, solely with respect to periods prior to the Closing Date, CPIH Subsidiaries) nor, to Company's knowledge, any predecessor of Company or any of its Subsidiaries (including, solely with respect to periods prior to the Closing Date, CPIH Subsidiaries) has filed any notice under any Environmental Law indicating past or present treatment of Hazardous Materials at any Facility, (ii) none of Company's or any of its Subsidiaries' Facilities constitute facilities for the treatment, storage or disposal of Hazardous Materials under RCRA or any state equivalent, and (iii) none of Company's or any of its Subsidiaries' operations involves the generation, transportation, treatment, storage or disposal of hazardous waste in violation of RCRA or any state equivalent that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or impose liability on any Lender or Agent; and
E. Compliance with all current requirements pursuant to or under Environmental Laws would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect or impose liability on any Lender or Agent.
5.14 EMPLOYEE MATTERS.
There is no strike or work stoppage in existence or threatened involving Company or any of its Subsidiaries that could reasonably be expected to have a Material Adverse Effect.
5.15 MATTERS RELATING TO COLLATERAL.
A. CREATION, PERFECTION AND PRIORITY OF LIENS. The execution and delivery of the Collateral Documents by Credit Parties, together with (x) the actions taken on or prior to the date hereof pursuant to subsections 4.1M, 4.1N, 6.8, 6.9 and 6.11 and (y) the delivery to Collateral Agent of any Pledged Collateral of the Credit Parties not delivered to Collateral Agent at the time of execution and delivery of the applicable Collateral Document (all of which Pledged Collateral has been so delivered) are effective to create in favor of Collateral Agent, for the benefit of Secured Parties, a Lien on all of the Collateral of the Credit Parties (which Lien has priority over any other Lien on such Collateral, subject to Permitted Encumbrances and Liens permitted under subsection 7.2A), and all filings and other actions necessary or desirable to perfect and maintain the perfection and such priority of such Liens have been duly made or taken and remain in full force and effect, other than the filing of any UCC financing statements delivered to Collateral Agent for filing (but not yet filed) and the periodic filing of UCC continuation statements in respect of UCC financing statements filed by or on behalf of Collateral Agent.
B. GOVERNMENTAL AUTHORIZATIONS. No authorization, approval or
other action by, and no notice to or filing with, any Government Authority is
required for either (i) the pledge or grant by any Credit Party of the Liens
purported to be created in favor of Collateral Agent pursuant to any of the
Collateral Documents or (ii) the exercise by Collateral Agent of any rights or
remedies in respect of any Collateral (whether specifically granted or created
pursuant to any of the Collateral Documents or created or provided for by
applicable law), except (a) for filings or recordings contemplated by subsection
5.15A, (b) as may be required, in connection with the disposition of any Pledged
Collateral, by laws generally affecting the offering and sale of securities, and
(c) authorizations and approvals in respect of the exercise of rights or
remedies as to any collateral of any Credit Party which is subject to regulation
under the Federal Power Act pursuant to Section 210(e)(2) of PURPA.
C. ABSENCE OF THIRD-PARTY FILINGS. Except such as may have been filed in favor of Collateral Agent as contemplated by subsection 5.15A and to evidence Liens permitted pursuant to subsection 7.2, (i) no effective UCC financing statement, fixture filing or other instrument similar in effect covering all or any part of the Collateral is on file in any filing or recording office, and (ii) no effective filing covering all or any part of the IP Collateral is on file in the PTO.
D. MARGIN REGULATIONS. The pledge of the Pledged Collateral pursuant to the Collateral Documents does not violate Regulation T, U or X of the Board of Governors of the Federal Reserve System.
E. INFORMATION REGARDING COLLATERAL. All information supplied to Collateral Agent by any Credit Party (including its officers, employees, agents, advisors, representatives or counsel) with respect to any of the Collateral (in each case taken as a whole with respect to any particular Collateral) is accurate and complete in all material respects.
5.16 DISCLOSURE.
No representation or warranty of Company or any of its Subsidiaries (including CPIH Subsidiaries) contained in any Credit Document or in any other certificate or written statement (excluding the projections, pro forma financial statements and forward looking statements contained therein and the estimates contained in such projections, pro forma financial statements and forward looking statements) furnished to Lenders by Company or any of its Subsidiaries (including CPIH Subsidiaries), including any such Person's officers, employees, agents, advisors, representatives or counsel, for use in connection with the transactions contemplated by this Agreement, contained as of the date such representation or warranty was made any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements contained herein or therein not misleading in any material respect in light of the circumstances in which the same were made and in light of such representations and warranties and all such prior representations and warranties, taken as a whole. Any projections and pro forma financial information contained in such materials are based upon good faith estimates and assumptions believed by each Borrower to be reasonable at the time made, it being recognized by Lenders that such projections as to future events are subject to significant business, economic, regulatory and competitive uncertainties and contingencies, and, accordingly, no assurances are given and no representations or warranties are made by Company or any of its Subsidiaries that any of the estimates and assumptions are correct, that the projections will be achieved or that the forward looking statements expressed in such information will correspond to actual results.
5.17 CASH MANAGEMENT SYSTEM.
The summary of the Cash Management System attached hereto as Schedule 4.1P is accurate and complete in all material respects as of the Closing Date and does not omit to state any material fact necessary to make the statements set forth therein not misleading. No Borrower has any Deposit Account which is not described in Schedule 4.1P other than Deposit Accounts permitted to be owned after the Closing Date pursuant to subsection 6.10. There has been no change to the Cash Management System since the Closing Date except such changes as are permitted under subsection 6.10 and such other changes as have been disclosed to Lenders in writing and approved by Administrative Agent.
5.18 MATTERS RELATING TO CREDIT PARTIES.
A. CREDIT PARTIES. Neither Company nor any of its Subsidiaries owns any interest in any Subsidiary which is not a Borrower (other than Excluded Subsidiaries).
B. DOMESTIC SUBSIDIARY ASSETS. Each Subsidiary which is a Borrower has granted a Lien in favor of Collateral Agent on substantially all of its property (other than the Capital Stock of CPIH) pursuant to the Collateral Documents, except in any case where the grant of such Lien would constitute a material violation of a valid and enforceable Contractual Obligation in favor of or for the benefit of a Person other than Company or any of its Subsidiaries and their respective Affiliates for which the required consents have not been obtained.
C. SUBSIDIARY CAPITAL STOCK. The Capital Stock of each Subsidiary which is directly owned by any Borrower has been pledged to Collateral Agent pursuant to the Collateral Documents, except for the Capital Stock of those Subsidiaries (other than Borrowers) (i) which is subject to a Lien permitted under subsection 7.2A securing Indebtedness permitted under subsection 7.1, or (ii) the pledge of which would constitute a material violation of (a) a valid and enforceable Contractual Obligation in favor of or for the benefit of a Person other than Company or any of its Subsidiaries and their respective Affiliates for which the required consents have not been obtained or (b) applicable law affecting such Borrower or such Subsidiary.
5.19 INVESTIGATION.
All obligations in existence immediately after the Closing Date (other than obligations that do not, in the aggregate, exceed $2,000,000) to extend credit or credit support or obtain the extension of credit or credit support or to make investments or expenditures with respect to existing or future Projects of any Borrower or any Subsidiary of any Borrower that are contained in Contractual Obligations or of which Borrowers are otherwise aware have been disclosed to Agents and the DIP Lenders prior to the Closing Date. Borrowers have made such inquiry and investigation as is necessary to enable Borrowers to make the representation contained in the preceding sentence.
5.20 MATTERS RELATING TO BANKRUPTCY PROCEEDINGS.
A. PLAN OF REORGANIZATION. There have been no material modifications, amendments revisions or restatements of the Approved Plan of Reorganization. Any representation and warranty made by Borrowers or any Subsidiary in the Approved Plan of Reorganization is accurate, true and correct in all material respects as of the Closing Date (or, to the extent such representations and warranties specifically relate to an earlier date, that such representations and warranties were accurate, true and correct in all material respects as of such earlier date).
B. CONFIRMATION ORDER. The Confirmation Order has been entered by the Bankruptcy Court at least 11 days prior to the Closing Date. The Confirmation Order has not been stayed pending any appeal or petition for review or for rehearing.
5.21 SUBORDINATED INDEBTEDNESS.
The Obligations constitute senior indebtedness that is entitled to the benefits of the subordination provisions, if any, of all Indebtedness of Company and its Subsidiaries under the Unsecured Creditor Notes.
5.22 REPORTING TO IRS.
Company does not intend to treat the Letters of Credit and related transactions as being a "reportable transaction" (within the meaning of Treasury Regulation Section 1.6011-4). In the event Company determines to take any action inconsistent with such intention, it will promptly notify Administrative Agent thereof. Company acknowledges that one or more Lenders may treat their Letters of Credit as part of a transaction that is subject to Treasury Regulation section 1.6011-4 or section 301.6112-1, and Administrative Agent and such Lender
or Lenders, as applicable, may file such IRS forms or maintain such lists and other records as they may determine is required by such Treasury Regulations.
5.23 SOLVENCY.
Borrowers (taken as a whole) and Company are, and, upon the incurrence of any Obligations by such Borrowers on any date on which this representation is made, will be, Solvent.
SECTION 6. COMPANY'S AFFIRMATIVE COVENANTS
Borrowers covenant and agree that, so long as any of the Letter of Credit Commitments hereunder shall remain in effect and until payment in full of all Obligations and the cancellation or expiration of all Letters of Credit, unless Requisite Lenders shall otherwise give prior written consent, Borrowers shall perform, and shall cause each of their Subsidiaries to perform, all covenants in this Section 6.
6.1 FINANCIAL STATEMENTS AND OTHER REPORTS.
Borrowers will maintain, and cause each of their respective Subsidiaries to maintain, a system of accounting established and administered in accordance with sound business practices to permit preparation of financial statements in conformity with GAAP. Borrowers will deliver to Administrative Agent (and, promptly after receipt thereof, Administrative Agent will deliver a copy to each Lender):
(i) Budget Report; Budget Update: as soon as available and in any event no later than the 15th Business Day of each month commencing with the 15th Business Day of April 2004, (a) for the month most recently ended, a report in form satisfactory to Administrative Agent reflecting the actual cash receipts and disbursements of Company and its Subsidiaries for the preceding month with respect to each line item described in the Budget for the current Fiscal Year and the percentage and dollar variance of such amounts from the projected amounts therefor set forth in (x) such Budget and (y) the Budget for the current Fiscal Year as delivered pursuant to subsection 6.1(xvi), accompanied by an Officer's Certificate from the chief financial officer of Company certifying that such report accurately presents, in all material respects, cash receipts and cash expenditures of Company and its Subsidiaries for the periods indicated, and (b) a supplement to the Budget for the current Fiscal Year, in the form of such Budget, reflecting projected cash receipts and disbursements of Company and its Subsidiaries for each month and each Fiscal Quarter remaining in the current Fiscal Year with respect to each line item described in such Budget, which supplement shall be accompanied by an Officer's Certificate from the chief financial officer of Company certifying that the projections contained in such supplement are based upon good faith estimates and assumptions believed by Company to be reasonable at the time made;
(ii) Events of Default, etc.: promptly upon any Officer of Company obtaining knowledge (a) of any condition or event that constitutes an Event of Default or Potential Event of Default, or becoming aware that any Lender has given any notice (other than to
Administrative Agent) or taken any other action with respect to a claimed Event of Default or Potential Event of Default, (b) that any Person has given any notice to Company or any of its Subsidiaries or taken any other action with respect to a claimed default or event or condition of the type referred to in subsection 8.2, (c) of any condition or event that would be required to be disclosed in a current report filed by Company with the Securities and Exchange Commission on Form 8-K if Company were required to file such reports under the Exchange Act, or (d) of the occurrence of any event or change that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect, an Officer's Certificate specifying the nature and period of existence of such condition, event or change, or specifying the notice given or action taken by any such Person and the nature of such claimed Event of Default, Potential Event of Default, default, event or condition, and what action Company has taken, is taking and proposes to take with respect thereto;
(iii) Quarterly Financials: as soon as available and in any event within 45 days after the end of each of the first three Fiscal Quarters of each Fiscal Year, the consolidated balance sheet of Company and its Subsidiaries as at the end of such Fiscal Quarter and the related consolidated statement of income of Company and its Subsidiaries for such Fiscal Quarter and the related consolidated statements of stockholders' equity and cash flows of Company and its Subsidiaries for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter, setting forth in each case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year, all in reasonable detail and certified by the chief financial officer of Company that they fairly present, in all material respects, the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments; provided, however, that so long as Company files a quarterly report on Form 10Q with the Securities and Exchange Commission for any Fiscal Quarter, Borrowers shall be required to deliver a copy of such quarterly report in lieu of the financial statements described in this subsection 6.1(iii);
(iv) Year-End Financials: as soon as available and in any event within 90 days after the end of each Fiscal Year, (a) the consolidated balance sheet of Company and its Subsidiaries as at the end of such Fiscal Year and the related consolidated and consolidating statements of income, stockholders' equity and cash flows of Company and its Subsidiaries for such Fiscal Year, setting forth in each case in comparative form the corresponding figures for the previous Fiscal Year, all in reasonable detail and certified by the chief financial officer of Company that they fairly present, in all material respects, the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, and (b) an audit report thereon of independent certified public accountants of recognized national standing selected by Company and satisfactory to Administrative Agent, which report shall (with respect to the audits for all Fiscal Years after 2003) be unqualified, shall express no doubts, assumptions or qualifications concerning the ability of Company and its Subsidiaries to continue as a going concern, and shall (with respect to the audits for all Fiscal Years including 2003) state that in the opinion of such certified public accountants such consolidated financial statements fairly present, in all material respects, the
consolidated financial position of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated in conformity with GAAP and that the audit by such accountants in connection with such consolidated financial statements has been made in accordance with auditing standards generally accepted in the United States; provided, however, that so long as Company files an annual report on Form 10K with the Securities Exchange Commission, Borrowers shall be required to deliver a copy of such annual report in lieu of the financial statements described in clause (a);
(v) Compliance Certificates: together with each delivery of
financial statements of Company and its Subsidiaries pursuant to
subdivisions (iii) and (iv) above, (a) an Officer's Certificate of
Company stating that the signers have reviewed the terms of this
Agreement and have made, or caused to be made under their supervision,
a review in reasonable detail of the transactions and condition of
Company and its Subsidiaries during the accounting period covered by
such financial statements and that such review has not disclosed the
existence during or at the end of such accounting period, and that the
signers do not have knowledge of the existence as at the date of such
Officer's Certificate, of any condition or event that constitutes an
Event of Default or Potential Event of Default, or, if any such
condition or event existed or exists, specifying the nature and period
of existence thereof and what action Company has taken, is taking and
proposes to take with respect thereto; and (b) a Compliance Certificate
demonstrating in reasonable detail compliance during and at the end of
the applicable accounting periods with the restrictions contained in
Section 7, in each case to the extent compliance with such restrictions
is required to be tested at the end of the applicable accounting
period;
(vi) Reconciliation Statements: other than the fresh start adjustments required under SOP 90-7, if, as a result of any change in accounting principles and policies from those used in the preparation of the audited financial statements referred to in subsection 5.3, the consolidated financial statements of Company and its Subsidiaries delivered pursuant to subdivisions (iii) or (iv) of this subsection 6.1 will differ in any material respect from the consolidated financial statements that would have been delivered pursuant to such subdivisions had no such change in accounting principles and policies been made, then (a) together with the first delivery of financial statements pursuant to subdivision (iii) or (iv) of this subsection 6.1 following such change, consolidated financial statements of Company and its Subsidiaries for (y) the current Fiscal Year to the effective date of such change and (z) the two full Fiscal Years immediately preceding the Fiscal Year in which such change is made, in each case prepared on a pro forma basis as if such change had been in effect during such periods, and (b) together with each delivery of financial statements pursuant to subdivision (iii) or (iv) of this subsection 6.1 following such change, if required pursuant to subsection 1.2, a written statement of the chief accounting officer or chief financial officer of Company setting forth the differences (including any differences that would affect any calculations relating to the financial covenants set forth in subsection 7.6) which would have resulted if such financial statements had been prepared without giving effect to such change;
(vii) Accountants' Certification: together with each delivery of consolidated financial statements of Company and its Subsidiaries pursuant to subdivision (iv) above,
a written statement by the independent certified public accountants giving the report thereon stating that in connection with their audit, nothing came to their attention that caused them to believe that Company failed to comply with the terms, provisions or conditions of subsection 7.6, insofar as they relate to financial and accounting matters, or, if such a failure to comply has come to their attention, specifying the nature and period of existence thereof (it being understood that their audit is not directed primarily toward obtaining knowledge of non-compliance and that such accountants shall not be liable by reason of any failure to obtain knowledge of any such non-compliance that would not be disclosed in the course of their audit);
(viii) Accountants' Reports: promptly upon request of an Agent (unless restricted by applicable professional standards), copies of all reports submitted to Company by independent certified public accountants in connection with each annual, interim or special audit of the financial statements of Company and its Subsidiaries made by such accountants, including any comment letter submitted by such accountants to management in connection with their annual audit;
(ix) SEC Filings and Press Releases: promptly upon their
becoming available, copies of (a) all financial statements, reports,
notices and proxy statements sent or made available generally by
Company to its security holders or by any Subsidiary of Company to its
security holders other than Company or another Subsidiary of Company,
(b) all regular and periodic reports and all registration statements
(other than on Form S-8 or a similar form) and prospectuses, if any,
filed by Company or any of its Subsidiaries with any securities
exchange or with the Securities and Exchange Commission or any
governmental or private regulatory authority, and (c) all press
releases and other statements made available generally by Company or
any of its Subsidiaries to the public concerning material developments
in the business of Company or any of its Subsidiaries;
(x) Litigation or Other Proceedings: (a) promptly upon any officer of Company obtaining knowledge of (1) the institution of, or non-frivolous threat of, any Proceeding against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries not previously disclosed in writing by Company to Lenders or (2) any material development in any Proceeding that, in the case of both clauses (1) and (2):
I. if adversely determined, has a reasonable possibility after giving effect to the coverage and policy limits of insurance policies issued to Company and its Subsidiaries of giving rise to a Material Adverse Effect; or
II. seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, or to contest or challenge the legality, validity or enforceability of, the transactions contemplated hereby;
written notice thereof together with such other information as may be reasonably available to Company to enable Lenders and their counsel to evaluate such matters; and (b) within twenty days after the end of each Fiscal Quarter, a schedule of all Proceedings
involving an alleged liability of, or claims against or affecting, an Borrower equal to or greater than $1,000,000, and promptly after request by Administrative Agent such other information as may be reasonably requested by Administrative Agent to enable Administrative Agent and its counsel to evaluate any of such Proceedings;
(xi) ERISA Events: with reasonable promptness upon becoming
aware of the occurrence of or forthcoming occurrence of (a) any ERISA Event or
(b) any event that would constitute an ERISA Event but for the requirements (in
order for such event to constitute an ERISA Event) that a Lien or liability
imposed as a result thereof be material, that the error giving rise thereto be
in bad faith, and/or that such event would reasonably be expected to result in a
Material Adverse Effect, a written notice specifying the nature thereof, what
action Company, any of its Subsidiaries or any of their respective ERISA
Affiliates has taken, is taking or proposes to take with respect thereto and,
when known, any action taken or threatened in writing by the Internal Revenue
Service, the Department of Labor or the PBGC with respect thereto;
(xii) ERISA Notices: with reasonable promptness, copies of (a) all notices received by Company, any of its Subsidiaries or any of their respective ERISA Affiliates from a Multiemployer Plan sponsor concerning an ERISA Event; and (b) copies of such other documents or governmental reports or filings relating to any Employee Benefit Plan as Administrative Agent shall reasonably request (it being agreed that commencing on the Closing Date, on an annual basis Borrowers shall request information from each Multiemployer Plan in accordance with section 4221 of ERISA to determine the potential withdrawal liability of Company, its Subsidiaries and their respective ERISA Affiliates for a complete withdrawal from such Multiemployer Plan);
(xiii) Insurance: as soon as practicable after any material change in insurance coverage maintained by Company and its Subsidiaries notice thereof to Administrative Agent specifying the changes and reasons therefor;
(xiv) Governing Body: with reasonable promptness, written notice of any change in the Governing Body of Company;
(xv) Material Contracts: promptly, and in any event within 10 Business Days after any Material Contract of Company or any of its Subsidiaries is terminated or amended in a manner that is materially adverse to Company or such Subsidiary, as the case may be, or any new Material Contract is entered into, a written statement describing such event with copies of such material amendments or new contracts, and an explanation of any actions being taken with respect thereto;
(xvi) Budget: no later than the 15th day of December of each
year commencing with December 15, 2004, a budget for the next Fiscal
Year, in the form of the Budget for the current Fiscal Year, reflecting
(a) projected cash receipts and disbursements of Company and its
Subsidiaries for each month and each Fiscal Quarter in the next Fiscal
Year and (b) projected net cash flows of Company and its Subsidiaries
for each Fiscal Year following the next Fiscal Year and ending with
2009, in each case with respect to each line item described in the
Budget for the current Fiscal Year, which budget shall be
accompanied by an Officer's Certificate from the chief financial officer of Company certifying that the projections contained in such budget are based upon good faith estimates and assumptions believed by Company to be reasonable at the time made;
(xvii) New Restricted Accounts: promptly upon opening any Restricted Account after the Closing Date that is required to be opened by Company or any of its Subsidiaries pursuant to a Contractual Obligation binding on such Person, a written notice setting forth in reasonable detail (a) the Project or obligation to which such account relates, (b) a description of the Contractual Obligation requiring such account to be opened and (c) the provisions of this Agreement permitting such account to be opened and maintained (it being understood that such written notice shall be deemed to supplement Schedule 2.3A(i)(f) annexed hereto for all purposes of this Agreement);
(xviii) Other Information: with reasonable promptness, such other information and data with respect to Company or any of its Subsidiaries as from time to time may be reasonably requested by any Agent or Requisite Lenders (or by any Lender so long as such request is made through an Agent (and Agents shall be required to request from Borrowers any such information and data reasonably requested by a Lender)); and
(xix) Notices from Holders of Subordinated Indebtedness:
promptly, upon receipt, copies of all notices from holders of
Subordinated Indebtedness or a trustee, agent or other representative
of such a holder.
6.2 EXISTENCE, ETC.
Except as permitted under subsection 7.7, Company will, and will cause each of its Subsidiaries to, at all times preserve and keep in full force and effect its existence and all rights and franchises material to its business; provided, however that neither Company nor any of its Subsidiaries shall be required to preserve the existence of any such Subsidiary or any such right or franchise if the management or Governing Body of Company or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of Company or such Subsidiary, as the case may be, and the loss thereof could not reasonably be expected to have a Material Adverse Effect.
6.3 PAYMENT OF TAXES AND CLAIMS; TAX.
Company will, and will cause each of its Subsidiaries to, pay
all taxes, assessments and other governmental charges imposed upon it or any of
its properties or assets or in respect of any of its income, businesses or
franchises before any material penalty accrues thereon, and all claims
(including claims for labor, services, materials and supplies) for material sums
that have become due and payable and that by law have or may become a Lien upon
any of its properties or assets, prior to the time when any penalty or fine
shall be incurred with respect thereto; provided that no such tax, assessment,
charge or claim need be paid if it is being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted, so long as
(i) such reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor and (ii) in the case of a
tax, assessment, charge or claim which has or may become a Lien against any of
the Collateral, such proceedings
conclusively operate to stay the sale of any portion of the Collateral to satisfy such charge or claim.
6.4 MAINTENANCE OF PROPERTIES; INSURANCE; APPLICATION OF NET INSURANCE/ CONDEMNATION PROCEEDS.
A. MAINTENANCE OF PROPERTIES. Company will, and will cause each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition, ordinary wear and tear excepted, all material properties used or useful in the business of Company and its Subsidiaries (including all Intellectual Property) and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof, except that Company and its Subsidiaries shall not be required to perform the foregoing obligations (i) with respect to Subsidiaries or assets to which Persons other than Company and its Subsidiaries have recourse under Limited Recourse Debt owed to such Persons or (ii) to the extent that failure to perform such obligations would not reasonably be expected to have a Material Adverse Effect.
B. INSURANCE. Company will maintain or cause to be maintained, with financially sound and reputable insurers, such public liability insurance, third party property damage insurance, business interruption insurance and casualty insurance with respect to liabilities, losses or damage in respect of the assets, properties and businesses of Company and its Subsidiaries and, for not less than one year following the Closing Date, of CPIH Subsidiaries (provided that Company shall not be required to maintain such insurance with respect to CPIH Subsidiaries to the extent such insurance is not commercially available to Company) as may customarily be carried or maintained under similar circumstances by corporations of established reputation engaged in similar businesses, in each case in such amounts (giving effect to self-insurance), with such deductibles, covering such risks and otherwise on such terms and conditions as shall be customary for corporations similarly situated in the industry. Without limiting the generality of the foregoing, Company will maintain or cause to be maintained (i) flood insurance with respect to each Flood Hazard Property that is located in a community that participates in the National Flood Insurance Program, in each case in compliance with any applicable regulations of the Board of Governors of the Federal Reserve System, and (ii) replacement value casualty insurance on the Collateral under such policies of insurance, with such insurance companies, in such amounts, with such deductibles, and covering such risks as are at all times satisfactory to Administrative Agent in its commercially reasonable judgment. Unless prohibited by contractual or other legal requirement, such policy of insurance shall (a) name Collateral Agent for the benefit of Secured Parties as an additional insured thereunder as its interests may appear and (b) in the case of each business interruption and casualty insurance policy, contain a loss payable clause or endorsement, satisfactory in form and substance to Administrative Agent, that names Collateral Agent for the benefit of Secured Parties as the loss payee thereunder for any covered loss in excess of $1,000,000 and provides for at least 30 days prior written notice to Collateral Agent of any modification or cancellation of such POLICY. As soon as practicable after the Closing Date, Company shall deliver to Administrative Agent a certificate from Borrowers' insurance broker(s) or other evidence satisfactory to it that all insurance required to be maintained pursuant to this subsection 6.4 is in full force and effect and that Collateral Agent on behalf of Secured Parties has been named as additional insured and/or loss payee thereunder to the extent required under this subsection 6.4.
C. APPLICATION OF NET INSURANCE/CONDEMNATION PROCEEDS.
(i) Business Interruption Insurance. Upon receipt by Company
or any of its Subsidiaries of any business interruption insurance
proceeds constituting Net Insurance/Condemnation Proceeds, (a) so long
as no Event of Default or Potential Event of Default shall have
occurred and be continuing, Company or such Subsidiary may retain and
apply such Net Insurance/Condemnation Proceeds for working capital
purposes or any other purposes not prohibited under this Agreement, and
(b) if an Event of Default or Potential Event of Default shall have
occurred and be continuing, Company shall apply an amount equal to such
Net Insurance/Condemnation Proceeds as provided in subsection 2.3A.
(ii) Net Insurance/Condemnation Proceeds Received by Company. Upon receipt by Company or any of its Subsidiaries of any Net Insurance/Condemnation Proceeds other than from business interruption insurance, (a) so long as no Event of Default or Potential Event of Default shall have occurred and be continuing, Company shall, or shall cause one or more of its Subsidiaries to, promptly and diligently apply such Net Insurance/Condemnation Proceeds to pay or reimburse the costs of repairing, restoring or replacing the assets in respect of which such Net Insurance/Condemnation Proceeds were received or, to the extent not so applied, as provided in subsection 2.3A, and (b) if an Event of Default or Potential Event of Default shall have occurred and be continuing (unless Company is otherwise required to use funds by law or contract), Company shall apply an amount equal to such Net Insurance/Condemnation Proceeds as provided in subsection 2.3A.
(iii) Net Insurance/Condemnation Proceeds Received by
Administrative Agent or Collateral Agent. Upon receipt by
Administrative Agent or Collateral Agent, as the case may be, of any
Net Insurance/Condemnation Proceeds, (a) if and to the extent Company
would have been required to apply such Net Insurance/Condemnation
Proceeds (if it had received them directly) Administrative Agent or
Collateral Agent, as the case may be, shall, and Company hereby
authorizes Administrative Agent or Collateral Agent, as the case may
be, to, apply such Net Insurance/Condemnation Proceeds as provided in
subsection 2.3A, and (b) to the extent the foregoing clause (a) does
not apply Administrative Agent or Collateral Agent, as the case may be,
shall deliver such Net Insurance/Condemnation Proceeds to Company, and
(1) Company and its Subsidiaries may retain and apply any portion
thereof that is business interruption insurance proceeds for working
capital purposes or any other purposes not prohibited under this
Agreement and (2) Company shall, or shall cause one or more of its
Subsidiaries to, promptly apply such Net Insurance/Condemnation
Proceeds that are not business interruption insurance proceeds to the
costs of repairing, restoring, or replacing the assets in respect of
which such Net Insurance/Condemnation Proceeds were received; provided,
however that if at any time Administrative Agent reasonably determines
(A) that Company or such Subsidiary is not proceeding diligently with
such repair, restoration or replacement or that such repair,
restoration or replacement cannot be completed within 180 days after
the receipt by Administrative Agent or Collateral Agent, as the case
may be, of such Net Insurance/Condemnation Proceeds, Administrative
Agent or Collateral Agent, as the case may be, shall, and Company
hereby authorizes Administrative Agent or Collateral Agent,
as the case may be, to, apply such Net Insurance/Condemnation Proceeds as provided in subsection 2.3A.
Notwithstanding the foregoing, no Net Insurance/Condemnation Proceeds shall be required to be applied as provided in subsection 2.3A to the extent such application would constitute a material violation of (1) a valid Contractual Obligation (in effect on the Closing Date or arising under the documentation for Limited Recourse Debt permitted to be incurred under this Agreement) in favor of or for the benefit of a Person other than Company or any of its Subsidiaries or their respective Affiliates for which the required consents have not been obtained or (2) applicable law affecting Company and its Subsidiaries. Notwithstanding anything in this Agreement to the contrary, in the event of any conflict or inconsistency between subsection 6.4C and the terms of the Intercreditor Agreement, the terms of the Intercreditor Agreement shall prevail.
6.5 INSPECTION RIGHTS; LENDER MEETING.
A. INSPECTION RIGHTS. Borrowers shall, and shall cause each of their respective Subsidiaries to, permit any authorized representatives designated by any Lender, at such Lender's expense, to visit and inspect any of the properties of such Borrower or of any of its Subsidiaries, to inspect, copy and take extracts from its and their financial and accounting records, and to discuss its and their affairs, finances and accounts with its and their officers and independent public accountants (provided that Company may, if it so chooses, be present at or participate in any such discussion), all upon reasonable notice and at such reasonable times during normal business hours and as often as may reasonably be requested; provided that, at any time after the occurrence and during the continuance of an Event of Default, Borrowers shall, and shall cause each of their respective Subsidiaries to, permit such additional visits, inspections and audits as Administrative Agent or Requisite Lenders may deem necessary or advisable, at any time or from time to time, all at Borrowers' expense.
B. LENDER MEETING. Company will, upon the request of Administrative Agent or Requisite Lenders, participate in a meeting of Agents and Lenders once during each Fiscal Year to be held at Company's corporate offices (or at such other location as may be agreed to by Company and Administrative Agent) at such time as may be agreed to by Company and Administrative Agent.
6.6 COMPLIANCE WITH LAWS, ETC.
Borrowers shall comply, and shall cause each of their Subsidiaries (including CPIH Subsidiaries) to comply, with the requirements of all applicable laws, rules, regulations and orders of any Government Authority (including all Environmental Laws), noncompliance with which could reasonably be expected to cause, individually or in the aggregate, a Material Adverse Effect.
6.7 ENVIRONMENTAL MATTERS.
A. ENVIRONMENTAL DISCLOSURE. Company will deliver to Administrative Agent:
(i) Environmental Audits and Reports. As soon as practicable following receipt thereof, copies of all environmental audits, investigations, analyses and reports of any kind or character (excluding writings which are protected by attorney-client privilege or the work-product doctrine or confidential self-evaluative writings), whether prepared by personnel of Company or any of its Subsidiaries or by independent consultants, governmental authorities or any other Persons, with respect to significant environmental matters at any Facility that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect or impose liability on any Lender or Agent or with respect to any Environmental Claims that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect or impose liability on any Lender or Agent;
(ii) Notice of Certain Releases, Remedial Actions, Etc.
Promptly upon the occurrence thereof, written notice describing in
reasonable detail (a) any Release required to be reported to any
federal, state or local governmental or regulatory agency under any
applicable Environmental Laws that could reasonably be expected to have
a Material Adverse Effect or impose liability on any Lender or Agent,
(b) any remedial action taken by Company or any other Person in
response to (1) any Hazardous Materials Activities the existence of
which could reasonably be expected to result in one or more
Environmental Claims having, individually or in the aggregate, a
Material Adverse Effect or imposing liability on any Lender or Agent,
or (2) any Environmental Claims that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect or
impose liability on any Lender or Agent;
(iii) Written Communications Regarding Environmental Claims, Releases, Etc. As soon as practicable following the sending or receipt thereof by Company or any of its Subsidiaries, a copy of any and all written communications (excluding writings which are protected by attorney-client privilege or the work-product doctrine or confidential self-evaluative writings), with respect to (a) the commencement or the threat to commence a proceeding regarding any Environmental Claims that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect or impose liability on any Lender or Agent, (b) any Release required to be reported to any federal, state or local governmental or regulatory agency that could reasonably be expected to have a Material Adverse Effect or impose liability on any Lender or Agent, and (c) any request for information from any governmental agency that suggests such agency is investigating whether Company or any of its Subsidiaries may be potentially responsible for any Hazardous Materials Activity that could reasonably be expected to have a Material Adverse Effect or impose liability on any Lender or Agent;
(iv) Notice of Certain Proposed Actions Having Environmental Impact. Prompt written notice describing in reasonable detail (a) any proposed acquisition of stock, assets, or property by Company or any of its Subsidiaries that could reasonably be expected to (1) expose Company or any of its Subsidiaries to, or result in, Environmental Claims that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or impose liability on any Lender or Agent or (2) affect the ability of Company or any of its Subsidiaries to maintain in full force and effect all Governmental Authorizations required under any Environmental Laws for their
respective operations except to the extent the failure to maintain such
Governmental Authorizations could not reasonably be expected to have a
Material Adverse Effect or impose liability on any Lender or Agent and
(b) any proposed action to be taken by Company or any of its
Subsidiaries to commence manufacturing or other industrial operations
or to modify current operations in a manner that could reasonably be
expected to subject Company or any of its Subsidiaries to any
additional obligations or requirements under any Environmental Laws
that could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect or impose liability on any Lender
or Agent; and
(v) Certain Communications. With respect to documents which
would have been required to be provided to Administrative Agent
pursuant to paragraph (i) or (iii) but for the parenthetical in those
paragraphs, Company shall promptly upon receiving such documents
provide a list identifying generally the documents not disclosed and
summarizing the information contained in such documents to the extent
consistent with not waiving any privilege with respect thereto. If the
privilege prevents Company from summarizing the information contained
in such documents Company (a) shall nevertheless advise Administrative
Agent that a matter, the nature of which cannot be disclosed without
waiving the applicable privilege, exists with respect to a specified
Facility or Environmental Claim that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect and
(b) shall provide such other information to Administrative Agent,
consistent with not waving the privilege, that Administrative Agent may
reasonably request.
B. COMPANY'S ACTIONS REGARDING ENVIRONMENTAL CLAIMS AND VIOLATIONS OF ENVIRONMENTAL LAWS. Company shall promptly take, and shall cause each of its Subsidiaries promptly to take, any and all actions necessary to (i) cure any violation of applicable Environmental Laws by Company or its Subsidiaries (including, solely with respect to periods prior to the Closing Date, CPIH Subsidiaries) that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and (ii) make an appropriate response to any Environmental Claim against Company or any of its Subsidiaries (including, solely with respect to periods prior to the Closing Date, CPIH Subsidiaries) and discharge any obligations it may have to any Person thereunder where failure to do so could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect (except if Company and its Subsidiaries do not have standing to contest or respond to such Environmental Claim); provided, however, that Company may, without breaching the requirements of this subsection 6.7B, contest an alleged violation of Environmental Laws or an Environmental Claim in good faith by appropriate proceedings promptly instituted and diligently conducted so long as during such contest the failure to cure such violation or to respond to such Environmental Claim or discharge the obligations thereunder could not reasonably be expected to result in a Material Adverse Effect.
6.8 EXECUTION OF BORROWER JOINDER AGREEMENT AND PERSONAL PROPERTY COLLATERAL DOCUMENTS AFTER THE CLOSING DATE.
A. EXECUTION OF BORROWER JOINDER AGREEMENT AND PERSONAL PROPERTY COLLATERAL DOCUMENTS. In the event that any Subsidiary of Company existing on the Closing
Date ceases to be an Excluded Subsidiary, Company will promptly notify Administrative Agent of that fact and cause such Subsidiary promptly (and in any event no later than 30 days after it ceases to be an Excluded Subsidiary) to execute and deliver to Administrative Agent a Borrower Joinder Agreement and counterparts of the Security Agreement and the Intercreditor Agreement and to take all such further actions and execute all such further documents and instruments (including actions, documents and instruments comparable to those described in subsection 4.1M) as may be necessary or, in the opinion of Administrative Agent, desirable to create in favor of Collateral Agent, for the benefit of Secured Parties, a valid and perfected First Priority security interest in all of the personal and mixed property assets of such Subsidiary described in the applicable forms of Collateral Documents, subject to any Liens in existence on the date such Subsidiary ceases to be an Excluded Subsidiary to the extent permitted under subsection 7.2A, provided that at the request of Company in connection with sales of assets permitted under subsection 7.7, Administrative Agent shall, subject to the terms of the Intercreditor Agreement, direct Collateral Agent (without need for any further consent from any Lender or Lenders) to release any Liens on a Subsidiary's assets and/or release a Subsidiary from this Agreement solely to the extent required by the terms of any such sales permitted under this Agreement; provided, however, that no Capital Stock of any Subsidiary that meets the criteria set forth in subsections 5.18C(i) or 5.18C(ii) shall be required to be pledged as Collateral pursuant to this subsection.
B. SUBSIDIARY ORGANIZATIONAL DOCUMENTS, LEGAL OPINIONS, ETC. Company shall deliver to Administrative Agent, together with the relevant Credit Documents, (i) certified copies of Organizational Documents of each Subsidiary which is becoming a Borrower pursuant to subsection 6.8A (each, an "ADDITIONAL SUBSIDIARY BORROWER"), together with a good standing certificate from the Secretary of State of the jurisdiction of such Subsidiary's organization and each other state in which such Person is qualified to do business and, to the extent generally available, a certificate or other evidence of good standing as to payment of any applicable franchise or similar taxes from the appropriate taxing authority of each of such jurisdictions, each to be dated a recent date prior to their delivery to Administrative Agent, (ii) a certificate executed by the secretary or similar officer of such Subsidiary as to (a) the fact that the attached resolutions of the Governing Body of such Subsidiary approving and authorizing the execution, delivery and performance of such Credit Documents are in full force and effect and have not been modified or amended and (b) the incumbency and signatures of the officers of such Subsidiary executing such Credit Documents, and (iii) a favorable opinion of counsel to such Subsidiary, in form and substance satisfactory to Administrative Agent and its counsel, as to (a) the due organization and good standing of such Subsidiary, (b) the due authorization, execution and delivery by such Subsidiary of such Credit Documents, (c) the enforceability of such Credit Documents against such Subsidiary and (d) such other matters (including matters relating to the creation and perfection of Liens in any Collateral pursuant to such Credit Documents) as Administrative Agent may reasonably request, all of the foregoing to be satisfactory in form and substance to Administrative Agent and its counsel.
C. RELEASE OF RESTRICTIONS. Borrowers shall use their good faith, commercially reasonable efforts to obtain all necessary consents from all Persons in whose favor or for whose benefit Contractual Obligations are in effect which would be violated by (i) a pledge of the Capital Stock of any Subsidiary of a Borrower, (ii) entry into a Borrower Joinder Agreement by a Subsidiary which is not already a Borrower, or (iii) granting a Lien on
substantially all of the assets of a Subsidiary. The foregoing efforts shall be exercised so as to obtain such consents as soon as practicable but no later than 90 days after the Closing Date.
6.9 MATTERS RELATING TO ADDITIONAL REAL PROPERTY COLLATERAL.
From and after the Closing Date, in the event that any Borrower acquires any fee interest in real property or any Material Leasehold Property, such Borrower shall, as soon as practicable after such Person acquires such real property or Material Leasehold Property, execute, acknowledge, file, record, do and deliver all and any further acts, deeds, conveyances, mortgages, hypothecations, pledges, charges, assignments, financing statements and continuations thereof, notices of assignment, transfers, certificates, assurances and other instruments, opinions, appraisals, title insurance and environmental reports as Administrative Agent may reasonably request to perfect and maintain the Liens created by the Collateral Documents, including, without limitation, deliver to Collateral Agent in proper form for recording in all appropriate places in all applicable jurisdictions, encumbering the interest of such Borrower in such mortgaged property; and such opinions, appraisal, documents, title insurance, environmental reports that would have been delivered on the Closing Date if such mortgaged were a Closing Date Mortgaged Property, and to assure, convey, assign, transfer and confirm unto Collateral Agent, for the benefit of the Secured Parties, the property and rights thereby conveyed and assigned or intended to now or hereafter be conveyed or assigned or that any Borrower may be or may hereafter become bound to convey or to assign to Administrative Agent.
6.10 DEPOSIT ACCOUNTS.
Borrowers shall, and shall cause each of their Subsidiaries (other than Bankrupt Subsidiaries) to, maintain the Cash Management System as described in Schedule 4.1P, as said Schedule 4.1P may be supplemented from time to time pursuant to clause (i)(c) below, and Company and its Subsidiaries shall not open or close Deposit Accounts or make other changes to the Cash Management System without the written consent of Administrative Agent, except that (i) Company and its Subsidiaries may open and maintain funds in Deposit Accounts with Collateral Agent or other depository institutions after the Closing Date so long as (a) concurrently with the opening of any such account with a depository institution other than Collateral Agent, Borrowers shall deliver to Administrative Agent a Control Agreement with respect to such account (unless after giving effect to such opening Borrowers would not be in breach of the requirement set forth in clause (i)(b)), (b) the aggregate amount on deposit at any time in all Deposit Accounts maintained with depository institutions other than Collateral Agent for which Control Agreements have not been delivered to Administrative Agent shall not exceed $1,000,000, and (c) concurrently with the opening of any such account, Borrowers shall deliver to Administrative Agent a written notice setting forth the account number and the name of the relevant depository institution (it being understood that such written notice shall be deemed to supplement Schedule 4.1P annexed hereto for all purposes of this Agreement) and, if applicable, the Project to which such account relates and the primary purpose of such account, and (ii) after the Closing Date Company and its Subsidiaries may open and maintain funds in Restricted Accounts that are required to be opened by Company or any of its Subsidiaries pursuant to a Contractual Obligation binding on such Person so long as promptly upon opening any such account, a written notice setting forth in reasonable detail (a) the Project or obligation to which
such account relates, (b) a description of the Contractual Obligation requiring such account to be opened, and (c) the provisions of this Agreement permitting such account to be opened and maintained (it being understood that such written notice shall be deemed to supplement Schedule 2.3A(i)(f) annexed hereto for all purposes of this Agreement).
6.11 FURTHER ASSURANCES.
A. ASSURANCES. Without expense or cost to Agents or Lenders, each Borrower shall from time to time hereafter execute, acknowledge, file, record, do and deliver all and any further acts, deeds, conveyances, mortgages, deeds of trust, deeds to secure debt, security agreements, hypothecations, pledges, charges, assignments, financing statements and continuations thereof, notices of assignment, transfers, certificates, assurances and other instruments as Administrative Agent may from time to time reasonably request and that do not involve a material expansion of Borrowers' obligations or liabilities hereunder in order to carry out more effectively the purposes of this Agreement, the other Credit Documents and the Confirmation Order, including to subject any Collateral, intended to now or hereafter be covered, to the Liens created by the Collateral Documents and the Confirmation Order, to perfect and maintain such Liens, and to assure, convey, assign, transfer and confirm unto Collateral Agent the property and rights thereby conveyed and assigned or intended to now or hereafter be conveyed or assigned or that any Borrower may be or may hereafter become bound to convey or to assign to Collateral Agent or for carrying out the intention of or facilitating the performance of the terms of this Agreement, any other Credit Documents or the Confirmation Order, registering or recording this Agreement or any other Credit Document. Without limiting the generality of the foregoing, Borrowers shall deliver to Collateral Agent, promptly upon receipt thereof, all instruments received by Borrowers after the Closing Date and take all actions and execute all documents necessary or reasonably requested by Collateral Agent to perfect Collateral Agent's Liens in any such instrument or any other Investment acquired by any Borrower.
B. FILING AND RECORDING OBLIGATIONS. Each Borrower shall jointly and severally pay all filing, registration and recording fees and all expenses incident to the execution and acknowledgement of any Mortgage or other Credit Document, including any instrument of further assurance described in subsection 6.11A, and shall pay all mortgage recording taxes, transfer taxes, general intangibles taxes and governmental stamp and other taxes, duties, imposts, assessments and charges arising out of or in connection with the execution, delivery, filing, recording or registration of any Mortgage or other Credit Document, including any instrument of further assurance described in subsection 6.11A, or by reason of its interest in, or measured by amounts payable under, the Notes, the Mortgages or any other Credit Document, including any instrument of further assurance described in subsection 6.11A, (excluding income, franchise and doing business Taxes), and shall pay all stamp Taxes and other Taxes required to be paid on any Credit Document; provided, however, that such Borrower may contest in good faith and through appropriate proceedings, any such Taxes, duties, imposts, assessments and charges; provided further, however, that such Borrower shall pay all such Taxes, duties, imposts and charges when due to the appropriate taxing authority during the pendency of any such proceedings if required to do so to stay enforcement thereof. If any Borrower fails to make any of the payments described in the preceding sentence within 10 days after notice thereof from Administrative Agent (or such shorter period as is necessary to protect the loss of or diminution in value of any Collateral by reason of tax foreclosure or otherwise, as determined by Administrative Agent)
accompanied by documentation verifying the nature and amount of such payments, Administrative Agent may (but shall not be obligated to) pay the amount due and Borrowers shall jointly and severally reimburse all amounts in accordance with the terms hereof.
C. COSTS OF DEFENDING AND UPHOLDING THE LIEN. Administrative Agent may, upon at least five days' prior notice to Borrowers, (i) appear in and defend any action or proceeding, in the name and on behalf of any Agent, Lenders or any Borrower, in which any Agent or any Lender is named or which Administrative Agent in its sole discretion determines is reasonably likely to materially adversely affect any Mortgaged Property, any other Collateral, any Mortgage, the Lien thereof or any other Credit Document and (ii) institute any action or proceeding which Administrative Agent reasonably determines should be instituted to protect the interest or rights of Agents and Lenders in any Mortgaged Property or other Collateral or under this Agreement or any other Credit Document. Borrowers, jointly and severally, agree that all reasonable costs and expenses expended or otherwise incurred pursuant to this subsection (including reasonable attorneys' fees and disbursements) by Administrative Agent shall be paid pursuant to subsection 10.2 hereof.
6.12 HIGH YIELD NOTES.
Company shall obtain no later than three months after the Closing Date, ratings of the High Yield Notes from S&P and/or Moody's; provided, however, that if such ratings shall not have been obtained by such date solely due to inaction or a refusal to act by any such rating agency that is, in either case, beyond the control of Borrowers (as determined in the reasonable judgment of Administrative Agent), Borrowers shall not be in breach of this subsection 6.12 so long as Borrowers shall take all steps Agents reasonably request from time to time to obtain such ratings.
6.13 MOST FAVORED NATIONS PAYMENTS.
Company shall, and shall cause each of its Subsidiaries to, extend any fees or pricing increases, to the extent such fees or pricing increases are the direct obligation of Company or its Subsidiaries, resulting from the amendment, waiver or modification, after the Closing Date, of the New L/C Facility Documents, on an equivalent basis (based in the case of fees on the respective amounts of Letter of Credit Exposure outstanding (on one hand) and the credit exposure under the New L/C Facility Documents (on the other hand)) to the Lenders regardless of whether a particular Lender has participated in or consented to a corresponding amendment, waiver or modification (if any) of the Credit Documents, and any such payment of equivalent fees shall be paid in cash concurrently with the fees giving rise to such equivalent fees.
SECTION 7. BORROWERS' NEGATIVE COVENANTS
Borrowers covenant and agree that, so long as any of the Letter of Credit Commitments hereunder shall remain in effect and until payment in full of all Obligations and the cancellation or expiration of all Letters of Credit, unless Requisite Lenders shall otherwise give prior written consent, Borrowers shall perform, and shall cause each of their Subsidiaries to perform, all covenants in this Section 7.
7.1 INDEBTEDNESS.
Borrowers shall not, and shall not permit their respective Subsidiaries to, directly or indirectly, create, incur or assume, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except:
(i) Borrowers may become and remain liable with respect to the Obligations and Indebtedness under the New L/C Facility Documents, the High Yield Notes, the Tax Note and the Unsecured Creditor Notes, and Subsidiaries of Borrowers may become and remain liable with respect to Indebtedness under the Tax Note;
(ii) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations and Performance Guaranties permitted by subsection 7.4 and, upon any matured obligations actually arising pursuant thereto, any Indebtedness created as a result thereof;
(iii) Borrowers may become and remain liable with respect to Indebtedness to any other Borrowers; provided that all such intercompany Indebtedness shall be evidenced by the Intercompany Master Note;
(iv) Subsidiaries of Company other than Borrowers may, after the Closing Date, become and remain liable with respect to Indebtedness to Company or any Subsidiary of Company so long as the proceeds of such Indebtedness are applied to working capital, capital expenditure, maintenance, operation, payroll and other liquidity requirements in the ordinary course of business of the Subsidiaries incurring such Indebtedness; provided, that (a) no such Indebtedness may be incurred at any time that Borrowers shall not be in compliance with subsection 7.6E, (b) no such Indebtedness may be incurred to make capital expenditures if after giving effect to such expenditures Borrowers would not be in pro forma compliance with subsection 7.6F, and (c) all such intercompany Indebtedness shall be evidenced by the Intercompany Master Note;
(v) Subsidiaries of Company may, after the Closing Date, become and remain liable with respect to Indebtedness to Company or any Subsidiary of Company the proceeds of which are applied to Development Expenses; provided that Development Expenses for all Projects of Company's Subsidiaries at any time after the Closing Date, net of any such Development Expenses that have theretofore been reimbursed after the Closing Date by the client of the relevant Project, shall not exceed on any date of determination an amount equal to (a) $3,000,000 plus (b) the product of $3,000,000 multiplied by the number of Fiscal Years that have commenced following January 31, 2004 but prior to such date of determination; and provided further, that all such intercompany Indebtedness shall be evidenced by the Intercompany Master Note;
(vi) Company and its Subsidiaries, as applicable, may remain liable with respect to Indebtedness outstanding on the Closing Date and described in Schedule 7.1(vi) annexed hereto;
(vii) Subsidiaries of Company may become and remain liable with respect to Indebtedness to Company or any of its Subsidiaries the proceeds of which are applied to
make Expansions permitted under subsection 7.3(vi) or 7.3(vii); provided that all such intercompany Indebtedness shall be evidenced by the Intercompany Master Note;
(viii) Subsidiaries of Company may become and remain liable with respect to Indebtedness consisting of a converted equity Investment by Company or another Subsidiary of Company in such Subsidiaries, provided that the underlying equity Investment was permitted under this Agreement at the time of such conversion;
(ix) Company and its Subsidiaries may become and remain liable with respect to Indebtedness under (a) Capital Leases in existence as of the Closing Date and described in Schedule 7.1(ix) and (b) Capital Leases entered into after the Closing Date, so long as the aggregate amount of Indebtedness outstanding at any time with respect to Capital Leases under clause (b) of this subsection 7.1(ix) shall not exceed $5,000,000;
(x) Company or any Subsidiary of Company may become and remain liable with respect to Indebtedness incurred to refinance, replace, renew or extend, in whole or in part, Indebtedness of such Person permitted to remain outstanding under subsection 7.1(vi); provided, that in each case (a) the terms (excluding the interest rate and fees payable with respect thereto, so long as such interest and fees on such Indebtedness are not borne directly or indirectly by Company or any of its Subsidiaries, whether through an offset to or deduction against service or operating agreement fees to Company or its Subsidiaries or otherwise) of such Indebtedness as refinanced, replaced, renewed or extended, taken as a whole (considering the economic benefits and disadvantages to Company and its Subsidiaries from such refinancing, replacement, renewal, or extension, as well as the economic benefits and disadvantages to Company and its Subsidiaries of the Project to which such Indebtedness relates), shall not be more disadvantageous in any material respect to Company and its Subsidiaries and the Lenders than the Indebtedness so refinanced, replaced, renewed or extended, (b) the principal amount of the Indebtedness as refinanced, replaced, renewed or extended shall not exceed 110% of the principal amount of the Indebtedness so refinanced, replaced, renewed or extended (provided that such limitation shall not apply with respect to Indebtedness that an existing client (if such client is a Government Authority) of a Project undertakes to service through the principal lease, service or operating agreement of the applicable Project), (c) no obligee or beneficiary of such Indebtedness after such refinancing, replacement, renewal or extension shall have greater recourse to Persons for the payment or collection of such Indebtedness than the obligee or beneficiary of the Indebtedness so refinanced, replaced, renewed or extended had immediately prior to such transaction, and (d) Company shall provide to Agents reasonable prior advance written notice of such proposed refinancing, replacement, renewal or extension and copies of all material contracts or other agreements being entered into in connection therewith;
(xi) Subsidiaries of Company that are obligated with respect to Limited Recourse Debt on the Closing Date relating to waste-to-energy Projects may, after the Closing Date, become and remain liable with respect to Limited Recourse Debt relating to such waste-to-energy Projects, so long as (a) all or substantially all the proceeds of such Limited Recourse Debt are applied to Expansions of such waste-to-energy Projects permitted under subsection 7.3(vii) or to ensure compliance with applicable laws and
regulatory requirements and (b) the incurrence by such Subsidiary of such Limited Recourse Debt is required by the existing client (if such client is a Government Authority) of the relevant Project and Company shall have delivered to Agents an Officer's Certificate to the foregoing effect; provided, that after the occurrence and during the continuation of an Event of Default, neither Company nor any of its Subsidiaries shall enter into a contractual commitment to incur any such Limited Recourse Debt;
(xii) Company may become and remain liable with respect to Indebtedness consisting solely of its obligations under Insurance Premium Financing Arrangements, which obligations shall not exceed at any time $30,000,000 in the aggregate;
(xiii) Borrowers may become and remain liable with respect to Indebtedness incurred to refinance, replace, defease, renew or extend, in whole or in part, the High Yield Notes issued on the Closing Date; provided, that (a) the fees, interest rates and pricing terms of such Indebtedness as refinanced, replaced, defeased, renewed or extended, taken as a whole (considering any extension of the term of such Indebtedness), shall not be more disadvantageous to Company and its Subsidiaries and the Lenders (in a manner deemed material by Agents) than the High Yield Notes so refinanced, replaced, defeased, renewed or extended, (b) no scheduled installment of principal shall be required on earlier dates than the maturity date of the High Yield Notes so refinanced, replaced, defeased, renewed or extended, (c) the other terms (including the redemption and repayment terms, representations and warranties, covenants and events of default) of such Indebtedness as refinanced, replaced, defeased, renewed or extended, taken as a whole, shall not be more disadvantageous to Company and its Subsidiaries and the Lenders (in a manner deemed material by Agents) than the High Yield Notes so refinanced, replaced, defeased, renewed or extended, (d) the principal amount of the Indebtedness as refinanced, replaced, defeased, renewed or extended shall not exceed the sum of (1) 110% of the principal amount of the Indebtedness so refinanced, replaced, defeased, renewed or extended, (2) interest accrued and unpaid on such principal amount immediately prior to such refinancing, replacement, defeasance, renewal or extension, and (3) premiums required to be paid upon such refinancing, replacement, defeasance, renewal or extension pursuant to the documentation for the High Yield Notes so refinanced, replaced, defeased, renewed or extended, (e) the obligations under (and the Liens securing) such Indebtedness as refinanced, replaced, defeased, renewed or extended shall be subject to the Intercreditor Agreement on terms substantively identical to the terms applicable to the High Yield Notes refinanced, replaced, defeased, renewed or extended thereby, and (f) Company shall provide to Agents reasonable prior advance written notice of such proposed refinancing, replacement, defeasance, renewal or extension and copies of all material contracts or other agreements being entered into in connection therewith;
(xiv) Company may become and remain liable with respect to Subordinated Indebtedness to Persons other than Company and its Subsidiaries in an aggregate amount at any time outstanding not to exceed $10,000,000; provided, that (a) such Indebtedness shall be unsecured and unguarantied, (b) no cash interest or cash principal payments shall be required on such Indebtedness until the Obligations are paid in full, (c) the interest
rates maturities, amortization schedules, covenants, defaults, remedies, subordination provisions and other terms of such Indebtedness are satisfactory to Agents and Requisite Lenders, (d) the proceeds of such Indebtedness shall not be applied to any purpose prohibited under this Agreement, and (e) after giving effect to the incurrence of such Indebtedness, Borrowers shall be in pro forma compliance with subsection 7.6B;
(xv) Bankrupt Subsidiaries may become and remain liable under intercompany loans by Company and its Subsidiaries (other than Bankrupt Subsidiaries) to such Bankrupt Subsidiaries to the extent such loans are permitted under subsection 7.3(xi);
(xvi) CEA may become and remain liable with respect to Indebtedness arising solely due to its pledge of the Capital Stock of CPIH under the CPIH Stock Pledge Agreement;
(xvii) Company and its Subsidiaries may become and remain liable with respect to their obligations to pay for services rendered by DHC to them under and in accordance with the Corporate Services Reimbursement Agreement; and
(xviii) Company and its Subsidiaries may become and remain liable with respect to other unsecured Indebtedness in an aggregate amount at any time outstanding not to exceed $7,500,000.
7.2 LIENS AND RELATED MATTERS.
A. PROHIBITION ON LIENS. Borrowers shall not, and shall not permit their respective Subsidiaries to, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset of any kind (including any document or instrument in respect of goods or accounts receivable) of Borrowers or any of their respective Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom, or file or authorize the filing of, or permit to remain in effect, any effective financing statement or other similar notice of any Lien with respect to any such property, asset, income or profits under the UCC or under any similar recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens granted pursuant to the Collateral Documents to secure the Obligations, the obligations of Borrowers under the New L/C Facility Documents, the obligations under the High Yield Notes and the obligations to the cash management bank with respect to the Cash Management System;
(iii) Liens existing on the Closing Date and described in Schedule 7.2 annexed hereto;
(iv) Liens on assets of any Subsidiary of Company and/or on the stock or other equity interests of such Subsidiary, in each case to the extent such Liens secure Limited Recourse Debt of such Subsidiary permitted by subsection 7.1(xi);
(v) Liens on assets of Company or any Subsidiary of Company securing refinancing Indebtedness permitted by subsection 7.1(x), provided that in each case the Liens securing such refinancing Indebtedness shall attach only to the assets that were subject to Liens securing the Indebtedness so refinanced and, if applicable, assets the acquisition of which was financed with the proceeds of such refinancing Indebtedness permitted by subsection 7.1(x);
(vi) Liens securing debt service reserve funds, completion obligations and similar accounts and obligations (other than Indebtedness) of Subsidiaries of Company to Persons other than Company and its Subsidiaries and their respective Affiliates, so long as (a) each such obligation is associated with a Project, (b) such Lien is limited to (1) assets associated with such Project (which in any event shall not include assets held by any Borrower other than a Borrower whose sole business is the ownership and/or operation of such Project and substantially all of whose assets are associated with such Project) and/or (2) the equity interests in such Subsidiary, but in the case of clause (2) only if such Subsidiary's sole business is the ownership and/or operation of such Project and substantially all of such Subsidiary's assets are associated with such Project, and (c) such obligation is otherwise permitted under this Agreement;
(vii) Liens on cash collateral of Subsidiaries of Company securing Contingent Obligations permitted under subsection 7.4(ix), so long as such cash is provided from funds that would not otherwise be available (due to prohibitions in the underlying agreements relating to Projects) for making dividends and distributions to Company and its other Subsidiaries;
(viii) Liens on cash collateral of Subsidiaries of Company securing Contingent Obligations permitted under subsection 7.4(x), so long as such cash is provided from funds that would not otherwise be available (due to prohibitions in the underlying agreements relating to Projects) for making dividends and distributions to Company and its other Subsidiaries;
(ix) Liens on cash collateral of Company and its Subsidiaries securing Contingent Obligations permitted under subsection 7.4(xi);
(x) Liens created pursuant to Insurance Premium Financing Arrangements otherwise permitted under this Agreement, so long as such Liens attach only to gross unearned premiums for the insurance policies;
(xi) Liens on cash collateral of Company securing insurance deductibles or self-insurance retentions required by third party insurers in connection with insurance arrangements entered into by Company and its Subsidiaries with such insurers in compliance with subsection 6.4B;
(xii) Liens on all or substantially all of the assets of the Bankrupt Subsidiaries to the extent such Liens secure the obligations of such Bankrupt Subsidiaries under loans made to them and permitted under subsection 7.3(xi);
(xiii) Liens securing Indebtedness permitted under subsection 7.1(ix)(b), so long as such Liens extend only to the assets subject to the relevant Capital Lease;
(xiv) Liens on the Capital Stock of CPIH pledged by CEA under the CPIH Stock Pledge Agreement; and
(xv) Other Liens on assets of any Subsidiary of Company securing Indebtedness in an aggregate amount not exceeding $2,500,000.
B. EQUITABLE LIEN IN FAVOR OF LENDERS. If any Borrowers or any of its Subsidiaries shall create or assume any Lien upon any of its properties or assets, whether now owned or hereafter acquired, other than Liens excepted by the provisions of subsection 7.2A and Liens created or assumed on properties or assets on which First Priority Liens created under the Collateral Documents are attached and perfected at the time of such creation or assumption, the Borrowers hereby agree that (i) they will be deemed to have automatically and without further action secured the Obligations with such Lien equally and ratably with any and all other Indebtedness, Contingent Obligations or any other obligations or debt (as defined in the Bankruptcy Code) secured thereby, and (ii) they shall take or cause to be taken such actions as Agents or Requisite Lenders deem necessary or advisable to evidence such equal and ratable Lien; provided that, notwithstanding the foregoing, this covenant shall not be construed as a consent by Requisite Lenders to the creation or assumption of any such Lien not permitted by the provisions of subsection 7.2A, and the creation or assumption of any such Lien not permitted by the provisions of subsection 7.2A shall constitute an Event of Default.
C. NO FURTHER NEGATIVE PLEDGES. Neither Company nor any of its Subsidiaries shall enter into any agreement (other than this Agreement, the Credit Documents, the New L/C Facility Documents and the High Yield Indenture) on or after the Closing Date prohibiting the creation or assumption of any Lien upon any of its properties or assets, whether now owned or hereafter acquired, except with respect to (i) specific property encumbered by a Lien permitted hereunder to secure payment of particular Indebtedness permitted to be incurred under subsection 7.1(vii), 7.1(x) (but only to the extent that the Indebtedness being refinanced was subject to a negative pledge on the same assets), 7.1(xi), or 7.1(xii), or by a Lien permitted under subsection 7.2A(vi), 7.2A(vii), 7.2A(viii), 7.2A(ix), 7.2A(xi), 7.2A(xii) or 7.2A(xiv), or by a Lien permitted under subsection 7.2A(xv) to the extent such Lien secures obligations permitted hereunder that are incurred to finance the acquisition of such specific property, (ii) specific property to be sold pursuant to an executed agreement with respect to an Asset Sale which is permitted hereunder, (iii) specific property that is leased pursuant to a lease permitted hereunder, (iv) provisions in the principal lease, service and operating agreements pertaining to Projects or the partnership and financing agreements relating to Projects, so long as in each case such lease, service, operating, partnership or financing agreement is an extension, renewal or replacement of such agreement in effect as of the Closing Date, is otherwise permitted to be entered into hereunder and contains no more restrictive provisions relating to prohibiting the creation or assumption of any Lien upon the properties or assets of the relevant Subsidiary than the lease, service, operating, partnership or financing agreement so extended, renewed or replaced, and (v) provisions contained in any New L/C Facility Agreement described in and permitted under clause (ii) of the definition of New L/C Facility Agreement.
D. NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO COMPANY OR
OTHER SUBSIDIARIES. Company will not, and will not permit any of its
Subsidiaries to, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any such Subsidiary to (i) pay dividends or make any other distributions on
any of such Subsidiary's capital stock owned by Company or any other Subsidiary
of Company, (ii) repay or prepay any Indebtedness owed by such Subsidiary to
Company or any other Subsidiary of Company, (iii) make loans or advances to
Company or any other Subsidiary of Company, or (iv) transfer any of its property
or assets to Company or any other Subsidiary of Company, except (a) as provided
in this Agreement or the other Credit Documents, (b) those encumbrances or
restrictions applicable to Subsidiaries of Company to the extent created under
documentation in existence on the Closing Date, under the New L/C Facility
Documents or under the High Yield Indenture, (c) as may be provided in an
executed agreement with respect to an Asset Sale which is permitted hereunder,
and (d) provisions in the principal lease, service or operating agreements,
partnership agreements and financing agreements pertaining to Projects, so long
as such lease, service or operating agreements, partnership agreements and
financing agreements are extensions, renewals or replacements of such agreements
in effect as of the Closing Date, are otherwise permitted to be entered into
hereunder and in each case contain no more restrictive provisions relating to
the ability of the relevant Subsidiary to take the actions described in clauses
(i) through (iv) than the agreement so extended, renewed or replaced.
7.3 INVESTMENTS; ACQUISITIONS.
Borrowers shall not, and shall not permit their respective Subsidiaries to, directly or indirectly, make or own any Investment in any Person, including any Joint Venture, or acquire, by purchase or otherwise, all or substantially all the business, property or fixed assets of, or capital stock or other ownership interest of any Person, or any division or line of business of any Person except:
(i) Company and its Subsidiaries may make and own Investments in Domestic Cash Equivalents and in such investments as are permitted or imposed under the terms of any cash collateral or debt service reserve agreement (including pursuant to the terms of any Project bond indenture) permitted hereunder;
(ii) Borrowers may make and own additional equity Investments in other Borrowers, so long as no such Investment shall be made by one Borrower in another Borrower if (a) the latter is subject to restrictions of the type described in subsection 7.2D more adverse than restrictions of such type that are applicable to the Borrower making such Investment, or (b) such Investment shall result in the obligee or beneficiary of any Indebtedness or Contingent Obligation (other than the Obligations) having greater recourse to assets for the payment or collection of such Indebtedness or Contingent Obligation than such obligee or beneficiary had immediately prior to such Investment; and Subsidiaries that are not Borrowers may make and own additional equity Investments in Borrowers other than Company, so long as no such Investment shall be made if (a) the applicable Subsidiary is subject to restrictions of the type described in subsection 7.2D more adverse than restrictions of such type that are applicable to the applicable Borrower, (b) such Investment shall result in the obligee or beneficiary of any Indebtedness or
Contingent Obligation (other than the Obligations) of such Subsidiary having greater recourse to assets for the payment or collection of such Indebtedness or Contingent Obligation than such obligee or beneficiary had immediately prior to such Investment, or (c) such Investment shall have any adverse effect on the Collateral for the Obligations;
(iii) Company and its Subsidiaries may make intercompany loans to the extent permitted under subsections 7.1(iii) and 7.1(vii);
(iv) Company and its Subsidiaries may make Consolidated Facilities Capital Expenditures permitted by subsection 7.6;
(v) Company and its Subsidiaries may continue to own the Investments owned by them on the Closing Date and described in Schedule 7.3(v) annexed hereto;
(vi) Company and its Subsidiaries may make Expansions which Company and its Subsidiaries are committed as of the Closing Date to make in those waste-to-energy Projects set forth in Schedule 7.3(vi) annexed hereto; provided that each such Investment (or commitment to make the same) made in connection with such Projects shall be of a type described on such Schedule and shall be in an amount not exceeding the amount set forth on such Schedule;
(vii) Company and its Subsidiaries may make Expansions (and may enter into contractual commitments to make such Investments) with respect to existing waste-to-energy Projects to the extent such Expansions are publicly financed, so long as (a) Company shall provide to Agents reasonable prior advance written notice of each such Investment and Expansion and copies of all material contracts or other agreements being entered into in connection with such Investment and Expansion, (b) such Expansion is not otherwise prohibited under this Agreement, (c) such Expansions are required by the existing client (if such client is a Government Authority) of the relevant Project and the amounts required therefor are advanced to Company and its Subsidiaries or paid directly by such client, and (d) such Investment (or such contractual commitment, as the case may be) shall not breach any other provision of this Agreement; provided, that after the occurrence and during the continuation of an Event of Default, neither Company nor any of its Subsidiaries shall enter into a contractual commitment for any such Investment;
(viii) Company and its Subsidiaries may, after the Closing Date, make and own Investments in any other Subsidiary of Company (to the extent in existence on the Closing Date) the proceeds of which are applied to working capital, maintenance, operation, payroll and other liquidity requirements in the ordinary course of business of Subsidiaries other than Borrowers; provided, that no such Investment may be made at any time that Borrowers shall not be in compliance with subsection 7.6E;
(ix) Company and its Subsidiaries may, after the Closing Date, make and own Investments in any other Subsidiary of Company (to the extent in existence on the Closing Date) the proceeds of which are applied to Development Expenses; provided that Development Expenses for all Projects of Company's Subsidiaries at any time after the Closing Date, net of any such Development Expenses that have theretofore been reimbursed after the
Closing Date by the client of the relevant Project, shall not exceed on any date of determination an amount equal to (a) $3,000,000 plus (b) the product of $3,000,000 multiplied by the number of Fiscal Years that have commenced following January 31, 2004 but prior to such date of determination;
(x) Borrowers and their Subsidiaries may own Investments in the form of non-cash consideration received in connection with (a) Asset Sales permitted under subsection 7.7(iii) or 7.7(iv) or (b) settlements of disputes, to the extent such settlements occur in the ordinary course of business;
(xi) Company and its Subsidiaries may make Investments after the Closing Date consisting of intercompany loans to the Bankrupt Subsidiaries, so long as (a) the proceeds of such loans are applied to working capital, maintenance, operation, payroll and other liquidity requirements in the ordinary course of business of such Bankrupt Subsidiaries, (b) the aggregate amount of such intercompany loans outstanding to the Bankrupt Subsidiaries at any time shall not exceed $2,000,000, (c) such loans shall have, pursuant to an order of the Bankruptcy Court in form and substance satisfactory to Agents, no less favorable payment priority and lien priority than the payment priority and lien priority of such Bankrupt Subsidiaries' obligations under the DIP Credit Agreement immediately prior to the Closing Date, and shall be secured by substantially the same assets of such Bankrupt Subsidiary as such obligations under the DIP Credit Agreement immediately prior to the Closing Date, and (d) such loans shall be evidenced by promissory notes that shall be pledged to secure the Obligations;
(xii) Borrowers may make payments to the extent contractually obligated pursuant to the terms of the Existing IPP International Project Guaranties;
(xiii) Subject to the Intercreditor Agreement, Borrowers may reimburse drawings made under letters of credit issued under the New L/C Facility Agreement that support obligations with respect to the IPP International Business; and
(xiv) CEA may make payments on account of Indebtedness of CPIH to the extent such payments are made solely from the proceeds of sales of Capital Stock of CPIH.
7.4 CONTINGENT OBLIGATIONS; PERFORMANCE GUARANTIES.
Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create or become or remain liable with respect to any Contingent Obligation or Performance Guaranty, and shall not create or become or remain liable with respect to any obligation to incur a subsequent Contingent Obligation or to post cash collateral to secure any obligation, except:
(i) Borrowers may become and remain liable (a) with respect to Contingent Obligations in respect of the Obligations and under the Credit Documents, (b) with respect to Contingent Obligations under guarantees of the High Yield Notes, and (c) with
respect to Contingent Obligations under the New L/C Facility Documents and the CPIH Stock Pledge Agreement;
(ii) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations in respect of Letters of Credit;
(iii) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations in respect of customary and appropriate indemnification and purchase price adjustment obligations incurred in connection with Asset Sales or other sales of assets to the extent such Asset Sales and sales are permitted under this Agreement;
(iv) Company and its Subsidiaries may become and remain liable with respect to (a) Performance Guaranties in existence on the Closing Date and described on Schedule 7.4(iv) annexed hereto, (b) Performance Guaranties replacing, renewing or extending Performance Guaranties described in clause (a), and (c) Performance Guaranties entered into in connection with a Bankrupt Subsidiary ceasing to be a Bankrupt Subsidiary, for the purpose of replacing a Performance Guaranty relating to such Bankrupt Subsidiary that was in effect immediately prior to the Closing Date but was terminated on the Closing Date, so long as no Persons enter into any such replacement Performance Guaranty as obligors other than the obligors under the Performance Guaranty being so replaced; provided that no such replacement, renewed or extended Performance Guaranty referred to in clause (b) or (c) (x) taken as a whole (considering the economic benefits and disadvantages to Company and its Subsidiaries from such replacement, renewal or extension, as well as the economic benefits and disadvantages to Company and its Subsidiaries of the Project to which such Performance Guaranty relates), shall be more disadvantageous in any material respect to Company and its Subsidiaries than the Performance Guaranty so replaced, renewed or extended or (y) shall be secured or guarantied;
(v) Company and its Subsidiaries may become and remain liable with respect to Performance Guaranties or Contingent Obligations supporting Expansions of waste-to-energy Projects permitted pursuant to subsection 7.3(vii), provided that (a) the terms of any such Performance Guaranty or Contingent Obligation shall be generally consistent with past practice of Company and its Subsidiaries, (b) in no event shall any such Performance Guaranty or Contingent Obligation be secured by collateral, (c) no Borrower or Subsidiary other than a Person already liable under a substantially similar Contingent Obligation with respect to such Project shall become liable under any such Contingent Obligation, (d) no Borrower or Subsidiary other than a Person already liable under a substantially similar Performance Guaranty with respect to such Project shall become liable under any such Performance Guaranty, and (e) after the occurrence and during the continuation of an Event of Default, neither Company nor any if its Subsidiaries shall enter into any such Performance Guaranty or Contingent Obligation or enter into a contractual commitment to provide any such Performance Guaranty or Contingent Obligation;
(vi) Company and its Subsidiaries, as applicable, may become
and remain liable with respect to (a) Contingent Obligations (other
than the Existing IPP International Project Guaranties) in existence on
the Closing Date and described in Schedule 7.4(vi) annexed hereto, and
(b) Contingent Obligations replacing, renewing or extending Contingent
Obligations described in clause (a); provided that no such replacement,
renewed or extended Contingent Obligation, taken as a whole, shall be
more disadvantageous in any material respect to Company and its
Subsidiaries than the Contingent Obligations so replaced, renewed or
extended;
(vii) Company and its Subsidiaries may become and remain liable with respect to usual and customary Contingent Obligations incurred in connection with arrangements made with third parties to obtain surety bonds, bid bonds and other similar security required to be delivered or posted in connection with (i) additions or improvements to existing facilities to increase the capacity, efficiency, performance or profitability of the applicable Project, so long as such additions or improvements are not Expansions, are required pursuant to binding Contractual Obligations of Company or its Subsidiaries and are in compliance with subsection 7.6F, and (ii) Expansions of existing Projects, to the extent such Expansions are otherwise permitted under subsection 7.3(vii) and the other provisions of this Agreement;
(viii) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations which Company and its Subsidiaries are contractually committed as of the Closing Date to incur with respect to those Projects set forth on Schedule 7.3(vi) annexed hereto; provided that each such Contingent Obligation (or commitment to incur the same) incurred in connection with such Projects shall be of a type described on such Schedule and shall be in an amount not exceeding the amount set forth on such Schedule;
(ix) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations consisting of long-term or forward purchase contracts and option contracts to buy, sell or exchange commodities and similar agreements or arrangements, so long as such contracts, agreements or arrangements do not constitute Commodities Agreements;
(x) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations constituting Hedge Agreements;
(xi) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations incurred in exchange (or in consideration) for (a) the release of cash collateral pledged by Company or its Subsidiaries or (b) the return and cancellation of undrawn letters of credit for which Company or its Subsidiaries are liable for reimbursement; provided that in each case the maximum amount of the Contingent Obligations so incurred shall not exceed 110% of the amount of cash collateral released or the face amount of the letters of credit returned and cancelled, as the case may be;
(xii) Company and its Subsidiaries may become and remain liable with respect to usual and customary Contingent Obligations incurred in connection with insurance
deductibles or self-insurance retentions required by third party insurers in connection with insurance arrangements entered into by Company and its Subsidiaries with such insurers in compliance with subsection 6.4B; and
(xiii) Company and its Subsidiaries, as applicable, may remain liable with respect to the Existing IPP International Project Guaranties, as such guaranties are in effect on the Closing Date.
7.5 RESTRICTED PAYMENTS.
Borrowers shall not, and shall not permit their respective
Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart
any sum for any Restricted Payment; provided, however, that (i) so long as no
Event of Default shall have occurred and be continuing, Borrowers may make
regularly scheduled payments of principal and interest in respect of any
Subordinated Indebtedness (other than the Tax Note) in accordance with the terms
of, and only to the extent required by, and subject to the subordination
provisions contained in, the indenture or other agreement pursuant to which such
Subordinated Indebtedness was issued, as such indenture or other agreement may
be amended from time to time to the extent permitted under subsection 7.12,
provided that so long as Borrowers may elect to pay all or any portion of such
interest in kind rather than in cash, Borrowers shall elect to pay in kind the
maximum portion of such interest with respect to which Borrowers can make such
election; (ii) Company and its Subsidiaries may make payments of principal,
interest and other amounts in respect of the Tax Note and Indebtedness permitted
under subsections 7.1(vi), 7.1(ix), 7.1(x), 7.1(xi), 7.1(xii), 7.1(xiv), 7.1(xv)
and 7.1(xviii), in accordance with the terms of, and only to the extent required
by, the Tax Note or the indentures or other agreements pursuant to which such
Indebtedness was issued, as the case may be, as such Tax Note, indentures or
other agreements may be amended from time to time to the extent permitted
hereunder, provided, however, that during the continuance of an Event of
Default, notwithstanding anything to the contrary in this Agreement, neither
Company nor any Subsidiary shall fund, contribute or otherwise advance amounts
for payment of Indebtedness permitted under subsections 7.1(vi), 7.1(x) and
7.1(xi) related to Projects unless it has an irrevocable Contractual Obligation
to make such payments; (iii) so long as no Event of Default shall have occurred
and be continuing, Subsidiaries of Company may, at the time Indebtedness is
refinanced or replaced as permitted under subsection 7.1 by other Indebtedness
permitted under such subsection, pay principal, accrued interest and other
amounts owing on such refinanced Indebtedness at such time, provided that such
payments may be made with respect to Limited Recourse Debt during the
continuance of an Event of Default so long as such payments are from the
proceeds of Limited Recourse Debt permitted to be incurred hereunder and such
proceeds are required to be applied to make such payments under a binding
Contractual Obligation to a third party; (iv) Company and its Subsidiaries may
pay any fees required to be paid to the Agents and Lenders hereunder; (v) so
long as no failure to pay any amount when due shall have occurred and be
continuing under this Agreement, Company may make payments to DHC to the extent
required under the Corporate Services Reimbursement Agreement; (vi) Company and
its Subsidiaries may make payments required under the DHC Tax Sharing Agreement;
(vii) Company and its Subsidiaries may make payments to Persons in accordance
with the Approved Plan of Reorganization to the extent such payments are made
from funds held in reserves established pursuant to the Approved Plan of
Reorganization, provided, that Borrowers shall not, and shall not permit their
respective Subsidiaries to, deposit
any amounts in such reserves in excess of the amounts established prior to the Closing Date pursuant to the Approved Plan of Reorganization; and (viii) Company and its Subsidiaries may apply cash in an amount not exceeding, in the aggregate, 105% of the stated amount of the Greenway L/C to cash collateralize or otherwise support the Greenway L/C as contemplated under subsection 4.1F(i)(d) and/or to reimburse drawings thereunder.
In addition, in any case where a Borrower or Subsidiary is a Joint Venture, Borrowers shall not, and shall not permit their respective Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum for (a) any dividend or other distribution, direct or indirect, on account of any shares of Capital Stock of such Joint Venture held by Persons other than Borrowers or any Subsidiaries of Borrowers, except a dividend payable solely in shares of that class of stock to the holders of that class, (b) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of Capital Stock of such Joint Venture held by Persons other than Borrowers or any Subsidiaries of Borrowers, or (c) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of Capital Stock of such Joint Venture held by Persons other than Borrowers or any Subsidiaries of Borrowers, except in each case to the extent the relevant action described in clause (a), (b) or (c) is required pursuant to a binding Contractual Obligation in effect as of the Closing Date or pursuant to an extension, renewal or replacement of such a Contractual Obligation so long as such extension, renewal or replacement is otherwise permitted to be entered into hereunder and contains provisions no less favorable to Company and its Subsidiaries than the relevant Contractual Obligations so extended, renewed or replaced.
7.6 FINANCIAL COVENANTS.
A. MINIMUM INTEREST COVERAGE RATIO. Company shall not permit the ratio of (i) Adjusted EBITDA to (ii) Consolidated Cash Interest Expense, in each case for any four-Fiscal Quarter period ending at the end of any Fiscal Quarter set forth below, to be less than the correlative ratio indicated:
MINIMUM INTEREST
FISCAL QUARTER COVERAGE RATIO
-------------- -----------------
FQ2 2004 1.15:1.00
FQ3 2004 1.15:1.00
FQ4 2004 1.15:1.00
FQ1 2005 1.15:1.00
FQ2 2005 1.20:1.00
FQ3 2005 1.20:1.00
FQ4 2005 1.25:1.00
FQ1 2006 1.25:1.00
FQ2 2006 1.30:1.00
FQ3 2006 1.30:1.00
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FQ4 2006 1.30:1.00
FQ1 2007 1.30:1.00
FQ2 2007 1.35:1.00
FQ3 2007 1.35:1.00
FQ4 2007 1.35:1.00
FQ1 2008 1.35:1.00
FQ2 2008 1.40:1.00
FQ3 2008 1.40:1.00
FQ4 2008 and thereafter 1.40:1.00
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B. MAXIMUM CONSOLIDATED LEVERAGE RATIO. Company shall not permit the Consolidated Leverage Ratio as at any date on or after the end of the most recently ended Fiscal Quarter set forth in the table below to exceed the correlative ratio indicated:
MAXIMUM CONSOLIDATED
FISCAL QUARTER LEVERAGE RATIO
-------------- ---------------------
FQ2 2004 7.00:1.00
FQ3 2004 7.00:1.00
FQ4 2004 7.00:1.00
FQ1 2005 7.00:1.00
FQ2 2005 6.75:1.00
FQ3 2005 6.75:1.00
FQ4 2005 6.50:1.00
FQ1 2006 6.50:1.00
FQ2 2006 6.25:1.00
FQ3 2006 6.25:1.00
FQ4 2006 6.25:1.00
FQ1 2007 6.25:1.00
FQ2 2007 6.00:1.00
FQ3 2007 6.00:1.00
FQ4 2007 6.00:1.00
FQ1 2008 6.00:1.00
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FQ2 2008 5.75:1.00
FQ3 2008 5.75:1.00
FQ4 2008 and thereafter 5.75:1.00
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C. MINIMUM CONSOLIDATED NET WORTH. Company shall not permit Consolidated Net Worth on any date of determination after the Closing Date to be less than (i) Consolidated Net Worth as of the Closing Date, if such date of determination occurs during 2004, or (ii) the sum of (a) Consolidated Net Worth as of the Closing Date plus (b) the product of $7,000,000 multiplied by the number of Fiscal Quarters that have ended after December 31, 2004 but prior to such date of determination, if such date of determination occurs after 2004.
D. MINIMUM ADJUSTED EBITDA. Company shall not permit Adjusted EBITDA for any four-Fiscal Quarter period ending at the end of any Fiscal Quarter set forth below to be less than the correlative amount indicated:
MINIMUM ADJUSTED
FISCAL QUARTER EBITDA
------------------------ ----------------
FQ2 2004 $40,000,000
FQ3 2004 $40,000,000
FQ4 2004 $40,000,000
FQ1 2005 $40,000,000
FQ2 2005 $40,000,000
FQ3 2005 $40,000,000
FQ4 2005 $45,000,000
FQ1 2006 $45,000,000
FQ2 2006 $45,000,000
FQ3 2006 $45,000,000
FQ4 2006 $45,000,000
FQ1 2007 $45,000,000
FQ2 2007 $45,000,000
FQ3 2007 $45,000,000
FQ4 2007 $45,000,000
FQ1 2008 $45,000,000
FQ2 2008 $45,000,000
FQ3 2008 $45,000,000
FQ4 2008 and thereafter $45,000,000
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E. MINIMUM NON-BORROWER CASH FLOW. Company shall not permit Non-Borrower Cash Flow for any four-Fiscal Quarter period ending at the end of any Fiscal Quarter, to be less than zero.
F. MAXIMUM CONSOLIDATED FACILITIES CAPITAL EXPENDITURES. Borrowers shall not, and shall not permit their respective Subsidiaries to, make or incur Consolidated Facilities Capital Expenditures during any Fiscal Year in excess of the Maximum Consolidated Facilities Capital Expenditures Amount for such Fiscal Year. For purposes of this subsection 7.6F, the "MAXIMUM CONSOLIDATED FACILITIES CAPITAL EXPENDITURES AMOUNT" for Fiscal Year 2004 shall equal $25,000,000 and for each Fiscal Year thereafter shall equal $20,000,000; provided, however, that the Maximum Consolidated Facilities Capital Expenditures Amount for any Fiscal Year after 2004 shall be increased by an amount equal to 25% of the excess, if any, of the Maximum Consolidated Facilities Capital Expenditures Amount for the previous Fiscal Year (prior to giving effect to this proviso) over the actual amount of Consolidated Facilities Capital Expenditures made or incurred during such previous Fiscal Year; and provided further, however, that Company may elect by written notice to Agents to increase the Maximum Consolidated Facilities Capital Expenditures Amount for any Fiscal Year by an amount not more than $5,000,000 by decreasing the Maximum Consolidated Facilities Capital Expenditures Amount for the subsequent Fiscal Year by an amount equal to the amount of such increase.
G. CERTAIN CALCULATIONS. Notwithstanding any provision of this Agreement to the contrary, (i) for purposes of calculating Adjusted EBITDA for any four-Fiscal Quarter period ending prior to the first Fiscal Quarter of 2005, Adjusted EBITDA for the third and fourth Fiscal Quarters of 2003 and the first Fiscal Quarter of 2004 shall be deemed to be equal to the correlative amounts set forth opposite such Fiscal Quarters on Schedule 7.6G annexed hereto; (ii) for purposes of determining compliance with subsection 7.6A for any four-Fiscal Quarter period ending prior to the last Fiscal Quarter of 2004, Consolidated Cash Interest Expense shall equal the product of (a) actual Consolidated Cash Interest Expense during the period from the Closing Date to the end of such four-Fiscal Quarter period multiplied by (b) the ratio of (1) 365 divided by (2) the number of days in such period; and (iii) for purposes of determining compliance with each of the covenants in this subsection 7.6, each of Adjusted EBITDA, Consolidated Cash Interest Expense, Consolidated Net Worth, Non-Borrower Cash Flow and Consolidated Facilities Capital Expenditures shall not include any portion thereof attributable to the results of operations or financial position, as the case may be, of CPIH Subsidiaries for the relevant period or as of the relevant date of determination.
7.7 RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES.
Borrowers shall not, and shall not permit their respective Subsidiaries to, alter the legal form of organization of Company or any of its Subsidiaries, or enter into any transaction of merger or consolidation, or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor or sublessor), transfer or otherwise dispose of (including by discount or compromise), in one transaction or a series of transactions,
all or any part of its business, property or assets (including its notes or receivables and Capital Stock of a Subsidiary, whether newly issued or outstanding) or its interests in or claims against any Project, in each case whether now owned or hereafter acquired, except:
(i) any Borrower may be merged with or into a Borrower, or be liquidated, wound up or dissolved, or all or any part of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of, in one transaction or a series of transactions, to a Borrower; provided that, no such transaction shall result in the obligee or beneficiary of any Indebtedness or Contingent Obligation (other than the Obligations) having greater recourse to assets or Persons for the payment or collection of such Indebtedness or Contingent Obligation than such obligee or beneficiary had immediately prior to such transaction;
(ii) (a) any Subsidiary of Company that is not a Borrower may
be merged with or into any other Subsidiary of Company that is not a
Borrower, or be liquidated, wound up or dissolved, or all or any part
of its business, property or assets may be conveyed, sold, leased,
transferred or otherwise disposed of, in one transaction or a series of
transactions, to another Subsidiary that is not a Borrower, provided,
that no such transaction shall result in the obligee or beneficiary of
any Indebtedness or Contingent Obligation (other than the Obligations)
having greater recourse to assets or Persons for the payment or
collection of such Indebtedness or Contingent Obligation than such
obligee or beneficiary had immediately prior to such transaction; and
(b) any Immaterial Foreign Subsidiary may be merged with or into any
Borrower, or be liquidated, wound up or dissolved, or all or any part
of its business, property or assets may be conveyed, sold, leased,
transferred or otherwise disposed of, in one transaction or a series of
transactions, to a Borrower, provided, that (1) no such transaction
shall result in the obligee or beneficiary of any Indebtedness or
Contingent Obligation (other than the Obligations) of such Immaterial
Foreign Subsidiary having greater recourse to assets or Persons for the
payment or collection of such Indebtedness or Contingent Obligation
than such obligee or beneficiary had immediately prior to such
transaction and (2) the relevant Borrower shall be a surviving entity
in any such transaction;
(iii) Company and its Subsidiaries may sell or otherwise dispose of assets in transactions that do not constitute Asset Sales; provided that the consideration received for such assets shall be in an amount at least equal to the fair market value thereof; and
(iv) Company and its Subsidiaries may make Asset Sales,
provided that (a) the consideration received for such assets shall be
in an amount at least equal to the fair market value thereof; (b) not
less than 90% of the consideration received (other than any
consideration consisting of the assumption of liabilities related to
such assets) in any such Asset Sale shall be cash (it being agreed that
cash the receipt of which may by the relevant terms of such Asset Sale
be deferred more than six months after the date of consummation of such
Asset Sale shall not be considered cash for purposes of this clause
(b)); (c) not more than 10% of the cash consideration received by
Company and its Subsidiaries in any such Asset Sale shall be received
after the date of consummation of such Asset Sale; (d) any Indebtedness
in relation to the assets sold in any such Asset Sale shall be repaid
and the related letters of credit shall be cancelled and returned to
the
issuers thereof; (e) the Net Asset Sale Proceeds of such Asset Sales shall be applied as Mandatory Payments to the extent required under subsection 2.3A; and (f) in the event that the Net Asset Sale Proceeds from any Asset Sale, when added to the aggregate Net Asset Sale Proceeds from all other Asset Sales after the Closing Date, would exceed $10,000,000, Company and its Subsidiaries shall not be permitted to consummate such Asset Sale without the prior written consent of Requisite Lenders.
7.8 TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES.
Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any holder of 5% or more of any class of equity Securities of Company or with any Affiliate of Company or of any such holder, on terms that are less favorable to Company or that Subsidiary, as the case may be, than those that might be obtained at the time from Persons who are not such a holder or Affiliate; provided that the foregoing restriction shall not apply to (i) any Indebtedness permitted under subsection 7.1 among Company and its Subsidiaries or among Subsidiaries of Company, (ii) reasonable and customary salaries and fees paid to current officers and members of the Governing Bodies of Company and its Subsidiaries, provided that such salary and fee arrangements are entered into at arms' length and on terms that are no less favorable to Company or that Subsidiary, as the case may be, than those that would have been obtained at the relevant time from Persons who are not such a holder or Affiliate, (iii) reasonable and customary indemnifications and insurance arrangements for the benefit of Persons that are officers or members of the Governing Bodies of Company and its Subsidiaries on or after the Closing Date, whether such Persons are current or former officers or members at the time such indemnifications or arrangements are entered into, provided that such indemnifications and arrangements are entered into at arms' length and on terms that are no less favorable to Company or that Subsidiary, as the case may be, than those that would have been obtained at the relevant time from Persons who are not such a holder or Affiliate, (iv) any employment agreements or benefits arrangements entered into on or after the Closing Date by Company and its Subsidiaries with employees at arms' length and on terms that are no less favorable to Company or that Subsidiary, as the case may be, than those that would have been obtained at the relevant time from Persons who are not such a holder or Affiliate, (v) payments (and other transactions) made in accordance with the terms of the Management Services and Reimbursement Agreement, the DHC Tax Sharing Agreement, the Corporate Services Reimbursement Agreement and the other Related Agreements, (vi) transactions occurring on the Closing Date and described on Schedule 7.8 annexed hereto, and (vii) the payment of reasonable legal fees and expenses incurred by law firms in which Directors of Company are affiliated for services rendered to Company and its Subsidiaries.
7.9 RESTRICTION ON LEASES.
Borrowers shall not, and shall not permit any of their Subsidiaries to, become liable in any way, whether directly by assignment or as a guarantor or other surety, for the obligations of the lessee under any lease for equipment (other than intercompany leases between Borrowers), unless, immediately after giving effect to the incurrence of liability with respect to such lease, the aggregate amount of all rents paid or payable by Company and its Subsidiaries on
a consolidated basis under all such leases entered into after the Closing Date at the time in effect during the then current Fiscal Year or any future period of 12 consecutive calendar months shall not exceed $3,000,000; provided, however, that this subsection 7.9 shall not prohibit Company or its Subsidiaries from incurring obligations pursuant to the renewal, extension or replacement of leases in effect at the Closing Date so long as such leases as renewed, extended or replaced are not more disadvantageous in any material respect to Company and its Subsidiaries and the Lenders than the leases so renewed, extended or replaced.
7.10 DETROIT PROJECT COVENANTS
Company shall not, and shall not permit any of its Subsidiaries to, enter into any Contractual Obligation after the Closing Date that would (i) grant a right to any Person or Persons to consent to or approve a sale or other disposition of all or any portion of the Detroit Project or the Capital Stock of the Detroit Project Subsidiary, (ii) be breached by a sale or other disposition of all or any portion of the Detroit Project or the Capital Stock of the Detroit Project Subsidiary if the consent or approval of any Person or Persons (other than Requisite Lenders) is not obtained, (iii) create any additional restriction not in existence as of the Closing Date limiting the ability of Company and its Subsidiaries to sell or dispose of all or any portion of the Detroit Project or the Capital Stock of the Detroit Project Subsidiary, or (iv) purport to restrict the ability of Company and its Subsidiaries to fund the operations of the Detroit Project after a default under the terms of such Contractual Obligation.
7.11 CONDUCT OF BUSINESS
From and after the Closing Date, Company shall not, and shall not permit any of its Subsidiaries, to engage in any business other than the energy, water and waste management businesses of the type in which they are engaged on the Closing Date and other activities to the extent incidental or reasonably related to such businesses.
7.12 AMENDMENTS TO RELATED AGREEMENTS, DEBT DOCUMENTATION AND ORGANIZATIONAL DOCUMENTS.
Company shall not, and shall not permit any of its
Subsidiaries to, amend, restate, modify or waive (or make any payment consistent
with an amendment, restatement, modification or waiver of) any material
provision of (i) the Management Services and Reimbursement Agreement or the
other Related Agreements (other than the New L/C Facility Documents), in each
case if the effect of such amendment, restatement, modification or waiver,
together with all other amendments, restatements, modifications or waivers made,
(a) except as otherwise permitted under subsection 7.1(xiii), is to impose
additional material obligations on, or confer material additional rights to the
holders thereof (or to other obligees with respect thereto) against, Company or
any of its Subsidiaries, or (b) is otherwise adverse to the interests of the
Lenders in a manner deemed material in the judgment of Agents or Requisite
Lenders so notifying Agents or Company; (ii) the Organizational Documents of
Company and its Subsidiaries, if the effect of such amendment, restatement,
modification or waiver, together with all other amendments, restatements,
modifications or waivers made, is adverse to the interests of the Lenders in a
manner deemed material in the judgment of Agents or Requisite Lenders; (iii) the
Subordinated Indebtedness, if the effect thereof would be to (a) change to
earlier dates the dates on which any
payments of principal or interest are due thereon, (b) increase the interest rate, or the portion thereof payable on a current basis in cash, applicable thereto, (c) change any event of default with respect thereto in any manner adverse to the interests of the Lenders, (d) change the redemption, prepayment or defeasance provisions thereof, (e) change the subordination provisions thereof (or of any guaranty thereof or intercreditor arrangement with respect thereto), (f) change any collateral therefor (other than to release such collateral), or (g) change any other term or provision thereof, if the effect of such change, together with all other changes made, is to increase materially the obligations of the obligor thereunder or to confer any additional rights on the holders of such Indebtedness that would be materially adverse (in the judgment of Agents or Requisite Lenders so notifying Agents or Company) to Company, Agents or the Lenders, without the prior written consent of Requisite Lenders; (iv) the principal documents relating to Limited Recourse Debt with respect to a Project if such amendment, restatement, modification or waiver, together with all other amendments, restatements, modifications and waivers made, would reasonably be expected to have a Material Adverse Effect; or (v) the New L/C Facility Documents, unless (a) the terms of the New L/C Facility Documents as so amended, restated, modified or waived are not more disadvantageous to Company and its Subsidiaries and the Lenders (in a manner deemed material by Agents) than the New L/C Facility Documents in effect on the Closing Date (it being understood and agreed that any amendment, restatement, modification or waiver having the effect of (1) increasing the maximum amount of any commitment to extend loans (as opposed to letters of credit) under the New L/C Facility Documents, or (2) reducing, delaying or waiving any otherwise required reduction in the amount of any commitment to extend loans or letters of credit under the New L/C Facility Documents, shall be deemed to be more disadvantageous for purposes of this clause (a) without further notice or other action by Agents), (b) the aggregate amount of Indebtedness and letters of credit outstanding, and additional commitments to extend credit, if any, under the New L/C Facility Documents as so amended, restated, modified or waived, do not exceed the aggregate amount of the commitments to extend credit in effect under the New L/C Facility Documents on the Closing Date, plus $5,000,000, (c) the obligations under (and the Liens securing) such New L/C Facility Documents as so amended, restated, modified or waived are subject to the Intercreditor Agreement on terms substantively identical to the terms applicable to the obligations in effect under the New L/C Facility Documents on the Closing Date, and (d) Company provides to Agents reasonable prior advance written notice of such proposed amendment, restatement, modification or waiver and copies of all material contracts or other agreements being entered into in connection therewith).
7.13 END OF FISCAL YEARS; FISCAL QUARTERS.
Company shall not, and shall not permit any of its Subsidiaries to change the end of the Fiscal Year of Company or any of its Subsidiaries from December 31st.
7.14 AMENDMENT TO PENSION PLANS.
Borrowers shall not amend or modify any Pension Plan after the Closing Date in any manner that results in or would reasonably be expected to result in an increase in the amount of unfunded benefit liabilities (as such unfunded benefit liabilities are determined in accordance with subsection 5.11D hereof), unless such amendment or modification is required under applicable law.
SECTION 8. EVENTS OF DEFAULT
If any of the following conditions or events ("EVENT OF DEFAULT") shall occur:
8.1 FAILURE TO MAKE PAYMENTS WHEN DUE.
Failure by Borrowers to pay when due any amount payable to an Issuing Lender in reimbursement of any drawing under a Letter of Credit; failure by Borrowers to pay any Mandatory Payment when due; or failure by Borrowers to pay any interest or any fee or any other amount due under this Agreement within five days after the date due; or
8.2 DEFAULT IN OTHER AGREEMENTS.
(i) Failure of Company or any of its Subsidiaries (other than the Bankrupt Subsidiaries) to pay when due any principal of or interest on or any other amount payable in respect of (a) the New L/C Facility Documents or the High Yield Notes, (b) any one or more items of Indebtedness (other than Indebtedness referred to in subsection 8.1 or in clause (a) above or clause (c) below) or Contingent Obligations or Performance Guaranties, in each case in the principal amount of $5,000,000 or more, individually or in the aggregate, or (c) Limited Recourse Debt of Subsidiaries of Company (other than the Bankrupt Subsidiaries) in the principal amount of $10,000,000 or more, individually or in the aggregate (provided that Limited Recourse Debt incurred in connection with one or more Projects to which less than $2,000,000 in the aggregate of the operating income of Company and its Subsidiaries (on a consolidated basis) is attributable for the 12-month period immediately preceding the failure to pay such interest, principal or other amounts shall not be considered Indebtedness or Limited Recourse Debt solely for purposes of this clause (c)), in each case beyond the end of any grace period provided therefor; or
(ii) breach or default by Company or any of its Subsidiaries (other than the Bankrupt Subsidiaries) with respect to any other material term of (a) the New L/C Facility Documents, the High Yield Indenture or the High Yield Notes, (b) one or more items of Indebtedness (other than Limited Recourse Debt) or Contingent Obligations in the individual or aggregate principal amounts referred to in clause (i) above or (c) any loan agreement, mortgage, indenture or other agreement relating to such item(s) of Indebtedness or Contingent Obligation(s), if the effect of such breach or default is to cause, or to permit the holder or holders of that Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such holder or holders) to cause, that Indebtedness or Contingent Obligation(s) to become or be declared due and payable prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be (upon the giving or receiving of notice, lapse of time, both, or otherwise); or
8.3 BREACH OF CERTAIN COVENANTS.
Failure of any Borrower to perform or comply with any term or condition contained in subsection 6.2 or Section 7 of this Agreement; or
8.4 BREACH OF WARRANTY.
Any representation, warranty, certification or other statement made by Company or any of its Subsidiaries in any Credit Document or in any statement or certificate at any time given by Company or any of its Subsidiaries in writing pursuant hereto or thereto or in connection herewith or therewith shall be false in any material respect on the date as of which made; or
8.5 OTHER DEFAULTS UNDER CREDIT DOCUMENTS.
Any Credit Party shall default in the performance of or
compliance with any term contained in this Agreement or any of the other Credit
Documents, other than any such term referred to in any other subsection of this
Section 8, and such default shall not have been remedied or waived within 30
days after the earlier of (i) an Officer of Company or such Credit Party
becoming aware of such default or (ii) receipt by Company or such Credit Party
of notice from Administrative Agent or any Lender of such default; or
8.6 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) A court having jurisdiction in the premises shall enter a decree or order for relief in respect of DHC or Company or any of its Subsidiaries (other than the Bankrupt Subsidiaries) in an involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, which decree or order is not stayed; or any other similar relief shall be granted under any applicable federal or state law; or
(ii) an involuntary case shall be commenced against DHC or Company or any of its Subsidiaries (other than the Bankrupt Subsidiaries) under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over DHC or Company or any of its Subsidiaries (other than the Bankrupt Subsidiaries), or over all or a substantial part of its property, shall have been entered; or there shall have occurred the involuntary appointment of an interim receiver, trustee or other custodian of DHC or Company or any of its Subsidiaries (other than the Bankrupt Subsidiaries) for all or a substantial part of its property; or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of DHC or Company or any of its Subsidiaries (other than the Bankrupt Subsidiaries), and any such event described in this clause (ii) shall continue for 60 days unless dismissed, bonded or discharged; or
8.7 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC..
(i) DHC or Company or any of its Subsidiaries (other than the Bankrupt Subsidiaries) shall have an order for relief entered with respect to it or commence a voluntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or DHC or Company or any of its Subsidiaries (other than the Bankrupt Subsidiaries) shall make any assignment for the benefit of creditors; or
(ii) DHC or Company or any of its Subsidiaries shall be unable, or shall fail generally, or shall admit in writing its inability, to pay its debts as such debts become due; or the Governing Body of DHC or Company or any of its Subsidiaries (other than the Bankrupt Subsidiaries), or any committee thereof, shall adopt any resolution or otherwise authorize any action to approve any of the actions referred to in clause (i) above or this clause (ii); or
8.8 JUDGMENTS AND ATTACHMENTS.
Any money judgment, writ or warrant of attachment or similar process involving (a) in any individual case an amount in excess of $5,000,000 or (b) in the aggregate at any time an amount in excess of $5,000,000 (in either case not adequately covered by insurance as to which a solvent and unaffiliated insurance company has acknowledged coverage) shall be entered or filed against Company or any of its Subsidiaries (other than the Bankrupt Subsidiaries) or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of 60 days (or in any event later than five days prior to the date of any proposed sale thereunder); or
8.9 DISSOLUTION.
Any order, judgment or decree shall be entered against Company or any of its Material Subsidiaries decreeing the dissolution or split up of Company or that Subsidiary and such order shall remain undischarged or unstayed for a period in excess of 30 days; or
8.10 EMPLOYEE BENEFIT PLANS.
There shall occur one or more ERISA Events that individually
or in the aggregate result in or are reasonably be expected to result in
liability of Company, any of its Subsidiaries or any of their respective ERISA
Affiliates in excess of $5,000,000 during the term of this Agreement; or there
shall exist as of January 1 of any year (based on, with respect to the Covanta
Energy Pension Plan, the actuarial valuation as of such January 1 and, with
respect to the SEIU Pension Plan, the actuarial valuation as of the immediately
preceding June 1), unfunded benefit liabilities (as defined in Section
4001(a)(18) of ERISA, but determined on the basis of the actuarial assumptions
used for funding purposes with respect to a Pension Plan (as set forth in
Section 412 of the Internal Revenue Code, including, where applicable, the
interest rate assumptions set forth in Section 412(l) of the Internal Revenue
Code)), in the aggregate for all Pension Plans (excluding for purposes of such
computation any Pension Plans with respect to which assets exceed benefit
liabilities), in excess of (i) $20,000,000, in the event Assumptions are
generally as favorable as the Assumptions used in the 2003 plan year valuations
with respect to such Pension Plans, or (ii) $26,000,000, in the event the
Assumptions are generally less favorable than the Assumptions used in the 2003
plan year valuations with respect to such Pension Plans; or
8.11 MATERIAL ADVERSE EFFECT.
Any event or change shall occur after the date of this Agreement that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect; or
8.12 CHANGE IN CONTROL.
A Change in Control shall have occurred; or
8.13 INVALIDITY OF INTERCREDITOR AGREEMENT; FAILURE OF SECURITY; REPUDIATION OF OBLIGATIONS.
At any time after the execution and delivery thereof, (i) the Intercreditor Agreement for any reason, other than the satisfaction in full of all Obligations, shall cease to be in full force and effect (other than in accordance with its terms) or shall be declared to be null and void, (ii) any Collateral Document (with respect to the obligations thereunder of Company or any Material Subsidiary (other than any Bankrupt Subsidiary)) shall cease to be in full force and effect (other than by reason of a release of Collateral thereunder in accordance with the terms hereof or thereof, the satisfaction in full of the Secured Obligations or any other termination of such Collateral Document in accordance with the terms hereof or thereof) or shall be declared null and void, or Collateral Agent shall not have or shall cease to have a valid and perfected Lien (with the priority set forth in subsection 5.15A) in any Collateral purported to be covered thereby, in each case for any reason other than the failure of Collateral Agent or any Lender to take any action within its control, or (iii) any Credit Party shall contest the validity or enforceability of any Credit Document in writing or deny in writing that it has any further liability, including with respect to future advances by Lenders, under any Credit Document to which it is a party; or
8.14 TERMINATION OF MATERIAL CONTRACTS.
Any Material Contract of the type described in clause (i) of the definition of Material Contract, or any power purchase agreement to which Company or any of its Subsidiaries is a party relating to a Project, shall be terminated by Company or any of its Subsidiaries or by the counterparty or counterparties thereto, if such termination is enforceable by Company, such Subsidiary, or such counterparty or counterparties, unless (a) such Material Contract is replaced within ten (10) days after such termination with a contract that is reasonably acceptable to the Requisite Lenders and on substantially the same economic terms as the relevant Material Contract being terminated, or (b) the Subsidiary of Company party to such Material Contract or power purchase agreement, as the case may be, is a Bankrupt Subsidiary and such termination would not reasonably be expected to have a Material Adverse Effect, or (c) the termination of such Material Contract occurs pursuant to the exercise by the counterparty or counterparties thereto of a contractual right to terminate such Material Contract for convenience and such termination would not reasonably be expected to have a Material Adverse Effect; or
8.15 NOL TREATMENT.
Any Capital Stock of Company of any of its Subsidiaries shall be issued, or any equity contribution shall be made to Company or any of its Subsidiaries, if (i) such issuance or
equity contribution would reasonably be expected to have a material adverse effect on the availability or accessibility to Company and its Subsidiaries of the net operating losses disclosed to Agents and Lenders prior to the Closing Date as being held by DHC, or (ii) the proceeds of such issuance or equity contribution are applied to any purpose prohibited under this Agreement:
THEN (i) upon the occurrence of any Event of Default described in subsection 8.6 or 8.7, each of (a) an amount equal to 105% of the maximum amount that may at any time be drawn under all Letters of Credit then outstanding (whether or not any beneficiary under any such Letter of Credit shall have presented, or shall be entitled at such time to present, the drafts or other documents or certificates required to draw under such Letter of Credit), and (b) all other Obligations shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by each Borrower, and obligation of Administrative Agent and any other Issuing Lender to issue, renew or extend any Letter of Credit and the right of Administrative Agent and any other Issuing Lender to issue, renew or extend any Letter of Credit hereunder shall thereupon terminate, and (ii) upon the occurrence and during the continuation of any other Event of Default, Administrative Agent shall, upon the written request or with the written consent of Requisite Lenders, by written notice to Borrowers, declare all or any portion of the amounts described in clauses (a) and (b) above to be, and the same shall forthwith become, immediately due and payable, and the obligation of Administrative Agent and any other Issuing Lender to issue, renew or extend any Letter of Credit and the right of Administrative Agent and any other Issuing Lender to issue, renew or extend any Letter of Credit hereunder shall thereupon terminate.
Any amounts described in clause (a) above, when received by Collateral Agent, shall be held by Collateral Agent pursuant to the terms of the Security Agreement and shall be applied as therein provided (subject to the terms of the Intercreditor Agreement).
Further upon the occurrence and during the continuance of any Event of Default, subject to the Intercreditor Agreement, Administrative Agent and Collateral Agent may, and upon the written request of Requisite Lenders shall, (i) exercise all rights and remedies of Administrative Agent or Collateral Agent set forth in any of the Collateral Documents, in addition to all rights and remedies allowed by, the United States and of any state thereof, including but not limited to the UCC, and (ii) revoke Borrowers' rights to use cash collateral in which Administrative Agent or Collateral Agent has an interest. The enumeration of the foregoing rights and remedies is not intended to be exhaustive and the exercise of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative and not alternative.
SECTION 9. ADMINISTRATIVE AGENT
9.1 APPOINTMENT.
A. APPOINTMENT OF ADMINISTRATIVE AGENT. Bank of America is hereby appointed Administrative Agent hereunder and under the other Credit Documents and Deutsche Bank is hereby appointed Documentation Agent hereunder. Each Lender hereby authorizes each Agent to act as its agent in accordance with the terms of this Agreement and the other Credit Documents. Each Agent agrees to act upon the express conditions contained in this Agreement
and the other Credit Documents, as applicable. The provisions of this Section 9 are solely for the benefit of Agents and Lenders and no Credit Party shall have rights as a third party beneficiary of any of the provisions thereof. In performing its functions and duties under this Agreement, Administrative Agent (other than as provided in subsection 2.1B) shall act solely as an agent of Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for any Borrower or any other Credit Party.
B. CONTROL. Each Lender and Administrative Agent hereby appoint each other Lender as agent for the purpose of perfecting Collateral Agent's security interest in assets that, in accordance with the UCC, can be perfected by possession or control.
9.2 POWERS AND DUTIES; GENERAL IMMUNITY.
A. POWERS; DUTIES SPECIFIED. Each Lender irrevocably authorizes each Agent to take such action on such Lender's behalf and to exercise such powers, rights and remedies hereunder and under the other Credit Documents as are specifically delegated or granted to such Agent by the terms hereof and thereof, together with such powers, rights and remedies as are reasonably incidental thereto. An Agent shall have only those duties and responsibilities that are expressly specified in this Agreement and the other Credit Documents. Each Agent may exercise such powers, rights and remedies and perform such duties by or through its Affiliates, agents or employees. No Agent shall have, by reason of this Agreement or any of the other Credit Documents, a fiduciary relationship in respect of any Lender or any Borrower; and nothing in this Agreement or any of the other Credit Documents, expressed or implied, is intended to or shall be so construed as to impose upon an Agent any obligations in respect of this Agreement or any of the other Credit Documents except as expressly set forth herein or therein.
B. NO RESPONSIBILITY FOR CERTAIN MATTERS. No Agent shall be responsible to any Lender for the execution, effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement or any other Credit Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by such Agent to Lenders or by or on behalf of any Borrower to such Agent or any Lender in connection with the Credit Documents and the transactions contemplated thereby or for the financial condition or business affairs of Borrowers or any other Person liable for the payment of any Obligations, nor shall such Agent be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Credit Documents or as to the use of the Letters of Credit or as to the existence or possible existence of any Event of Default or Potential Event of Default. Anything contained in this Agreement to the contrary notwithstanding, Administrative Agent shall not have any liability arising from confirmations of the amount of the Letter of Credit Usage or the component amounts thereof.
C. EXCULPATORY PROVISIONS. No Agent or any of its officers, directors, employees or agents shall be liable to Lenders for any action taken or omitted by such Agent under or in connection with any of the Credit Documents except to the extent caused by such Agent's gross negligence or willful misconduct. An Agent shall be entitled to refrain from any
act or the taking of any action (including the failure to take an action) in connection with this Agreement or any of the other Credit Documents or from the exercise of any power, discretion or authority vested in it hereunder or thereunder unless and until such Agent shall have received instructions in respect thereof from Requisite Lenders (or such other Lenders as may be required to give such instructions under subsection 10.6) and, upon receipt of such instructions from Requisite Lenders (or such other Lenders, as the case may be), such Agent shall be entitled to act or (where so instructed) refrain from acting, or to exercise such power, discretion or authority, in accordance with such instructions. Without prejudice to the generality of the foregoing, (i) each Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for Company and its Subsidiaries), accountants, experts and other professional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever against an Agent as a result of such Agent acting or (where so instructed) refraining from acting under this Agreement or any of the other Credit Documents in accordance with the instructions of Requisite Lenders (or such other Lenders as may be required to give such instructions under subsection 10.6).
D. AGENTS ENTITLED TO ACT AS LENDER. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, an Agent in its individual capacity as a Lender hereunder. With respect to its participation in the Letters of Credit, an Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not performing the duties and functions delegated to it hereunder, and the term "Lender" or "Lenders" or any similar term shall, unless the context clearly otherwise indicates, include each Agent in its individual capacity. An Agent and its Affiliates may accept deposits from, lend money to, acquire equity interests in and generally engage in any kind of commercial banking, investment banking, trust, financial advisory or other business with Company or any of its Affiliates as if it were not performing the duties specified herein, and may accept fees and other consideration from any Borrower for services in connection with this Agreement and otherwise without having to account for the same to Lenders. The Lenders acknowledge that, pursuant to such activities, Deutsche Bank or Bank of America or their respective Affiliates may receive information regarding a Borrower or its Affiliates (including information that may be subject to confidentiality obligations in favor of such Borrower or such Affiliate) and acknowledge that the relevant Agent shall be under no obligation to provide such information to them.
9.3 INDEPENDENT INVESTIGATION BY LENDERS; NO RESPONSIBILITY FOR APPRAISAL OF CREDITWORTHINESS.
Each Lender agrees that it has made its own independent investigation of the financial condition and affairs of Company and its Subsidiaries in connection with the issuance of Letters of Credit hereunder and that it has made and shall continue to make its own appraisal of the creditworthiness of Company and its Subsidiaries. No Agent shall have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of Lenders or to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the issuance of any
Letter of Credit or at any time or times thereafter, and no Agent shall have any responsibility with respect to the accuracy of or the completeness of any information provided to Lenders.
9.4 RIGHT TO INDEMNITY.
Each Lender, in proportion to its Pro Rata Share, severally agrees to indemnify Agents and the officers, directors, employees, agents, attorneys, professional advisors and affiliates of each of them to the extent that any such Person shall not have been reimbursed by Borrowers, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements and fees and disbursements of any financial advisor engaged by Agents) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against an Agent or and other such Persons in exercising the powers, rights and remedies of an Agent or performing duties of an Agent hereunder or under the other Credit Documents or otherwise in its capacity as Agent in any way relating to or arising out of this Agreement or the other Credit Documents; provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of an Agent resulting from such Agent's gross negligence or willful misconduct. If any indemnity furnished to an Agent or any other such Person for any purpose shall, in the opinion of such Agent, be insufficient or become impaired, such Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished.
9.5 SUCCESSOR AGENTS.
Any Agent may resign at any time by giving 30 days' prior written notice thereof to Lenders and Borrowers, and an Agent may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to Borrowers and Administrative Agent and signed by Requisite Lenders. If Bank of America is an Issuing Lender, any such resignation or removal of Bank of America as Administrative Agent shall also constitute its resignation or removal as Issuing Lender. Upon any such notice of resignation or any such removal, Requisite Lenders shall have the right, upon five Business Days' notice to Borrowers, to appoint a successor Agent. If, within 30 days after the date of an Agent's notice of its intention to resign, no successor to such Agent shall have been so appointed by Requisite Lenders, then such Agent's resignation shall become effective on such date without the need for any further action and the Lenders shall be deemed to have been appointed as successor to such Agent hereunder and shall thereafter perform all the duties of such Agent hereunder and/or under any other Credit Document until the appointment by Requisite Lenders of some other successor to such Agent. Upon the acceptance of any appointment as an Agent hereunder by a successor to an Agent, including the Lenders as successor to an Agent (who shall be deemed to have accepted such appointment pursuant to this subsection 9.5), such successor to such Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Agent (and, if the removed Agent is an Issuing Lender, all the rights, powers, privileges and duties of an Issuing Lender), the retiring or removed Agent shall be discharged from its duties and obligations under this Agreement, and, if the retiring or removed Agent is an Issuing Lender, such retiring or removed Issuing Lender shall be discharged from its duties and obligations under this Agreement, without any other or further act or deed on the part of such retiring or removed Issuing Lender or any other Lender; provided, however, that the successor
Issuing Lender shall be obligated to issue Letters of Credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or to make other arrangements satisfactory to the retiring or removed Issuing Lender to effectively assume the obligations of such retiring or removed Issuing Lender with respect to such outstanding Letters of Credit, and such retiring or removed Issuing Lender shall continue to have all rights of an Issuing Lender with respect to such outstanding Letters of Credit until the cancellation or expiration of such Letters of Credit and the reimbursement of any amounts drawn thereunder. After any retiring or removed Agent's resignation or removal hereunder as an Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Agent under this Agreement and the other Credit Documents.
9.6 INTERCREDITOR AGREEMENT.
Each Lender hereby further authorizes Administrative Agent, on behalf of and for the benefit of Lenders, to enter into and to be the agent for and representative of Lenders under the Intercreditor Agreement, and each Lender agrees to be bound by the terms of the Intercreditor Agreement; provided that Administrative Agent shall not (i) enter into or consent to any material amendment, modification, termination or waiver of any provision contained in the Intercreditor Agreement or (ii) release any Collateral (except as otherwise expressly permitted or required pursuant to the terms of this Agreement or the applicable Collateral Document), in each case without the prior consent of Requisite Lenders (or, if required pursuant to subsection 10.6, all Lenders). Anything contained in any of the Credit Documents to the contrary notwithstanding, each Borrower, Administrative Agent and each Lender hereby agree that (1) no Lender shall have any right individually to realize upon any of the Collateral under any Collateral Document, it being understood and agreed that all powers, rights and remedies under the Collateral Documents may be exercised solely by Collateral Agent for the benefit of Lenders in accordance with the terms thereof and of the Intercreditor Agreement, and (2) in the event of a foreclosure by Collateral Agent on any of the Collateral pursuant to a public or private sale, Administrative Agent or any Lender may be the purchaser of any or all of such Collateral at any such sale and Administrative Agent, as agent for and representative of Lenders (but not any Lender or Lenders in its or their respective individual capacities unless Requisite Lenders shall otherwise agree in writing) shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Obligations as a credit on account of the purchase price for any Collateral payable by Administrative Agent at such sale.
9.7 ADMINISTRATIVE AGENT MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to Company or any of the Subsidiaries of Company, Administrative Agent (irrespective of whether any Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether Administrative Agent shall have made any demand on Borrowers) shall be entitled and empowered, by intervention in such proceeding or otherwise
(i) to file and prove a claim for the whole amount of principal and interest owing and unpaid in respect of any Obligations that are owing and unpaid and to file such
other papers or documents as may be necessary or advisable in order to have the claims of Lenders and Agents (including any claim for the reasonable compensation, expenses, disbursements and advances of Lenders and Agents and their agents and counsel and all other amounts due Lenders and Agents under subsections 2.2, 3.2 and 10.2) allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to Administrative Agent and, in the event that Administrative Agent shall consent to the making of such payments directly to Lenders, to pay to Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of Agents and their agents and counsel, and any other amounts due Agents under subsections 2.2, 3.2 and 10.2.
Nothing herein contained shall be deemed to authorize Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lenders or to authorize Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.
SECTION 10. MISCELLANEOUS
10.1 SUCCESSORS AND ASSIGNS; ASSIGNMENTS AND PARTICIPATIONS IN LETTERS OF CREDIT.
A. GENERAL. This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of Lenders (it being understood that Lenders' rights of assignment are subject to the further provisions of this subsection 10.1). Neither any Borrower's rights or obligations hereunder nor any interest therein may be assigned or delegated by any Borrower without the prior written consent of all Lenders (and any attempted assignment or transfer by any Borrower without such consent shall be null and void). No sale, assignment or transfer or participation of any Letter of Credit or any participation therein may be made separately from a sale, assignment, transfer or participation of a corresponding interest in the relevant Letter of Credit Commitment of the Lender effecting such sale, assignment, transfer or participation. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Affiliates of each of Agents and Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. No Lender shall be permitted to assign any portion of its rights or obligations hereunder to any other Person if, upon giving effect to such assignment, Borrowers would be obligated to pay such assignee amounts greater than the amounts, if any, which Borrowers would have been required to pay such assigning Lender under subsection 2.4 if such assignment did not occur.
B. ASSIGNMENTS.
(i) Amounts and Terms of Assignments. Any Lender may assign to one or more Eligible Assignees all or any portion of its rights and obligations under this Agreement; provided that (a) except (1) in the case of an assignment of the entire remaining amount of the assigning Lender's rights and obligations under this Agreement or (2) in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund of a Lender, the aggregate amount of the Letter of Credit Exposure of the assigning Lender and the assignee subject to each such assignment shall not be less than $5,000,000, determined as of the date the Assignment Agreement with respect to such assignment is delivered to Administrative Agent or, if a trade date is specified in the Assignment Agreement, as of such trade date, unless Administrative Agent otherwise consents, such consent not to be unreasonably withheld or delayed, (b) the parties to each assignment shall execute and deliver to Administrative Agent an Assignment Agreement, together with a processing and recordation fee of $5,000, and the Eligible Assignee, if it shall not be a Lender prior to such assignment, shall deliver to Administrative Agent a counterpart to the Intercreditor Agreement and such documents and information reasonably requested by Administrative Agent, including such forms, certificates or other evidence, if any, with respect to United States federal income tax withholding matters as the assignee under such Assignment Agreement may be required to deliver to Administrative Agent pursuant to subsection 2.4B(iii), and no such assignment shall be effective unless and until such Assignment Agreement is accepted by Administrative Agent and recorded in the Register as provided in subsection 10.1B(ii), (c) except in the case of an assignment to another Lender, Administrative Agent and each Issuing Lender shall have consented thereto (which consents shall not be unreasonably withheld or delayed (it being understood that nothing in this clause (c) shall affect the requirement that the relevant assignee meet the requirements in the definition of Eligible Assignee and any other applicable requirements of this Agreement)), and (d) no assignment by a Defaulting Lender shall be permitted unless such Defaulting Lender or assignee has funded such Defaulting Lender's defaulted funding obligations with respect to participations in Letters of Credit; provided, however, that Underwriting Lender shall have the right to assign all or any portion of its rights and obligations under this Agreement, from time to time, without regard to the $5,000,000 minimum assignment amount (but otherwise in accordance with the terms of this Agreement, including this subsection 10.1) set forth in subsection 10.1B(i)(a), so long as the aggregate amount of the Letter of Credit Exposure of each of the Underwriting Lender and of such assignee, determined as of the date the Assignment Agreement with respect to such assignment is delivered to Administrative Agent or, if a trade date is specified in the Assignment Agreement, as of such trade date, shall not be less than $1,000,000. Upon such execution, delivery and consent, from and after the effective date specified in such Assignment Agreement, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment Agreement, shall have the rights and obligations of a Lender hereunder, (y) the assignee shall be a party to the Intercreditor Agreement and, to the extent that rights and obligations have been assigned to it pursuant to such Assignment Agreement, shall have the rights and obligations of a "Creditor Party" thereunder (as such term is defined in the Intercreditor Agreement) and (z) the assigning Lender thereunder shall, to the
extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment Agreement, relinquish its rights (other than any rights which survive the termination of this Agreement under subsection 10.9B) and be released from its obligations under this Agreement and the Intercreditor Agreement (and, in the case of an Assignment Agreement covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of subsection 10.9; provided that, anything contained in any of the Credit Documents to the contrary notwithstanding (but subject to subsection 9.5), if such Lender is an Issuing Lender such Lender shall continue to have all rights and obligations of an Issuing Lender with respect to any Letters of Credit issued by it until the cancellation or expiration of such Letters of Credit and the reimbursement of any amounts drawn thereunder). Other than as provided in subsection 10.5, any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection 10.1B shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection 10.1C. Except as otherwise provided in this subsection 10.1, no Lender shall, as between Borrowers and such Lender, as between Agents and such Lender, or as between Issuing Lender and such Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment or transfer of, or any granting of participations in, all or any part of its Letter of Credit Commitment, Letters of Credit or participations therein or the other Obligations owed to such Lender.
(ii) Acceptance by Administrative Agent; Recordation in Register. Upon its receipt of an Assignment Agreement executed by an assigning Lender and an assignee representing that it is an Eligible Assignee and the processing and recordation fee referred to in subsection 10.1B(i) and any forms, certificates or other evidence with respect to United States federal income tax withholding matters that such assignee may be required to deliver to Administrative Agent pursuant to subsection 2.4B(iii), Administrative Agent shall, if Administrative Agent and Issuing Lenders have consented to the assignment evidenced thereby (to the extent each such consent is required pursuant to subsection 10.1B(i)), (a) accept such Assignment Agreement by executing a counterpart thereof as provided therein (which acceptance shall evidence any required consent of Administrative Agent to such assignment), (b) record the information contained therein in the Register, and (c) give prompt notice thereof to Company. Administrative Agent shall maintain a copy of each Assignment Agreement delivered to and accepted by it as provided in this subsection 10.1B(ii).
C. PARTICIPATIONS. Any Lender may, without the consent of, or notice to, any Borrower or Administrative Agent, sell participations to one or more Persons (other than a natural Person or any Borrower or any of its Affiliates) in all or a portion of such Lender's rights and/or obligations under this Agreement; provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) Borrowers, Agents and Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision
of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver directly affecting (i) the extension of the Maturity Date or (ii) a reduction of the principal amount of or the rate of interest payable on any Obligation allocated to such participation. Subject to the further provisions of this subsection 10.1C, each Borrower agrees that each Participant shall be entitled to the benefits of subsection 2.4 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection 10.1B. To the extent permitted by law, each Participant also shall be entitled to the benefits of subsection 10.4 as though it were a Lender, provided such Participant agrees to be subject to subsection 10.5 as though it were a Lender. A Participant shall not be entitled to receive any greater payment under subsection 2.4 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant unless the sale of the participation to such Participant is made with Borrowers' prior written consent. A Participant that would be a Non-US Lender if it were a Lender shall not be entitled to the benefits of subsection 2.4.
D. PLEDGES AND ASSIGNMENTS. Any Lender may at any time pledge or assign a security interest in all or any portion of the Obligations owed to such Lender, to secure obligations of such Lender, including any pledge or assignment to secure obligations to any Federal Reserve Bank; provided that (i) no Lender shall be relieved of any of its obligations hereunder as a result of any such assignment or pledge and (ii) in no event shall any assignee or pledgee be considered to be a "Lender" or be entitled to require the assigning Lender to take or omit to take any action hereunder.
E. INFORMATION. Each Lender may furnish any information concerning Company and its Subsidiaries (including CPIH Subsidiaries) in the possession of that Lender from time to time to assignees and participants (including prospective assignees and participants), subject to subsection 10.20.
F. AGREEMENTS OF LENDERS. Each Lender listed on the signature pages hereof hereby agrees, and each Lender that becomes a party hereto pursuant to an Assignment Agreement shall be deemed to agree, (i) that it is an Eligible Assignee described in clause (i) of the definition thereof; (ii) that it has experience and expertise in the funding of or purchasing participations of the type purchased in the Letters of Credit; and (iii) that it will fund or purchase such participations for its own account in the ordinary course of its business and without a view to distribution thereof within the meaning of the Securities Act or the Exchange Act or other federal securities laws (it being understood that, subject to the provisions of this subsection 10.1, the disposition of such participations or any interests therein shall at all times remain within its exclusive control).
G. ASSIGNMENTS TO FEDERAL RESERVE BANKS. In addition to the assignments and participations permitted under the foregoing provisions of this subsection 10.1, any Lender may assign and pledge all or any portion of the Obligations owed to such Lender hereunder to any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any operating circular issued by such Federal Reserve Bank; provided that (i) no Lender shall, as between Company and such Lender, be relieved of any of its obligations hereunder as a result of any such assignment and pledge and
ii) in no event shall such Federal Reserve Bank be considered to be a "Lender" or be entitled to require the assigning Lender to take or omit to take any action hereunder.
H. LENDER RATING REQUIREMENTS. Each Lender (to the extent not already a Downgraded Lender) agrees to notify Administrative Agent and Issuing Lenders within five Business Days after any downgrade of its long term senior unsecured debt obligations to a rating of worse than "Baa3" from Moody's or worse than "BBB-" from S&P (any Lender so downgraded being a "DOWNGRADED LENDER"). Promptly, and in any event prior to the date which is 10 Business Days after such downgrade, the relevant Downgraded Lender, at its own expense, shall deliver to Issuing Lenders, at such Downgraded Lender's option, either (i) evidence satisfactory to Issuing Lenders that the Letter of Credit Commitment of such Downgraded Lender is irrevocably guaranteed or similarly supported pursuant to documentation and arrangements (and by Persons) reasonably satisfactory to Administrative Agent and Issuing Lenders, or (ii) cash collateral supporting the maximum amount of the Letter of Credit Commitment of such Downgraded Lender pursuant to documentation and arrangements reasonably satisfactory to Administrative Agent and Issuing Lenders. Each such Downgraded Lender agrees to pay promptly on demand the reasonable fees and expenses of Issuing Lenders and Administrative Agent (including reasonable costs, fees and expenses of counsel) in connection with the arrangements for such fronting institution, such guaranty or similar support or such cash collateral.
10.2 EXPENSES.
Whether or not the transactions contemplated hereby shall be consummated, Borrowers agree, jointly and severally, to pay promptly (i) all the actual and reasonable costs and expenses of negotiation, preparation and execution of the Credit Documents and any consents, amendments, waivers or other modifications thereto; (ii) all the costs of furnishing all opinions by counsel for Credit Parties (including any opinions requested by Agents or Lenders as to any legal matters arising hereunder) and of Borrowers' performance of and compliance with all agreements and conditions on their part to be performed or complied with under this Agreement and the other Credit Documents including with respect to confirming compliance with environmental and insurance requirements; (iii) the reasonable fees, expenses and disbursements of advisors and counsel to Agents (including O'Melveny & Myers LLP, counsel to Agents, and Ernst & Young Corporate Finance LLC) in connection with the negotiation, preparation, execution, interpretation or administration of the Credit Documents and any proposed consents, amendments, waivers or other modifications thereto and any other documents or matters requested by any Borrower; (iv) all the actual costs and reasonable expenses of creating and perfecting Liens in favor of Collateral Agent on behalf of Secured Parties pursuant to any Collateral Document, including filing and recording fees, expenses and taxes, stamp or documentary taxes, search fees, title insurance premiums, and reasonable fees, expenses and disbursements of counsel to Administrative Agent and Collateral Agent and of counsel providing any opinions that Agents or Requisite Lenders may request in respect of the Collateral Documents or the Liens created pursuant thereto; (v) all the actual costs and reasonable fees, expenses and disbursements of any auditors, accountants or appraisers and any environmental or other consultants, advisors and agents (including Ernst & Young Corporate Finance LLC) employed or retained by Agents or their counsel; (vi) all the actual costs and reasonable expenses incurred in connection with the custody or preservation of any of the Collateral; (vii) all other
actual and reasonable costs and expenses incurred by Agents in connection with the syndication of the Letter of Credit Commitments; and (viii) all the actual costs and reasonable expenses, including reasonable attorneys' fees and costs of settlement, incurred by Agents and Lenders in enforcing any Obligations of or in collecting any payments due from any Credit Party hereunder or under the other Credit Documents (including in connection with the sale of, collection from, or other realization upon any of the Collateral) or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a "work-out" or pursuant to the Chapter 11 Cases or any other insolvency or bankruptcy proceedings.
10.3 INDEMNITY.
In addition to the payment of expenses pursuant to subsection 10.2, whether or not the transactions contemplated hereby shall be consummated, Borrowers jointly and severally agree to defend (subject to Indemnitees' selection of counsel), indemnify, pay and hold harmless Agents and Lenders (including Issuing Lenders), and the officers, directors, employees, agents and affiliates of Agents and Lenders (collectively called the "INDEMNITEES"), including Issuing Lenders, from and against any and all Indemnified Liabilities (as hereinafter defined); provided that Borrowers shall not have any obligation to any Indemnitee hereunder with respect to any Indemnified Liabilities to the extent such Indemnified Liabilities arise solely from the gross negligence or willful misconduct of that Indemnitee as determined by a final judgment of a court of competent jurisdiction.
As used herein, "INDEMNIFIED LIABILITIES" means, collectively, any and all liabilities, obligations, losses, damages (including natural resource damages), penalties, actions, judgments, suits, claims (including Environmental Claims), costs (including the costs of any investigation, study, sampling, testing, abatement, cleanup, removal, remediation or other response action necessary to remove, remediate, clean up or abate any Hazardous Materials Activity), expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened by any Person, whether or not any such Indemnitee shall be designated as a party or a potential party thereto, and any fees or expenses incurred by Indemnitees in enforcing this indemnity), whether direct, indirect or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or regulations and Environmental Laws), on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of (i) this Agreement or the other Credit Documents and the Chapter 11 Cases (it being understood that such Indemnified Liabilities arising out of the Chapter 11 Cases shall apply solely to Indemnitees in their capacities as Agents, Lenders and Issuing Lenders or officers, directors, employees, agents and affiliates of Agents, Lenders or Issuing Lenders, and not in any other capacities) or the transactions contemplated hereby or thereby (including the issuance of Letters of Credit hereunder or the use or intended use of any thereof, the failure of an Issuing Lender to honor a drawing under a Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto Government Authority, or any enforcement of any of the Credit Documents (including any sale of, collection from, or other realization upon any of the Collateral), (ii) the statements contained in the commitment letter delivered by any Lender with respect thereto, or (iii) any Environmental Claim or any
Hazardous Materials Activity relating to or arising from, directly or indirectly, any past or present activity, operation, land ownership, or practice of Company or any of its Subsidiaries (including, solely with respect to periods prior to the Closing Date, CPIH Subsidiaries).
To the extent that the undertakings to defend, indemnify, pay and hold harmless set forth in this subsection 10.3 may be unenforceable in whole or in part because they are violative of any law or public policy, Borrowers shall contribute the maximum portion that they are permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of them.
10.4 SET-OFF.
In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence and during the continuance of any Event of Default each Lender is hereby authorized by each Borrower at any time or from time to time, without notice to any Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, including Indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts) and any other Indebtedness at any time held or owing by that Lender or any Affiliate of such Lender to or for the credit or the account of any Borrower or any other Credit Party against and on account of the obligations and liabilities of any Borrower or any other Credit Party to that Lender (or any Affiliate of such Lender) or to any other Lender (or any Affiliate of any other Lender) under this Agreement, the Letters of Credit and participations therein and the other Credit Documents, including all claims of any nature or description arising out of or connected with this Agreement, the Letters of Credit and participations therein or any other Credit Document, irrespective of whether or not (i) any Agent or any Lender shall have made any demand hereunder or (ii) any amounts in respect of the Letters of Credit or any other amounts due hereunder shall have become due and payable pursuant to Section 8 and although said obligations and liabilities, or any of them, may be contingent or unmatured. Each Borrower hereby further grants to Administrative Agent and each Lender a security interest in all deposits and accounts maintained with Administrative Agent or such Lender as security for the Obligations.
10.5 RATABLE SHARING.
A. Subject at all times to their obligations under the Intercreditor Agreement, Lenders hereby agree among themselves that if any of them shall, whether by voluntary or involuntary payment, by realization upon security, through the exercise of any right of set-off or banker's lien, by counterclaim or cross action or by the enforcement of any right under the Credit Documents or otherwise, or as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code, receive payment or reduction of a proportion of the aggregate amount of Letters of Credit, fees and other amounts then due and owing to that Lender hereunder or under the other Credit Documents with respect to the Obligations (collectively, the "AGGREGATE AMOUNTS DUE" to such Lender) that is greater than the proportion received by any other Lender in respect of the Aggregate Amounts Due to such other Lender, then the Lender receiving such proportionately greater payment shall (i) notify Administrative Agent and each other Lender of the receipt of such payment and (ii) apply a portion of such payment to purchase assignments
(which it shall be deemed to have purchased from each seller of an assignment simultaneously upon the receipt by such seller of its portion of such payment) of the Aggregate Amounts Due to the other Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by all Lenders in proportion to the Aggregate Amounts Due to them; provided that if all or part of such proportionately greater payment received by such purchasing Lender is thereafter recovered from such Lender, those purchases shall be rescinded and the purchase prices paid for such assignments shall be returned to such purchasing Lender ratably to the extent of such recovery, but without interest. Each Borrower expressly consents to the foregoing arrangement and agrees that any purchaser of an assignment so purchased may exercise any and all rights of a Lender as to such assignment as fully as if that Lender had complied with the provisions of subsection 10.1B with respect to such assignment. In order to further evidence such assignment (and without prejudice to the effectiveness of the assignment provisions set forth above), each purchasing Lender and each selling Lender agree to enter into an assignment agreement at the request of a selling Lender or a purchasing Lender, as the case may be, in form and substance reasonably satisfactory to each such Lender and to Administrative Agent.
B. Notwithstanding anything in this subsection 10.5 to the contrary, in the event any one or more Lenders (for purposes of this subsection 10.5, "ENFORCING LENDERS") receives any amounts that are subject to the sharing provisions of subsection 10.5A as a result of such Enforcing Lender or Enforcing Lenders, but not any Agents or all Lenders, commencing Proceedings to recover such amounts, no Lender that is not an Enforcing Lender shall be entitled to the benefits of subsection 10.5A with respect to the amounts received by such Enforcing Lenders (i) unless and until such Lender has paid its Pro Rata Share of the out-of-pocket costs and expenses (including legal fees and expenses of counsel to such Enforcing Lenders) incurred by such Enforcing Lenders in connection with such Proceedings or (ii) in any greater amount at any time than such Lender would be entitled to receive under such subsection if all Lenders paid their Pro Rata Shares of such costs and expenses.
10.6 AMENDMENTS AND WAIVERS.
No amendment, modification, termination or waiver of any provision of this Agreement or of the Notes or the Credit Documents, and no consent to any departure by any Borrower therefrom, shall in any event be effective without the written concurrence of Requisite Lenders; provided that no such amendment, modification, termination, waiver or consent shall, without the consent of: (a) each Lender with Obligations directly affected (whose consent shall be required for any such amendment, modification, termination or waiver in addition to that of Requisite Lenders) (1) reduce the principal amount of any funded amount with respect to a participation in a Letter of Credit, (2) increase the maximum aggregate amount of such Lender's Letter of Credit Commitment or Letters of Credit, (3) postpone the Maturity Date, (4) postpone the date on which any interest or any fees are payable, (5) decrease the interest rate borne by any funded amount with respect to a participation in a Letter of Credit (other than any waiver of any increase in the interest rate applicable pursuant to subsection 2.1C, the penultimate sentence of subsection 3.2 or subsection 6.13) or the amount of any fees payable hereunder, (6) reduce the amount or postpone the due date of any reimbursement of a drawing (other than from a Mandatory Payment) in respect of any Letter of Credit, (7) extend the expiration date of any Letter of Credit beyond the Maturity Date, (8) change in any manner the obligations of Lenders relating to the purchase of participations in Letters of Credit, or (9) change in any manner or waive the provisions contained
in subsection 8.1; (b) each Lender, (1) change in any manner the definition of "Pro Rata Share" or the definition of "Requisite Lenders" (except for any changes resulting solely from an increase in Letter of Credit Commitments approved by Requisite Lenders), (2) change in any manner any provision of this Agreement that, by its terms, expressly requires the approval or concurrence of all Lenders, (3) release any Lien granted in favor of Administrative Agent or Collateral Agent with respect to all or substantially all of the Collateral or release any substantial portion of Borrowers from their obligations under this Agreement, in each case other than in accordance with the terms of the Credit Documents, or (4) change in any manner or waive the provisions contained in subsection 10.6; (c) Administrative Agent, Documentation Agent and each Issuing Lender, change in any manner the definition of "Eligible Assignee"; (d) Administrative Agent and each Issuing Lender, change subsection 4.1X or the obligations of any Lender under subsection 10.1H or subsection 2.6 (and no consent of Requisite Lenders shall be required for any waiver of the conditions precedent contained in subsection 4.1X or any waiver of any obligations of a Lender contained in subsection 10.1H if such waiver is consented to by each Issuing Lender and Administrative Agent); (e) the relevant Agent, affect the rights or duties of such Agent (in its capacity as such Agent) under this Agreement or any other Credit Document; and (f) the relevant Issuing Lender, affect the rights or duties of such Issuing Lender (in its capacity as an Issuing Lender) under this Agreement or any other Credit Document.
In addition, (i) no amendment, modification, termination or waiver of any provision of Section 3 shall be effective without the written concurrence of Administrative Agent and Documentation Agent and, with respect to the purchase of participations in Letters of Credit, without the written concurrence of each Issuing Lender that has issued an outstanding Letter of Credit or has not been reimbursed for a payment under a Letter of Credit; (ii) no amendment, modification, termination or waiver of any provision of Section 9 or of any other provision of this Agreement which, by its terms, expressly requires the approval or concurrence of Administrative Agent or Documentation Agent shall be effective without the written concurrence of Administrative Agent or Documentation Agent, as the case may be; and (iii) no amendment, modification, termination or waiver of any provision of this Agreement which, by its terms, expressly requires the approval or concurrence of the applicable Issuing Lender shall be effective without the written concurrence of such Issuing Lender. Administrative Agent may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of that Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on any Borrower or Borrowers in any case shall entitle any Borrower or Borrowers to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this subsection 10.6 shall be binding upon each Lender at the time outstanding, each future Lender and, if signed by Borrowers, on Borrowers. Administrative Agent agrees that promptly after the effectiveness of any amendment, termination, supplement, waiver or other modification of this Agreement it shall provide, or cause to be provided, to each Lender a copy thereof to the extent such a copy is available to Administrative Agent.
10.7 INDEPENDENCE OF COVENANTS.
All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted
by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of an Event of Default or Potential Event of Default if such action is taken or condition exists.
10.8 NOTICES; EFFECTIVENESS OF SIGNATURES.
Unless otherwise specifically provided herein, any notice or
other communication herein required or permitted to be given shall be in writing
and may be personally served, or sent by telefacsimile or United States mail or
courier service or (subject to the following paragraphs in this subsection 10.8)
electronic mail and shall be deemed to have been given (a) when delivered in
person or by courier service, (b) upon receipt of telefacsimile in complete and
legible form, (c) three Business Days after depositing it in the United States
mail with postage prepaid and properly addressed, or (d) in the case of
communications delivered by electronic mail to the extent provided in the
following paragraph, as provided pursuant to such paragraph; provided that
notices to Administrative Agent and any Issuing Lender shall not be effective
until received. For the purposes hereof, the address of each party hereto shall
be as set forth under such party's name on the signature pages hereof or (i) as
to Company and Administrative Agent, such other address as shall be designated
by such Person in a written notice delivered to the other parties hereto and
(ii) as to each other party, such other address as shall be designated by such
party in a written notice delivered to Administrative Agent.
Notices and other communications to the Lenders hereunder may
be delivered or furnished by electronic communication (including e-mail and
Internet or intranet websites) pursuant to procedures approved by Administrative
Agent, provided that the foregoing shall not apply to notices to any Lender
pursuant to Section 2 or Section 3 hereof if such Lender has notified
Administrative Agent that it is incapable of receiving notices under such
Section by electronic communication. Administrative Agent or any Borrower may,
in its discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by it,
provided that approval of such procedures may be limited to particular notices
or communications.
Credit Documents and notices under the Credit Documents may be transmitted and/or signed by telefacsimile. The effectiveness of any such documents and signatures shall, subject to applicable law, have the same force and effect as an original copy with manual signatures and shall be binding on all Credit Parties, Agents and Lenders. Administrative Agent may also require that any such documents and signature be confirmed by a manually-signed copy thereof; provided, however, that the failure to request or deliver any such manually-signed copy shall not affect the effectiveness of any facsimile document or signature.
10.9 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
A. All representations, warranties and agreements made herein or in any other Credit Document shall survive the execution and delivery of this Agreement and the issuance of the Letters of Credit hereunder.
B. Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of Borrowers set forth in subsections 2.4, 3.5A, 10.2, 10.3, 10.4, 10.19 and 10.20 and the agreements of Lenders set forth in subsections 9.2C, 9.4, 10.5, 10.19
and 10.20 shall survive the cancellation or expiration of the Letters of Credit and the reimbursement of any amounts drawn thereunder, and the termination of this Agreement (and the benefits to a Lender of such agreements of Borrowers shall survive such Lender's ceasing to be a party hereto pursuant to subsection 10.1B).
10.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of an Agent or any Lender in the exercise of any power, right or privilege hereunder or under any other Credit Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement and the other Credit Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available.
10.11 MARSHALLING; PAYMENTS SET ASIDE.
Neither any Agent nor any Lender shall be under any obligation to marshal any assets in favor of Company or any other party or against or in payment of any or all of the Obligations. To the extent that Company makes a payment or payments to Administrative Agent or Lenders (or to Administrative Agent for the benefit of Lenders), or Agents or Lenders enforce any security interests or exercise their rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, any other state or federal law, common law or any equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor or related thereto, shall be revived and continued in full force and effect as if such payment or payments had not been made or such enforcement or setoff had not occurred.
10.12 SEVERABILITY.
In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
10.13 OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS;
DAMAGE WAIVER.
The obligations of Lenders hereunder are several and no Lender
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shall be responsible for the obligations or Letter of Credit Commitments of any other Lender hereunder. Nothing contained herein or in any other Credit Document, and no action taken by Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders, or Lenders and Company, as a partnership, an association, a Joint Venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out of this Agreement and it shall not be
necessary for any other Lender to be joined as an additional party in any proceeding for such purpose.
To the extent permitted by law, each Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with or as a result of this Agreement, any other Credit Document, any transaction contemplated by the Credit Documents, any Letter of Credit or the use of proceeds of drawings thereunder.
10.14 RELEASE OF SECURITY INTEREST.
Upon the proposed sale or other disposition of any Collateral that is permitted by this Agreement or to which Requisite Lenders have otherwise consented, for which a Credit Party desires to obtain a security interest release from Collateral Agent, such Credit Party shall deliver to Administrative Agent and Collateral Agent an Officer's Certificate (i) stating that the Collateral or the Capital Stock subject to such disposition is being sold or otherwise disposed of in compliance with the terms hereof and of the Credit Documents and (ii) specifying the Collateral or Capital Stock being sold or otherwise disposed of in the proposed transaction. Upon the receipt of such Officer's Certificate, Collateral Agent shall, at such Credit Party's expense, so long as Collateral Agent (a) believes in good faith that the facts stated in such Officer's Certificate are true and correct and (b), if the sale or other disposition of such item of Collateral or Capital Stock constitutes an Asset Sale, shall have received evidence satisfactory to it that arrangements satisfactory to it have been made for delivery of the Net Asset Sale Proceeds if and as required by subsection 2.3, execute and deliver such releases of its security interest in such Collateral as may be reasonably requested by such Credit Party. In the event of any conflict or inconsistency between this subsection 10.14 and the terms of the Intercreditor Agreement, the terms of the Intercreditor Agreement shall prevail.
10.15 HEADINGS.
Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect.
10.16 APPLICABLE LAW.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER OR ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THAT WOULD REQUIRE APPLICATION OF ANOTHER LAW.
10.17 CONSTRUCTION OF AGREEMENT.
Each of the parties hereto acknowledges that it has been represented by counsel in the negotiation and documentation of the terms of this Agreement, that it has had full and fair opportunity to review and revise the terms of this Agreement, and that this Agreement has been drafted jointly by all of the parties hereto. Accordingly, each of the parties hereto acknowledges and agrees that the terms of this Agreement shall not be construed against or in favor of another party.
10.18 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT, OR ANY OBLIGATIONS THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK (AS ANY AGENT, AGENTS, LENDER OR LENDERS BRINGING SUCH ACTION MAY ELECT IN ITS OR THEIR SOLE DISCRETION). BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH BORROWER, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS (AND SUBMITS TO) GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO SUCH BORROWER AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SUBSECTION 10.8;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH BORROWER IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST SUCH BORROWER IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 10.18
RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO
THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW
SECTION 5-1402 OR OTHERWISE.
10.19 WAIVER OF JURY TRIAL.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS CREDIT TRANSACTION
OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this
waiver is intended to be all-encompassing of any and all disputes that may be
filed in any court and that relate to the subject matter of this transaction,
including contract claims, tort claims, breach of duty claims and all other
common law and statutory claims. Each party hereto acknowledges that this waiver
is a material inducement to enter into a business relationship, that each has
already relied on this waiver in entering into this Agreement, and that each
will continue to rely on this waiver in their related future dealings. Each
party hereto further warrants and represents that it has reviewed this waiver
with its legal counsel and that it knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING
(OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION
10.19 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THE CREDIT EXTENDED HEREUNDER. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
10.20 CONFIDENTIALITY.
Each Lender shall hold all non-public information obtained pursuant to the requirements of this Agreement that has been identified as confidential by Company in accordance with such Lender's customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices, it being understood and agreed by Borrowers that in any event a Lender may make (a) disclosures to Affiliates and professional advisors of such Lender, (b) disclosures reasonably required by (i) any bona fide assignee, transferee or participant in connection with the contemplated assignment or transfer by such Lender of any Obligations or any participations therein, or (ii) any direct or indirect contractual counterparties in swap agreements or such contractual counterparties' professional advisors provided that such assignee, transferee, participant, contractual counterparty or professional advisor agrees to keep such information confidential to the same extent required of Lenders hereunder, (c) disclosures to any court or tribunal (whether or not pursuant to subpoena) in connection with any action arising out of or related to this Agreement, or (d) disclosures required or requested by any Government Authority or representative thereof or pursuant to legal process; provided that, unless specifically prohibited by applicable law or court order, each Lender shall notify Company of any request by any Government Authority or representative thereof (other than any such request in connection with any examination of such Lender by such Government Authority) for disclosure of any such non-public information prior to disclosure of such information; and provided, further that in no event shall any Lender be obligated or
required to return any materials furnished by Company or any of its Subsidiaries (including CPIH Subsidiaries).
Notwithstanding anything herein to the contrary, information required to be treated as confidential by reason of the foregoing shall not include, and Administrative Agent, each Lender and the respective Affiliates of each of the foregoing (and the respective partners, directors, officers, employees, agents, advisors and other representatives of each of the foregoing and their respective Affiliates) (collectively, the "LENDER PARTIES") may disclose to any and all Persons, without limitation of any kind, (x) any information with respect to United States federal and state income tax treatment and United States federal income tax structure of the transactions contemplated hereby and any facts that may be relevant to understanding such tax treatment, which facts shall not include for this purpose the names of the parties or any other Person named herein, or information that would permit identification of the parties or such other Persons, or any pricing terms or other non-public business or financial information that is unrelated to such tax treatment or facts, and (y) all materials of any kind (including opinions or other tax analyses) relating to such tax treatment or facts that are provided to any of the Lender Parties.
10.21 RELEASE OF PARTIES; WAIVERS.
A. Each Borrower, on behalf of itself and each of its Subsidiaries, including CPIH Subsidiaries (collectively, the "RELEASORS"), hereby releases, remises, acquits and forever discharges each Agent, each Lender (in its capacity as a Lender hereunder and as a lender, collateral agent, depository or letter of credit issuer and in any other capacity under or in connection with the Prepetition Credit Documents or the DIP Credit Documents), each other Prepetition Lender and DIP Lender (in its capacity as a lender, collateral agent, depository or letter of credit issuer and in any other capacity under or in connection with the Prepetition Credit Documents or the DIP Credit Documents), and each of their respective employees, agents, representatives, consultants, attorneys, fiduciaries, servants, officers, directors, partners, predecessors, successors and assigns, subsidiary corporations, parent corporations, related corporate divisions, participants and assigns (all of the foregoing hereinafter called the "RELEASED PARTIES"), from any and all actions and causes of action, judgments, executions, suits, debts, claims, demands, liabilities, obligations, setoffs, recoupments, counterclaims, defenses, damages and expenses of any and every character, known or unknown, suspected or unsuspected, direct and/or indirect, at law or in equity, of whatsoever kind or nature, whether heretofore or hereafter arising, for or because of any matter or things done, omitted or suffered to be done by any of the Released Parties prior to and including the date of execution hereof, and in any way directly or indirectly arising out of or in any way connected to this Agreement, any of the other Credit Documents, the Prepetition Credit Documents, and DIP Credit Documents or the administration or enforcement of any of such documents (all of the foregoing hereinafter called the "RELEASED MATTERS"). Each Releasor acknowledges that the agreements in this subsection are intended to be in full satisfaction of all or any alleged injuries or damages suffered or incurred by such Releasor arising in connection with the Released Matters and constitute a complete waiver of any right of setoff or recoupment, counterclaim or defense of any nature whatsoever which arose prior to the Closing Date to payment or performance of the Obligations. Each Releasor represents and warrants that it has no knowledge of any claim by it against the Released Parties or of any facts, or acts or omissions of the Released Parties which on the date hereof would be the basis of a claim by the Releasors against the Released Parties which is not
released hereby. Each Releasor represents and warrants that it has not purported to transfer, assign, pledge or otherwise convey any of its right, title or interest in any Released Matter to any other person or entity and that the foregoing constitutes a full and complete release of all Released Matters. Releasors have granted this release freely, and voluntarily and without duress.
10.22 NO FIDUCIARY DUTY.
No Agent nor any Lender has or shall have, by reason of this Agreement or any of the Credit Documents, a fiduciary relationship in respect of, or a fiduciary duty to, any Borrower, Borrowers, any other Credit Party or Credit Parties, and the relationship between Administrative Agent, the other Agents and Lenders, on one hand, and each Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor.
10.23 COUNTERPARTS; EFFECTIVENESS.
This Agreement and any amendments, waivers, consents or supplements hereto or in connection herewith may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto.
10.24 NO THIRD PARTY BENEFICIARIES
Nothing in this Agreement, express or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Indemnitees and Released Parties related to Agents, and Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.
BORROWERS:
COVANTA ENERGY CORPORATION, as a Borrower
By:_________________________________
Name: Anthony Orlando
Title: Authorized Officer
EACH OF THE ENTITIES NAMED ON SCHEDULE A
ANNEXED HERETO, as a Borrower
By:_________________________________
Name: Anthony Orlando
Title: Authorized Officer
Notice Address for each Borrower:
c/o Covanta Energy Corporation
40 Lane Road
Fairfield, NJ 07007
Attn: Timothy J. Simpson
Schedule A Other Borrowers
1. AMOR 14 Corporation
2. Burney Mountain Power
3. Covanta Acquisition, Inc.
4. Covanta Alexandria/Arlington, Inc.
5. Covanta Bessemer, Inc.
6. Covanta Bristol, Inc.
7. Covanta Cunningham Environmental Support, Inc.
8. Covanta Energy Americas, Inc.
9. Covanta Energy Construction, Inc.
10. Covanta Energy Group, Inc.
11. Covanta Energy International, Inc.
12. Covanta Energy Resource Corp.
13. Covanta Energy Services, Inc.
14. Covanta Energy West, Inc.
15. Covanta Engineering Services, Inc.
16. Covanta Fairfax, Inc.
17. Covanta Geothermal Operations Holdings, Inc.
18. Covanta Geothermal Operations, Inc.
19. Covanta Haverhill Properties, Inc.
20. Covanta Haverhill, Inc.
21. Covanta Heber Field Energy, Inc.
22. Covanta Hennepin Energy Resource Co., Limited Partnership
23. Covanta Hillsborough, Inc.
24. Covanta Honolulu Resource Recovery Venture
25. Covanta Huntsville, Inc.
26. Covanta Hydro Energy, Inc.
27. Covanta Hydro Operations West, Inc.
28. Covanta Hydro Operations, Inc.
29. Covanta Imperial Power Services, Inc.
30. Covanta Indianapolis, Inc.
31. Covanta Kent, Inc.
32. Covanta Lancaster, Inc.
33. Covanta Lee, Inc.
34. Covanta Long Island, Inc.
35. Covanta Marion Land Corp.
36. Covanta Marion, Inc.
37. Covanta Mid-Conn., Inc.
38. Covanta Montgomery, Inc.
39. Covanta New Martinsville Hydroelectric Corporation
40. Covanta New Martinsville Hydro-Operations Corporation
41. Covanta Oahu Waste Energy Recovery, Inc.
42. Covanta Omega Lease, Inc.
43. Covanta Onondaga Operations, Inc.
C
44. Covanta Operations of Union, LLC
45. Covanta OPW Associates, Inc.
46. Covanta OPWH, Inc.
47. Covanta Pasco, Inc.
48. Covanta Plant Services of New Jersey, Inc.
49. Covanta Power Equity Corporation
50. Covanta Power Pacific, Inc.
51. Covanta Power Plant Operations
52. Covanta Projects of Hawaii, Inc.
53. Covanta Projects, Inc.
54. Covanta RRS Holdings, Inc.
55. Covanta Secure Services, Inc.
56. Covanta SIGC Energy, Inc.
57. Covanta SIGC Energy II, Inc.
58. Covanta SIGC Geothermal Operations, Inc.
59. Covanta Stanislaus, Inc.
60. Covanta Systems, LLC
61. Covanta Wallingford Associates, Inc.
62. Covanta Waste to Energy , LLC
63. Covanta Water Holdings, Inc.
64. Covanta Water Systems, Inc.
65. Covanta Water Treatment Services, Inc.
66. DSS Environmental, Inc.
67. ERC Energy II, Inc.
68. ERC Energy, Inc.
69. Haverhill Power, LLC
70. Heber Field Energy II, Inc.
71. Heber Loan Partners
72. LMI, Inc.
73. Mammoth Geothermal Company
74. Mammoth Power Company
75. Michigan Waste Energy, Inc.
76. Mt. Lassen Power
77. Pacific Geothermal Company
78. Pacific Oroville Power, Inc.
79. Pacific Wood Fuels Company
80. Pacific Wood Services Company
81. Three Mountain Operations, Inc.
82. Three Mountain Power, LLC
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AGENTS AND LENDERS:
AGENTS AND LENDERS:
BANK OF AMERICA, N.A.,
as Administrative Agent and Co-Arranger
By:________________________________________________
Name: Henry Y. Yu
Title: Managing Director
Notice Address:
Bank of America, N.A., as Administrative Agent
555 So. Flower Street, 17th Floor
CA9-706-17-54
Los Angeles, California 90071
Attention: David Price, Vice President
Voice: (213) 345-1300
Fax: (415) 503-5011
email: david.price@bankofamerica.com
For all operational issues for Letters of Credit
and Loans:
Bank of America, N.A., as Administrative Agent
901 Main St., 14th Floor
MC: TX1-492-14-11
Dallas, Texas 75202
Phone: 214-209-0987
Fax: 214-290-8370
Attention: Richard A. Piland
E-mail:
richard.a.piland@bankofamerica.com
DEUTSCHE BANK SECURITIES, INC.,
as Documentation Agent and Co-Arranger
By:_____________________________________________
Name:
Title:
By:_____________________________________________
Name:
Title:
Notice Address:
Attention:
Deutsche Bank Securities, Inc.
60 Wall Street
New York, NY 10005
UBS AG, STAMFORD BRANCH,
as Issuing Lender
By:_____________________________________________
Name:
Title:
By:_____________________________________________
Name:
Title:
BANC OF AMERICA SECURITIES LLC,
as Agent for BANK OF AMERICA, N.A., as a Lender
By:_____________________________________________
Name:
Title:
BAYERISCHE HYPO-UND VEREINSBANK AG,
as a Lender
By:_____________________________________________
Name:
Title:
By:_____________________________________________
Name:
Title:
BEAR STEARNS & CO. INC.,
as a Lender
By:_____________________________________________
Name:
Title:
DEUTSCHE BANK AG, NEW YORK BRANCH
as a Lender
By:___________________________________
Name: Keith Braun
Title: Director
By:___________________________________
Name: Patrick Dowling
Title: Vice President
IIB BANK LIMITED,
as a Lender
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
KBC BANK NV, NEW YORK BRANCH,
as a Lender
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
Notice Address:
Attention: Rose Pagan
KBC Bank NV, New York Branch
125 West 55th Street
New York, NY 10019
Telephone No.: (212) 541-0657
Fax No.: (212) 956-5581
LANDESBANK HESSEN-THURINGEN GIROZENTRALE,
as a Lender
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
Notice Address:
420 Fifth Avenue
New York, New York 10018
Attention: Structured Finance
Telephone: 212-703-5303
Telecopier: 212-703-5262
MERRILL LYNCH, PIERCE, FENNER &
SMITH, INCORPORATED,
as a Lender
By:___________________________________
Name:
Title:
THE BANK OF NEW YORK,
as a Lender
By:___________________________________
Name:
Title:
UBS LOAN FINANCE LLC,
as a Lender
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
U.S. BANK NATIONAL ASSOCIATION
(FORMERLY KNOWN AS FIRSTAR BANK, N.A.),
as a Lender
By:___________________________________
Name: Alan R. Milster
Title: Vice President
WESTLB AG (FORMERLY KNOWN AS WESTDEUTSCHE
LANDESBANK GIROZENTRALE), NEW YORK BRANCH,
as a Lender
By:___________________________________ Name:
Title:
By:___________________________________
Name:
Title:
EXHIBIT 4.19
CREDIT AGREEMENT
DATED AS OF MARCH 10, 2004
AMONG
COVANTA ENERGY CORPORATION
AND
EACH OF ITS SUBSIDIARIES PARTY HERETO,
THE LENDERS LISTED HEREIN,
AS LENDERS,
AND
BANK ONE, NA,
AS ADMINISTRATIVE AGENT
Page No.
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Section 1. DEFINITIONS.................................................................................... 1
1.1. Certain Defined Terms.......................................................................... 1
1.2. Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement............. 39
1.3. Other Definitional Provisions and Rules of Construction........................................ 40
Section 2. REVOLVING LOANS; INTEREST RATES; FEES; AND CERTAIN TERMS OF PAYMENT AND REPAYMENT AND
OTHER MATTERS.................................................................................. 40
2.1. Revolving Loan Commitments; Making of Revolving Loans; the Register; Optional Notes............ 40
2.2. Interest on the Revolving Loans................................................................ 44
2.3. Fees........................................................................................... 47
2.4. Mandatory Payments, Reductions in Commitments; General Provisions Regarding Payments;
Application of Proceeds of Collateral.......................................................... 48
2.5. Use of Proceeds................................................................................ 55
2.6. Special Provisions Governing Eurodollar Rate Loans............................................. 55
2.7. Increased Costs; Taxes; Capital Adequacy....................................................... 57
2.8. Statement of Lenders; Obligation of Lenders and Issuing Lender to Mitigate..................... 60
2.9. Defaulting Lender.............................................................................. 61
2.10. Joint and Several Liability; Payment Indemnifications.......................................... 63
2.11. Rights of Subrogation, Contribution, Etc....................................................... 63
Section 3. LETTERS OF CREDIT.............................................................................. 64
3.1. Letter of Credit Commitments; Issuance of Letters of Credit and Lenders' Purchase of
Participations Therein......................................................................... 64
3.2. Letter of Credit Fees.......................................................................... 68
3.3. Drawings and Reimbursement of Amounts Paid Under Letters of Credit............................. 69
3.4. Obligations Absolute........................................................................... 71
3.5. Nature of Issuing Lender's Duties.............................................................. 72
3.6. Cash Collateral for Letters of Credit.......................................................... 73
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Section 4. CONDITIONS..................................................................................... 74
4.1. Conditions to Closing Date..................................................................... 74
4.2. Conditions to All Revolving Loans.............................................................. 85
4.3. Conditions to Letters of Credit................................................................ 86
Section 5. COMPANY'S REPRESENTATIONS AND WARRANTIES....................................................... 86
5.1. Organization, Powers, Qualification, Good Standing, Business and Subsidiaries.................. 87
5.2. Authorization of Borrowing, Etc................................................................ 87
5.3. Financial Condition............................................................................ 88
5.4. No Material Adverse Change; No Restricted Payments............................................. 89
5.5. Title to Properties; Liens; Real Property; Intellectual Property............................... 89
5.6. Litigation; Adverse Facts...................................................................... 90
5.7. Payment of Taxes............................................................................... 90
5.8. Performance of Agreements; Material Contracts.................................................. 91
5.9. Governmental Regulation........................................................................ 91
5.10. Securities Activities.......................................................................... 91
5.11. Employee Benefit Plans......................................................................... 91
5.12. Certain Fees................................................................................... 93
5.13. Environmental Protection....................................................................... 93
5.14. Employee Matters............................................................................... 94
5.15. Matters Relating to Collateral................................................................. 94
5.16. Disclosure..................................................................................... 95
5.17. Cash Management System......................................................................... 96
5.18. Matters Relating to Credit Parties............................................................. 96
5.19. Investigation.................................................................................. 96
5.20. Matters Relating to Bankruptcy Proceedings..................................................... 97
5.21. Subordinated Indebtedness...................................................................... 97
5.22. Reporting to IRS............................................................................... 97
5.23. Solvency....................................................................................... 97
Section 6. COMPANY'S AFFIRMATIVE COVENANTS................................................................ 97
6.1. Financial Statements and Other Reports......................................................... 98
6.2. Existence, Etc................................................................................. 103
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6.3. Payment of Taxes and Claims; Tax............................................................... 103
6.4. Maintenance of Properties; Insurance; Application of Net Insurance/ Condemnation
Proceeds....................................................................................... 104
6.5. Inspection Rights; Lender Meeting.............................................................. 106
6.6. Compliance with Laws, Etc...................................................................... 107
6.7. Environmental Matters.......................................................................... 107
6.8. Execution of Borrower Joinder Agreement and Personal Property Collateral Documents
After the Closing Date......................................................................... 109
6.9. Matters Relating to Additional Real Property Collateral........................................ 110
6.10. Deposit Accounts............................................................................... 111
6.11. Further Assurances............................................................................. 111
6.12. High Yield Notes............................................................................... 113
6.13. Most Favored Nations Payments.................................................................. 113
6.14. Montgomery Letter of Credit Cancellation....................................................... 113
Section 7. BORROWERS' NEGATIVE COVENANTS.................................................................. 113
7.1. Indebtedness................................................................................... 114
7.2. Liens and Related Matters...................................................................... 117
7.3. Investments; Acquisitions...................................................................... 120
7.4. Contingent Obligations; Performance Guaranties................................................. 123
7.5. Restricted Payments............................................................................ 125
7.6. Financial Covenants............................................................................ 127
7.7. Restriction on Fundamental Changes; Asset Sales................................................ 130
7.8. Transactions with Shareholders and Affiliates.................................................. 132
7.9. Restriction on Leases.......................................................................... 132
7.10. [Intentionally Omitted]........................................................................ 133
7.11. Conduct of Business............................................................................ 133
7.12. Amendments to Related Agreements, Debt Documentation and Organizational Documents.............. 133
7.13. End of Fiscal Years; Fiscal Quarters........................................................... 134
7.14. Amendment to Pension Plans..................................................................... 134
Section 8. EVENTS OF DEFAULT.............................................................................. 134
8.1. Failure to Make Payments When Due.............................................................. 135
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8.2. Default in Other Agreements.................................................................... 135
8.3. Breach of Certain Covenants.................................................................... 135
8.4. Breach of Warranty............................................................................. 136
8.5. Other Defaults Under Credit Documents.......................................................... 136
8.6. Involuntary Bankruptcy; Appointment of Receiver, Etc........................................... 136
8.7. Voluntary Bankruptcy; Appointment of Receiver, Etc............................................. 136
8.8. Judgments and Attachments...................................................................... 137
8.9. Dissolution.................................................................................... 137
8.10. Employee Benefit Plans......................................................................... 137
8.11. [Material Adverse Effect....................................................................... 138
8.12. Change in Control.............................................................................. 138
8.13. Invalidity of Intercreditor Agreement; Failure of Security; Repudiation of Obligations......... 138
8.14. Termination of Material Contracts.............................................................. 138
8.15. NOL Treatment.................................................................................. 139
Section 9. ADMINISTRATIVE AGENT........................................................................... 140
9.1. Appointment.................................................................................... 140
9.2. Powers and Duties; General Immunity............................................................ 140
9.3. Independent Investigation by Lenders; No Responsibility For
Appraisal of Creditworthiness.................................................................. 142
9.4. Right to Indemnity............................................................................. 142
9.5. Successor Administrative Agents................................................................ 143
9.6. Intercreditor Agreement........................................................................ 143
9.7. Administrative Agent May File Proofs of Claim.................................................. 144
Section 10. MISCELLANEOUS.................................................................................. 145
10.1. Successors and Assigns; Assignments and Participations in Letters of Credit.................... 145
10.2. Expenses....................................................................................... 149
10.3. Indemnity...................................................................................... 150
10.4. Set-Off........................................................................................ 151
10.5. Ratable Sharing................................................................................ 151
10.6. Amendments and Waivers......................................................................... 152
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10.7. Independence of Covenants...................................................................... 154
10.8. Notices; Effectiveness of Signatures........................................................... 154
10.9. Survival of Representations, Warranties and Agreements......................................... 155
10.10. Failure or Indulgence Not Waiver; Remedies Cumulative.......................................... 155
10.11. Marshalling; Payments Set Aside................................................................ 155
10.12. Severability................................................................................... 156
10.13. Obligations Several; Independent Nature of Lenders' Rights; Damage Waiver...................... 156
10.14. Release of Security Interest................................................................... 156
10.15. Headings....................................................................................... 157
10.16. Applicable Law................................................................................. 157
10.17. Construction of Agreement...................................................................... 157
10.18. Consent to Jurisdiction and Service of Process................................................. 157
10.19. Waiver of Jury Trial........................................................................... 158
10.20. Confidentiality................................................................................ 159
10.21. No Fiduciary Duty.............................................................................. 159
10.22. Counterparts; Effectiveness.................................................................... 160
10.23. No Third Party Beneficiaries................................................................... 160
SIGNATURE PAGES.................................................................................................. S-1
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EXHIBITS
I NOTICE OF BORROWING
II FORM OF REVOLVING NOTE
III FORM OF REQUEST FOR ISSUANCE OF LETTER OF CREDIT
IV NOTICE OF CONVERSION / CONTINUATION
V FORM OF COMPLIANCE CERTIFICATE
VI FORM OF ASSIGNMENT AGREEMENT
VII FORM OF SECURITY AGREEMENT
VIII FORM OF BORROWER JOINDER AGREEMENT
IX FORM OF SOLVENCY CERTIFICATE
X FORM OF OPINIONS OF CREDIT PARTIES' COUNSEL
XI DHC PLEDGE AGREEMENT
XII [INTENTIONALLY OMITTED]
XIII FORM OF INTERCREDITOR AGREEMENT
XIV FORM OF MORTGAGE
XV [INTENTIONALLY OMITTED]
SCHEDULES
1.1A [INTENTIONALLY OMITTED]
1.1B PRINCIPAL LEASE, SERVICE AND OPERATING AGREEMENTS
1.1C BUDGET
2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES
2.4A(iii)(f) DEBT SERVICE RESERVE ACCOUNTS
3.1(a)(i) LETTER OF CREDIT OBLIGATIONS
4.1C CORPORATE STRUCTURE
4.1N CLOSING DATE MORTGAGED PROPERTIES
4.1P CASH MANAGEMENT SYSTEM
5.1 COMPANY AND SUBSIDIARIES
5.5B REAL PROPERTY
5.5C INTELLECTUAL PROPERTY
5.6 LITIGATION
5.8A CERTAIN ALLEGED DEFAULTS
5.8C MATERIAL CONTRACTS
5.11 MATTERS RELATING TO EMPLOYEE BENEFIT PLANS
5.13 ENVIRONMENTAL MATTERS
7.1(vi) CERTAIN EXISTING INDEBTEDNESS
7.1(ix) CERTAIN EXISTING CAPITAL LEASES
7.2 CERTAIN EXISTING LIENS
7.3(v) CERTAIN EXISTING INVESTMENTS
7.3(vi) CERTAIN WTE PROJECTS
7.4(iv) CERTAIN EXISTING PERFORMANCE GUARANTIES
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7.4(vi) CERTAIN EXISTING CONTINGENT OBLIGATIONS 7.6G STIPULATED ADJUSTED OPERATING CASH FLOW 7.8 CERTAIN TRANSACTIONS WITH AFFILIATES |
COVANTA ENERGY CORPORATION
CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of March 10, 2004 and entered into by and among COVANTA ENERGY CORPORATION, a Delaware corporation ("COMPANY"); EACH OF COMPANY'S SUBSIDIARIES LISTED ON THE SIGNATURE PAGES HEREOF (each such Subsidiary and Company individually referred to herein as a "BORROWER" and, collectively (together with any Additional Subsidiary Borrowers (this and other capitalized terms used in the recitals hereto without definition being used as defined in subsection 1.1)), on a joint and several basis, as "BORROWERS"); THE PERSONS IDENTIFIED ON THE SIGNATURE PAGES HEREOF AS LENDERS (each individually referred to herein as a "LENDER" and collectively as "LENDERS"); and BANK ONE, NA ("BANK ONE"), as administrative agent for Lenders (in such capacity, "ADMINISTRATIVE AGENT").
R E C I T A L S
WHEREAS, on April 1, 2002 (the "PETITION DATE"), Borrowers and certain of their Domestic Subsidiaries (collectively, the "DEBTORS") filed voluntary petitions for relief under the Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York (such proceedings being jointly administered under Case Nos. 02-40826 through 02-40949, 02-16322, 03-13679 through 03-13685, and 03-13687 through 03-13709 are hereinafter referred to as the "CHAPTER 11 CASES"), and each Borrower has operated its businesses and managed its properties as a debtor-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code; and
WHEREAS, the Debtors have proposed, their creditors have approved, and the Bankruptcy Court has confirmed, the Plan of Reorganization;
NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Borrowers, Lenders and Administrative Agent agree as follows:
SECTION 1. DEFINITIONS
1.1. CERTAIN DEFINED TERMS.
The following terms used in this Agreement shall have the following meanings:
"ADDITIONAL SUBSIDIARY BORROWER" has the meaning assigned to that term in subsection 6.8B.
"ADJUSTED EBITDA" means, for any period, (i) without
duplication, the aggregate amount derived by combining the amounts for such
period of (a) "Operating income (loss)", plus (b) Net Depreciation and
Amortization Expense, plus (c) "Amortization of premium and discount, net" plus
(d) "Unbilled receivables", to the extent associated with accretion accounting
for Limited Recourse Debt relating to Projects of Company and its Subsidiaries,
minus (e) "Equity in income from unconsolidated investments", minus (ii) without
duplication, the aggregate amount derived by combining the amounts (each
expressed as a positive number) for such period of (a) "Payment of debt", to the
extent consisting of principal payments on Limited Recourse Debt relating to
Projects of Company and its Subsidiaries, plus (b) "Minority interests", plus
(c) accretion of principal on the High Yield Notes, as each such line item
referred to in clauses (i)(a), (i)(e) and (ii)(b) is reflected in Company's
consolidated statement of income prepared in conformity with GAAP and as each
such line item referred to in clauses (i)(c), (i)(d) and (ii)(a) is reflected in
Company's consolidated statement of cash flows prepared in conformity with GAAP,
in each case reported in a manner consistent with Company's reporting of such
amount in its quarterly or annual report (as the case may be) on Form 10Q or
10K, respectively, prior to the Closing Date, whether such line items are so
titled or otherwise titled; provided, however, that with respect to any such
period ending during 2008, each of the line items referred to above shall be
calculated as if the terms of the service agreement of Company and its
Subsidiaries relating to the Alexandria Project in effect for Fiscal Year 2007
continued in effect during 2008, without giving effect to any negative impact on
Adjusted EBITDA from the terms of any extension in 2008 of such service
agreement.
"ADMINISTRATIVE AGENT" has the meaning assigned to that term in the introduction to this Agreement and also means and includes any successor Administrative Agent appointed pursuant to subsection 9.5.
"AFFILIATE", as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person (other than exclusively as a result of such Person's role as a senior executive of that Person or Project manager or operator), whether through the ownership of voting securities or by contract or otherwise.
"AGGREGATE AMOUNTS DUE" has the meaning assigned to that term in subsection 10.5.
"AGREEMENT" means this Credit Agreement dated as of March 10, 2004, as it may be amended, restated, supplemented or otherwise modified from time to time.
"ANNUAL FREE CASH FLOW" means, for any period, (i) the sum for such period of (without duplication) (a) all cash revenue received by Company and its Subsidiaries from Projects and facilities that are not Projects, other than amounts received by Company or such Subsidiary as a "pass through" entity for debt service on Limited Recourse Debt, (b) all
amounts previously in reserve with respect to Projects that are released from
such reserves to Company or any of its Subsidiaries, other than amounts that are
required to be paid (but that have not yet been paid) to third parties pursuant
to binding Contractual Obligations of Company or any of its Subsidiaries and
that are permitted under this Agreement to be paid to such third parties, (c)
all distributions made to Company and its Subsidiaries on account of Capital
Stock held by Company and its Subsidiaries, (d) all interest earned by Company
and its Subsidiaries on Cash On Hand of Company and its Subsidiaries, (e) all
amounts released to Company and its Subsidiaries from cash accounts related to
Expansions, excluding any portion of such amounts that are not expended in such
period and are required to be (and are permitted under this Agreement to be)
expended by Company and its Subsidiaries in connection with such Expansions in a
subsequent period (provided, that Administrative Agent shall have reviewed and
approved the exclusion of such portion of such released amounts from this clause
(i)(e) prior to such exclusion), (f) all reimbursement amounts received by
Company and its Subsidiaries under the Management Services and Reimbursement
Agreement, and (g) all cash refunds or rebates of taxes received by Company and
its Subsidiaries (but excluding from the amounts referred to in clauses (i)(a)
through (i)(g) any portion of such amounts that was previously required to be
applied (and was applied) as a Mandatory Payment), minus, without duplication of
amounts already excluded or deducted from clauses (i)(a) through (i)(g) above,
(ii) the sum for such period of (without duplication) (a) operating
disbursements of Company and its Subsidiaries, (b) Consolidated Facilities
Capital Expenditures, (c) corporate overhead of Company and its Subsidiaries,
(d) payments on debt and leases of Company and its Subsidiaries, to the extent
such payments are permitted to be made under this Agreement, (e) distributions
on Capital Stock of Subsidiaries to Persons other than Company and its
Subsidiaries, (f) all payments by Company and its Subsidiaries to third parties
during such period as a result of drawings under the Existing IPP International
Project Guaranties, (g) all payments by Company and its Subsidiaries to the
extent that such payments are required to be reimbursed to Company and its
Subsidiaries pursuant to the Management Services and Reimbursement Agreement,
(h) any amounts posted in such period by Company and its Subsidiaries for credit
support to the extent such amounts are required to be posted during such period
pursuant to binding Contractual Obligations of Company or any of its
Subsidiaries, (i) all cash principal, interest and fee payments (other than
Mandatory Payments) by Company and its Subsidiaries that are not prohibited by
the terms of this Agreement, including all payments made by Borrowers to
reimburse amounts drawn under Letters of Credit or letters of credit issued
under the Detroit L/C Facility Agreement, (j) all cash payments of taxes by
Company and its Subsidiaries, (k) all cash payments by Company and its
Subsidiaries during such period under the DHC Corporate Services Reimbursement
Agreement, to the extent such payments are permitted to be made under this
Agreement, and (l) all payments by Company and its Subsidiaries made during such
period into reserves with respect to Projects, to the extent such payments (1)
are required to be placed during such period in such reserves pursuant to
binding Contractual Obligations of Company or any of its Subsidiaries and (2)
are funded from amounts which are included in the amounts described in clause
(i) of this definition for such period; provided, however, that in any Fiscal
Year commencing with Fiscal Year 2005, Annual Free Cash Flow for such Fiscal
Year shall be reduced by the amount, if any, by which the sum of
the amounts of Annual Free Cash Flow for each of the immediately preceding Fiscal Years (commencing with Fiscal Year 2004) was less than zero.
"APPROVED FUND" means a Fund that is administered or managed by (i) a Lender, (ii) an Affiliate of a Lender or (iii) an entity or an Affiliate of an entity that administers or manages a Lender.
"APPROVED PLAN OF REORGANIZATION" has the meaning assigned to that term in subsection 4.1E(i).
"ASSET SALE" means the sale by Company or any of its
Subsidiaries to any Person of (i) any of the Capital Stock of any of Company's
Subsidiaries, (ii) substantially all of the assets of any division or line of
business of Company or any of its Subsidiaries, or (iii) any other assets
(whether tangible or intangible) of Company or any of its Subsidiaries (other
than (a) inventory sold in the ordinary course of business and (b) any such
other assets to the extent that the aggregate value of such assets sold in any
single transaction or related series of transactions is equal to $500,000 or
less and the aggregate value of all such other assets since the Closing Date is
equal to $2,000,000 or less, in each case so long as not less than 90% of the
consideration received for such assets shall be cash); provided, however, that
Asset Sales shall not include (1) any sale or discount, in each case without
recourse, of accounts receivable arising in the ordinary course of business, but
only in connection with the compromise or collection thereof (provided, that
sales and discounts of not more than $10,000,000 in face value of accounts
receivable may be excluded from Asset Sales pursuant this clause (1), and the
sole consideration received in connection with any such sale of accounts
receivable shall be cash), (2) any sale or exchange of specific items of
equipment, so long as the purpose of each such sale or exchange is to acquire
(and results within 120 days of such sale or exchange in the acquisition of)
replacement items of equipment which are the functional equivalent of the item
of equipment so sold or exchanged (provided, that any cash received in
connection with any such sale or exchange that is not expended as part of such
sale or exchange to obtain such replacement items of equipment, to the extent in
excess of the amounts set forth in clause (b) of this definition, shall be
deemed cash proceeds of an Asset Sale), (3) disposals of obsolete, worn out or
surplus property in the ordinary course of business (provided, that not less
than 75% of the consideration, if any, received in connection with any such
disposal shall be cash, and any such cash received, to the extent in excess of
the amounts set forth in clause (b) of this definition, shall be deemed cash
proceeds of an Asset Sale), (4) any discount or compromise of notes or accounts
receivable for less than the face value thereof, to the extent Company deems
necessary in order to resolve disputes that occur in the ordinary course of
business, or (5) any IPP International Sale.
"ASSIGNMENT AGREEMENT" means an Assignment Agreement in substantially the form of Exhibit VI annexed hereto.
"ASSUMPTIONS" has the meaning assigned to that term in subsection 5.11D.
"BACK-UP CLOSING DATE LETTER OF CREDIT" means a Closing Date Letter of Credit issued in support of a DIP Tranche A L/C or a DIP Tranche B L/C and any Letter of Credit issued to replace or extend the same pursuant to subsection 3.1B(ii)(a).
"BANK OF AMERICA" means Bank of America, N.A.
"BANK ONE" has the meaning assigned to that term in the introduction to this Agreement.
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled "Bankruptcy", as now and hereafter in effect, or any successor statute.
"BANKRUPTCY COURT" means the United States Bankruptcy Court for the Southern District of New York and any other court properly exercising jurisdiction over any relevant Chapter 11 Case.
"BANKRUPT SUBSIDIARY" means any of the Warren Subsidiaries, the Lake Subsidiary or the Tampa Subsidiaries, in each case so long as such Debtor remains subject to its Chapter 11 Case before the Bankruptcy Court.
"BASE RATE" means, at any time, the higher of (i) the Prime Rate or (ii) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change.
"BASE RATE LOANS" means Revolving Loans bearing interest at rates determined by reference to the Base Rate as provided in subsection 2.2A.
"BASE RATE MARGIN" means four and one-half of one percent (4.50%).
"BORROWER JOINDER AGREEMENT" means a Borrower Joinder Agreement, substantially in the form of Exhibit VIII annexed hereto.
"BORROWERS" has the meaning assigned to that term in the introduction to this Agreement.
"BUDGET" means (i) with respect to Fiscal Year 2004, the budget delivered by Company to Lenders on or prior to the Closing Date pursuant to subsection 4.1G, setting forth projected cash receipts and expenditures for Company and its Subsidiaries for each calendar month and each Fiscal Quarter from the Closing Date through December 31, 2004, and projected net cash flows for Company and its Subsidiaries for each Fiscal Year thereafter through December 31, 2008, as such budget may be supplemented pursuant to subsection 6.1(i), and (ii) with respect to each Fiscal Year after 2004, the budget delivered by Company to Lenders pursuant to subsection 6.1(xvi), setting forth projected cash receipts and expenditures for Company and its Subsidiaries for each calendar month and Fiscal Quarter during such Fiscal Year and projected net cash flows for Company and its Subsidiaries for
each Fiscal Year thereafter through December 31, 2009, as such budget may be supplemented pursuant to subsection 6.1(i).
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York or the State of Illinois or is a day on which banking institutions located in such state are authorized or required by law or other governmental action to close.
"CAPITAL EXPENDITURES" means cash expenditures by Company and its Subsidiaries that, in conformity with GAAP, would be included in "additions to property, plant or equipment" or comparable items reflected in the consolidated statement of cash flows of Company and its Subsidiaries for the relevant period.
"CAPITAL LEASE", as applied to any Person, means any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person.
"CAPITAL STOCK" means the capital stock or other equity interests of a Person.
"CASH MANAGEMENT SYSTEM" means the cash management system of Borrowers, described in Schedule 4.1P annexed hereto, as such Cash Management System may be modified pursuant to subsection 6.10.
"CASH ON HAND" has the meaning assigned to that term in subsection 2.4A(iii)(f).
"CEA" means Covanta Energy Americas, Inc., a Delaware corporation.
"CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Section 9601 et seq.), or any successor statute, and all implementing regulations promulgated thereunder.
"CHANGE IN CONTROL" means the occurrence of any one or more of the following: (i) DHC shall cease to own, directly, 80% or more of the outstanding Capital Stock of Company; or (ii) any "change of control" or "change in control" or event, however titled, shall occur that requires under the High Yield Indenture a prepayment of the High Yield Notes or an offer to prepay High Yield Notes as a result of a change in ownership of all or some portion of the Capital Stock of Company or any of its Subsidiaries or all or substantially all of the assets of Company and its Subsidiaries.
"CHAPTER 11 CASES" has the meaning assigned to that term in the recitals to this Agreement.
"CLOSING DATE" means the date on which each of the conditions described in subsection 4.1 have been satisfied or waived by Administrative Agent and Requisite Lenders (or such other Lenders as may be required under subsection 10.6).
"CLOSING DATE LETTERS OF CREDIT" means the Letters of Credit issued on or about the Closing Date pursuant to subsection 3.1B(i), consisting of the Back-Up Closing Date Letters of Credit, the Montgomery Closing Date Letter of Credit and the Replacement Closing Date Letters of Credit and any Letters of Credit issued to replace or extend the same pursuant to subsection 3.1B(ii)(a).
"CLOSING DATE MORTGAGED PROPERTY" has the meaning assigned to that term in subsection 4.1N.
"CLOSING DATE MORTGAGES" has the meaning assigned to that term in subsection 4.1N.
"CLOSING DATE RETAINED AMOUNT" has the meaning assigned to that term in subsection 4.1T.
"COLLATERAL" means, collectively, all of the real, personal and mixed property (including Capital Stock) in which Liens are purported to be granted pursuant to the Collateral Documents, as security for the Obligations.
"COLLATERAL ACCOUNT" means the cash collateral account maintained with Collateral Agent pursuant to the Security Agreement to secure the obligations of Borrowers with respect to Letter of Credit Exposure.
"COLLATERAL AGENT" means Bank of America, in its capacity as Collateral Agent under the Intercreditor Agreement and the Collateral Documents.
"COLLATERAL DOCUMENTS" means the Security Agreement, the DHC Pledge Agreement, the Control Agreements, the Mortgages and all other instruments or documents (pursuant to which a Lien to secure all or any portion of the Obligations is purported or intended to be created, granted, evidenced or perfected) delivered from time to time by any Credit Party pursuant to this Agreement or any of the other Credit Documents, as such instruments and documents may be amended, restated, supplemented or otherwise modified from time to time.
"COMMITMENTS" means one or more of the Revolving Loan Commitments or the Letter of Credit Commitments or any combination thereof.
"COMMITMENT FEE PERCENTAGE" means, on any date of determination, a per annum rate equal to 0.50%.
"COMMODITIES AGREEMENT" means any long-term or forward purchase contract or option contract to buy, sell or exchange commodities or similar agreement or arrangement to which Company or any of its Subsidiaries is a party unless, under the terms of such contract, option contract agreement or arrangement Company expects to make or take delivery of the commodities which are the subject thereof.
"COMPANY" has the meaning assigned to that term in the introduction to this Agreement.
"COMPETITOR" means any Person (and its Affiliates) primarily engaged in the business of (i) the generation and sale of electricity or (ii) municipal waste management.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form of Exhibit V annexed hereto.
"CONFIRMATION ORDER" means the Findings of Fact, Conclusions of Law and Order under 11 U.S.C. Section 1129 and Rule 3020 of the Federal Rules of Bankruptcy Procedure Confirming Debtors' Second Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code entered by the Bankruptcy Court on March 5, 2004 in the Chapter 11 Cases, without modification, revision or amendment.
"CONSOLIDATED CASH INTEREST EXPENSE" means, for any period,
(i) Consolidated Interest Expense for such period minus (ii) to the extent
included in Consolidated Interest Expense for such period, accretion of
principal on the High Yield Notes, interest paid in kind and not in cash during
such period and any other amounts not paid or payable in cash.
"CONSOLIDATED FACILITIES CAPITAL EXPENDITURES" means, for any period, the aggregate of all cash expenditures by Company and its Subsidiaries during that period that, in conformity with GAAP, would be included in "additions to property, plant or equipment" or comparable items reflected in the consolidated statement of cash flows of Company and its Subsidiaries for that or any other period. Expenditures that are reimbursed by the client (if such client is a Government Authority) of a Project under the principal lease, service or operating agreement relating to such Project pursuant to a Contractual Obligation on the part of such client to reimburse such expenditures shall not constitute Consolidated Facilities Capital Expenditures.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, (i) total interest expense, net of interest income, of Company and its Subsidiaries on a consolidated basis with respect to all outstanding Indebtedness of Company and its Subsidiaries to the extent such Indebtedness is or is required to be reflected on the consolidated balance sheet of Company and its Subsidiaries in conformity with GAAP, but excluding any Indebtedness consisting of Limited Recourse Debt, and (ii) to the extent not included in the calculation of the amount described in clause (i), all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and net costs under Interest Rate Agreements, but excluding, however, from clauses (i) and (ii) any amounts referred to in subsection 2.3 payable to Administrative Agent and Lenders on or before the Closing Date and any amounts referred to in subsection 2.3 of the Detroit L/C Facility Agreement payable to the agents and lenders thereunder on or before the Closing Date.
"CONSOLIDATED LEVERAGE RATIO" means, as at any date of determination, the ratio of (a) Total Debt as at such date to (b) Adjusted EBITDA for the four-Fiscal Quarter period most recently ended prior to such date.
"CONSOLIDATED NET WORTH" means, as at any date of determination, the sum of the capital stock and additional paid-in capital plus retained earnings (or minus accumulated deficits) of Company and its Subsidiaries on a consolidated basis, as such amounts are or are required to be reflected on the consolidated balance sheet of Company and its Subsidiaries in conformity with GAAP.
"CONTINGENT OBLIGATION", as applied to any Person, means any
direct or indirect liability, contingent or otherwise, of that Person (i) with
respect to any Indebtedness, lease, dividend or other obligation of another if
the primary purpose or intent thereof by the Person incurring the Contingent
Obligation is to provide assurance to the obligee of such obligation of another
that such obligation of another will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected (in whole or in part) against loss in respect
thereof, (ii) with respect to any letter of credit issued for the account of
that Person or as to which that Person is otherwise liable for reimbursement of
drawings, or (iii) under Hedge Agreements. Contingent Obligations shall include
(a) the direct or indirect guaranty, endorsement (otherwise than for collection
or deposit in the ordinary course of business), co-making, discounting with
recourse or sale with recourse by such Person of the obligation of another, (b)
the obligation to make take-or-pay or similar payments if required regardless of
non-performance by any other party or parties to an agreement, and (c) any
liability of such Person for the obligation of another through any agreement
(contingent or otherwise) (1) to purchase, repurchase or otherwise acquire such
obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise) or (2) to maintain the solvency
or any balance sheet item, level of income or financial condition of another if,
in the case of any agreement described under subclauses (1) or (2) of this
sentence, the primary purpose or intent thereof is as described in the preceding
sentence. The amount of any Contingent Obligation shall be equal to the amount
(if stated) of the obligation so guaranteed or otherwise supported or, if less,
the amount to which such Contingent Obligation is specifically limited, or, if
the amount of any Contingent Obligation is not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined by
Company in good faith based upon reasonable assumptions. No obligations under
Performance Guaranties shall constitute Contingent Obligations.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any provision of any Security issued by that Person or of any material indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject.
"CONTROL AGREEMENT" means an agreement, satisfactory in form and substance to Administrative Agent and executed by the financial institution or securities intermediary at which a Deposit Account or a Securities Account, as the case may be, is
maintained, pursuant to which such financial institution or securities intermediary confirms and acknowledges Collateral Agent's security interest in such account, and agrees that the financial institution or securities intermediary, as the case may be, will comply with instructions originated by Collateral Agent as to disposition of funds in such account, without further consent by Company or any Subsidiary, as such agreement may be amended, restated, supplemented or otherwise modified from time to time.
"CORPORATE SERVICES REIMBURSEMENT AGREEMENT" means the corporate services and expense reimbursement agreement entered into by DHC and Company on the Closing Date, as such agreement may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted thereunder and under subsection 7.12.
"COVANTA ENERGY PENSION PLAN" means the Pension Plan referred to generally by Company on and prior to the Closing Date as the "Covanta Energy Pension Plan".
"CPIH" means Covanta Power International Holdings, Inc., a Delaware corporation, and its successors and assigns.
"CPIH BORROWERS" means CPIH and any additional borrowers under the CPIH Term Loan Agreement from time to time.
"CPIH REVOLVER AGREEMENT" means that certain credit agreement dated as of the date hereof by and among CPIH Borrowers, as borrowers, and the financial institutions listed on the signature pages thereof, as lenders, as such credit agreement may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted thereunder and under subsection 7.12.
"CPIH REVOLVER DOCUMENTS" means the "Loan Documents" as defined in the CPIH Revolver Agreement.
"CPIH STOCK PLEDGE AGREEMENT" means the pledge agreement dated as of the Closing Date pursuant to which CEA pledges the Capital Stock of CPIH to secure the obligations of CPIH Borrowers under the CPIH Revolver Documents and the CPIH Term Loan Documents, as such agreement may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted thereunder and under subsection 7.12.
"CPIH SUBSIDIARIES" means, on and after the Closing Date, CPIH and its Subsidiaries.
"CPIH TERM LOAN AGREEMENT" means that certain credit agreement dated as of the date hereof by and among CPIH Borrowers, the Persons listed on the signature pages thereof, as lenders, and Bank of America and Deutsche Bank, as agents for such lenders, as such credit agreement may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted thereunder and under subsection 7.12.
"CPIH TERM LOAN DOCUMENTS" means the "Loan Documents" as defined in the CPIH Term Loan Agreement.
"CREDIT DOCUMENTS" means this Agreement, the Revolving Notes, the Letters of Credit (and any applications for, or reimbursement agreements or other documents or certificates executed by Borrowers in favor of Issuing Lender relating to, the Letters of Credit) and the Collateral Documents, the Intercreditor Agreement and all amendments, waivers and consents relating thereto.
"CREDIT EXPOSURE" means, with respect to any Lender, as of any date of determination, that Lender's Revolving Loan Exposure and Letter of Credit Exposure.
"CREDIT PARTY" means each Borrower and DHC, and "CREDIT PARTIES" means all such Persons, collectively.
"CREDIT UTILIZATION" means, on any date of determination, the sum of (i) the aggregate principal amount of all outstanding Revolving Loans plus (ii) the aggregate amount of Letter of Credit Usage.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap agreement, or option contract to buy, sell or exchange currencies or other similar agreement or arrangement to which Company or any of its Subsidiaries is a party.
"D.E. SHAW" means D. E. Shaw Laminar Portfolios, L.L.C. a Delaware limited liability company.
"DEBTORS" has the meaning assigned to that term in the recitals to this Agreement.
"DEFAULTED PARTICIPATION" has the meaning assigned to that term in subsection 2.9.
"DEFAULT EXCESS" has the meaning assigned to that term in subsection 2.9.
"DEFAULTING LENDER" has the meaning assigned to that term in subsection 2.9.
"DEFAULT PERIOD" has the meaning assigned to that term in subsection 2.9.
"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or similar account maintained with a Person engaged in the business of banking, including a savings bank, savings and loan association, credit union or trust company.
"DETROIT L/C FACILITY AGREEMENT" means (i) that certain credit agreement dated as of the date hereof by and among Borrowers, as borrowers, Bank of America, as Administrative Agent, the Documentation Agent party thereto, the Co-Lead Arrangers party thereto, and the financial institutions listed on the signature pages thereof, as lenders, and (ii) any credit agreement entered into by Borrowers to refinance, replace, renew or extend, in
whole or in part, the credit agreement referenced in clause (i) and the Indebtedness and letters of credit issued thereunder (provided, that (a) the terms of the Detroit L/C Facility Documents as so refinanced, replaced, renewed or extended shall not be more disadvantageous to Company and its Subsidiaries and the Lenders (in a manner deemed material by Administrative Agent) than the Detroit L/C Facility Documents in effect on the Closing Date (it being understood and agreed that any refinancing, replacement, renewal or extension having the effect of reducing, delaying or waiving any otherwise required reduction in the amount of any commitment to extend letters of credit under the Detroit L/C Facility Documents shall be deemed to be more disadvantageous for purposes of this clause (a) without further notice or other action by Administrative Agent), (b) the aggregate amount of Indebtedness and letters of credit outstanding and additional commitments to extend credit, if any, under the Detroit L/C Facility Documents as refinanced, replaced, renewed or extended, shall not exceed the aggregate amount of the commitments to extend credit in effect under the Detroit L/C Facility Documents on the Closing Date (or, if less, the amount of such commitments in effect immediately prior to such refinancing, replacement, renewal or extension), plus $5,000,000, (c) the credit available under the Detroit L/C Facility Documents as refinanced, replaced, renewed or extended shall be limited to letters of credit issuable in connection with the Project to which the Existing Detroit L/Cs relate (provided, that the requirements of this clause (c) shall not apply with respect to credit extended pursuant to the $5,000,000 additional amount described at the end of the foregoing clause (b)), (d) the obligations under (and the Liens securing) the Detroit L/C Facility Documents as refinanced, replaced, renewed or extended shall be subject to the Intercreditor Agreement on terms substantively identical to the terms applicable to the obligations in effect under the Detroit L/C Facility Documents in effect on the Closing Date, and (e) Company shall provide to Administrative Agent reasonable prior advance written notice of such proposed refinancing, replacement, renewal or extension and copies of all material contracts or other agreements being entered into in connection therewith), in the case of clause (i) or (ii) as such credit agreement may be amended, supplemented or otherwise modified from time to time to the extent permitted under subsection 7.12.
"DETROIT L/C FACILITY DOCUMENTS" means (i) the Detroit L/C Facility Agreement, and (ii) the other "Credit Documents" as defined in the Detroit L/C Facility Agreement.
"DETROIT PROJECT SUBSIDIARY" means Michigan Waste Energy, Inc., a Delaware corporation.
"DEUTSCHE BANK" means Deutsche Bank Securities, Inc.
"DEVELOPMENT EXPENSE" means, with respect to any Project, cash expenditures made by Company or any of its Subsidiaries to fund (i) engineering, permitting, legal, environmental and other similar expenses and (ii) fees and expenses of consultants and advisers with respect to engineering, permitting, legal and environmental issues, in each case to the extent such expenses are payable to Persons other than Company and its Subsidiaries in connection with any Expansion permitted under this Agreement, prior to the date of financial closing for such Expansion; provided, that Development Expenses shall exclude
payroll expense and reasonable travel expenses of employees of Company and its Subsidiaries.
"DHC" means Danielson Holding Corporation, a Delaware corporation.
"DHC PLEDGE AGREEMENT" means the DHC Pledge Agreement executed and delivered on the Closing Date by DHC, substantially in the form of Exhibit XI annexed hereto, as such DHC Pledge Agreement may thereafter be amended, restated, supplemented or otherwise modified from time to time.
"DHC TAX SHARING AGREEMENT" means the tax sharing agreement entered into by DHC, Company and CPIH on the Closing Date, as such agreement may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted thereunder and under subsection 7.12.
"DIP AGENTS" means the Persons identified as "Agents" under the DIP Credit Agreement, in their capacities as agents for DIP Lenders under the DIP Credit Agreement.
"DIP CREDIT AGREEMENT" means that certain Debtor-In-Possession Credit Agreement dated as April 1, 2002, by and among Company and certain of its Subsidiaries, as debtors and debtors-in-possession, the financial institutions listed on the signature pages thereof, as lenders, and Bank of America and Deutsche Bank, as agents for such lenders, as such agreement is in effect immediately prior to the Closing Date.
"DIP CREDIT DOCUMENTS" means the "Loan Documents" as defined in the DIP Credit Agreement.
"DIP LENDER" means each of the "Lenders" under the DIP Credit Agreement on the Closing Date, in its capacity as a lender under the DIP Credit Agreement.
"DIP TRANCHE A L/C" means each letter of credit outstanding as of the Closing Date that is described on Schedule 1.1A (Part I) annexed to the Detroit L/C Facility Agreement (setting forth the expiration date, renewal requirements and other particulars of such letter of credit, including the type of obligation supported thereby), under which the maximum aggregate available amount for drawing is $6,276,500.00, determined as of the Closing Date; and "DIP TRANCHE A L/CS" means all such letters of credit, collectively.
"DIP TRANCHE B L/C" means each letter of credit outstanding as of the Closing Date that is described on Schedule 1.1A (Part II) annexed to the Detroit L/C Facility Agreement (setting forth the expiration date, renewal requirements and other particulars of such letter of credit), under which the maximum aggregate available amount for drawing is $170,074,145.19, determined as of the Closing Date; and "DIP TRANCHE B L/CS" means all such letters of credit, collectively.
"DISTRIBUTABLE CASH" has the meaning assigned to that term in subsection 4.1T.
"DOCUMENTATION AGENT" has the meaning assigned to that term in the introduction to this Agreement and also means and includes any successor Documentation Agent appointed pursuant to subsection 9.5.
"DOLLARS" and the sign "$" mean the lawful money of the United States.
"DOMESTIC CASH EQUIVALENTS" means, as at any date of
determination, (i) marketable securities (a) issued or directly and
unconditionally guaranteed as to interest and principal by the United States
Government or (b) issued by any agency of the United States the obligations of
which are backed by the full faith and credit of the United States, in each case
maturing within 30 days after such date; (ii) marketable direct obligations
issued by any state of the United States or any political subdivision of any
such state or any public instrumentality thereof, in each case maturing within
30 days after such date and having, at the time of the acquisition thereof, the
highest rating obtainable from either Standard & Poor's ("S&P") or Moody's
Investors Service, Inc. ("MOODY'S"); (iii) commercial paper maturing no more
than 30 days from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least "A-1" from S&P or at least "P-1" from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within 30
days after such date and issued or accepted by any Lender or by any commercial
bank organized under the laws of the United States or any state thereof or the
District of Columbia that (a) is at least "adequately capitalized" (as defined
in the regulations of its primary Federal banking regulator) and (b) has Tier 1
capital (as defined in such regulations) of not less than $100,000,000; (v)
shares of any money market mutual fund that (a) has at least 95% of its assets
invested continuously in the types of investments referred to in clauses (i) and
(ii) above, (b) has net assets of not less than $500,000,000, and (c) has the
highest rating obtainable from either S&P or Moody's; and (vi) such other
securities as Company and Administrative Agent may agree on from time to time.
"DOMESTIC SUBSIDIARY" means any Subsidiary of any Borrower that is incorporated or organized under the laws of the United States, any state thereof or in the District of Columbia.
"ELIGIBLE ASSIGNEE" means (i) any Person that is (a) a commercial bank organized under the laws of the United States or any state thereof, (b) a savings and loan association or savings bank organized under the laws of the United States or any state thereof, (c) a commercial bank organized under the laws of any other country or a political subdivision thereof, provided, that (1) such bank is acting through a branch or agency located in the United States or (2) such bank is organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development or a political subdivision of such country, or (d) any other financial institution that extends credit or buys loans as one of its businesses; (ii) any Person that is a Lender at the time of the relevant assignment; or (iii) any other Person designated as an Eligible Assignee pursuant to the prior written consent of Administrative Agent in its sole discretion; provided, that none of Company nor any Affiliate of Company nor any Competitor shall be an Eligible Assignee; and provided, further, that in order to be an Eligible Assignee, a Person must have at the time
of determination a long term senior unsecured debt rating of "A2" or better from Moody's and/or "A" or better from S&P.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as defined in Section 3(3) of ERISA which is maintained or contributed to by Company, any of its Subsidiaries or any of their respective ERISA Affiliates.
"ENFORCING LENDERS" has the meaning assigned to that term in subsection 10.5B.
"ENVIRONMENTAL CLAIM" means any investigation, notice, notice of violation, claim, action, suit, proceeding, demand, abatement order or other order or directive (conditional or otherwise), by any Government Authority or any other Person, arising (i) pursuant to or in connection with any actual or alleged violation of any Environmental Law, or (ii) in connection with any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment.
"ENVIRONMENTAL LAWS" means any and all current or future statutes, ordinances, orders, rules, regulations, guidance documents, judgments, Governmental Authorizations, or any other requirements of any Government Authority relating to (i) environmental matters, including those relating to any Hazardous Materials Activity, (ii) the generation, use, storage, transportation or disposal of Hazardous Materials, or (iii) occupational safety and health, industrial hygiene, land use or the protection of human, plant or animal health or welfare, in any manner applicable to Company or any of its Subsidiaries (including, solely with respect to periods prior to the Closing Date, CPIH Subsidiaries) or any Facility.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto.
"ERISA AFFILIATE" means, as applied to any Person, (i) any corporation that is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is a member; (ii) any trade or business (whether or not incorporated) that is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member.
"ERISA EVENT" means (i) a "reportable event" within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for 30-day notice to the PBGC has been waived by regulation) that would reasonably be expected to have a Material Adverse Effect; (ii) the failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with
Section 412(d) of the Internal Revenue Code) or the imposition of a Lien on the
property of Company or any of its Subsidiaries pursuant to Section 412(n) of the
Internal Revenue Code, except any such failure or imposition attributable to an
error made in good faith which results in the imposition of liability or a Lien
on Company and its Subsidiaries and their respective ERISA Affiliates of an
immaterial amount, so long as such error, failure and imposition are promptly
corrected after discovery of such error by Company or any of its Subsidiaries,
or the failure to make by its due date a required installment of a material
amount under Section 412(m) of the Internal Revenue Code with respect to any
Pension Plan or the failure to make any required contribution of a material
amount to a Multiemployer Plan; (iii) the provision by the administrator of any
Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to
terminate such plan in a distress termination described in Section 4041(c) of
ERISA; (iv) the withdrawal by Company, any of its Subsidiaries or any of their
respective ERISA Affiliates from any Pension Plan with two or more contributing
sponsors or the termination of any such Pension Plan resulting in material
current liability of Company or any of its Subsidiaries (including CPIH
Subsidiaries, to the extent such CPIH Subsidiaries are ERISA Affiliates of
Company or any of its Subsidiaries) pursuant to Section 4063 or 4064 of ERISA;
(v) the institution by the PBGC of proceedings to terminate any Pension Plan, or
the occurrence of any event or condition that would reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan; (vi) the imposition of
material current liability on Company, any of its Subsidiaries or any of their
respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by
reason of the application of Section 4212(c) of ERISA; (vii) the withdrawal of
Company, any of its Subsidiaries or any of their respective ERISA Affiliates in
a complete or partial withdrawal (within the meaning of Sections 4203 and 4205
of ERISA) from any Multiemployer Plan if it would reasonably be expected that
Company or any of its Subsidiaries will incur material liability therefor (in
excess of the contribution that would otherwise have been due absent such
withdrawal), or the receipt by Company, any of its Subsidiaries or any of their
respective ERISA Affiliates of notice from any Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that
it intends to terminate or has terminated under Section 4041A or 4042 of ERISA;
(viii) the assertion of a material claim (other than routine claims for
benefits) against any Employee Benefit Plan other than a Multiemployer Plan or
the assets thereof, or against Company, any of its Subsidiaries or any of their
respective ERISA Affiliates in connection with any Employee Benefit Plan, if
such assertion or the liability with respect thereto would reasonably be
expected to have a Material Adverse Effect; (ix) receipt from the Internal
Revenue Service of notice of the failure of any Pension Plan (or any other
Employee Benefit Plan intended to be qualified under Section 401(a) of the
Internal Revenue Code) to qualify under Section 401(a) of the Internal Revenue
Code, or of the failure of any trust forming part of any Pension Plan to qualify
for exemption from taxation under Section 501(a) of the Internal Revenue Code,
in either case if such failure would reasonably be expected to have a Material
Adverse Effect; or (x) the imposition of a Lien on the property of Company or
any of its Subsidiaries pursuant to Section 401(a)(29) of the Internal Revenue
Code or pursuant to ERISA with respect to any Pension Plan.
"EURODOLLAR BASE RATE" means, with respect to a Eurodollar Loan for the relevant Interest Period, the applicable British Bankers' Association LIBOR rate for deposits in U.S. dollars as reported by any generally recognized financial information service as of 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period, provided that, if no such British Bankers' Association LIBOR rate is available to Administrative Agent, the applicable Eurodollar Base Rate for the relevant Interest Period shall instead be the rate determined by Administrative Agent to be the rate at which Bank One or one of its Affiliate banks offers to place deposits in U.S. dollars with first-class banks in the interbank market at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, in the approximate amount of Bank One's relevant Eurodollar Loan and having a maturity equal to such Interest Period.
"EURODOLLAR RATE" means, with respect to a Eurodollar Loan for the relevant Interest Period the quotient of (i) the Eurodollar Base Rate applicable to such Interest Period, divided by (ii) one minus the Reserve Requirement (expressed as a decimal) applicable to such Interest Period.
"EURODOLLAR RATE LOANS" means Revolving Loans bearing interest at rates determined by reference to the Eurodollar Rate as provided in subsection 2.2A.
"EURODOLLAR RATE MARGIN" means six and one-half of one percent (6.50%).
"EVENT OF DEFAULT" has the meaning assigned to that term in
Section 8.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute.
"EXCLUDED SUBSIDIARY" means (i) each Subsidiary of Company for which becoming a Borrower would constitute a material violation of (a) a valid and enforceable Contractual Obligation in favor of a Person other than Company or any of its Subsidiaries for which the required consents have not been obtained or (b) applicable law affecting such Subsidiary, provided, that any such Subsidiary of Company shall cease to be covered under this clause at such time as such Subsidiary's becoming a Borrower would no longer constitute a material violation of such Contractual Obligation or applicable law, whether as a result of obtaining the required consents or otherwise, and (ii) each Bankrupt Subsidiary.
"EXISTING DETROIT L/CS" means, collectively, the following DIP Tranche B L/Cs: (i) Irrevocable Standby Letter of Credit Number SBY501806 issued by UBS Bank, in the available amount of $96,731,392.81 as of the Closing Date, for the benefit of PMCC Leasing Corporation and Resource Recovery Business Trust-A, and (ii) Irrevocable Standby Letter of Credit Number SBY501835 issued by UBS Bank, in the available amount of $41,460,161.38 as of the Closing Date, for the benefit of Aircraft Services Corporation and Resource Recovery Business Trust-B.
"EXISTING INTERCREDITOR AGREEMENT" means the "Intercreditor Agreement" as defined in the DIP Credit Agreement on the Closing Date, as such "Intercreditor Agreement" is in effect on the Closing Date.
"EXISTING IPP INTERNATIONAL PROJECT GUARANTIES" means, collectively, (i) the existing guaranty by Covanta Energy Group of the obligations of the CPIH Subsidiaries under certain agreements relating to the Haripur Project, the Samalpatti Project and the Trezzo Project, (ii) the existing guaranty by Covanta Projects, Inc. of the obligations of the CPIH Subsidiaries under certain agreements relating to the Quezon Project, and (iii) the existing guaranty by Company of the obligations of the CPIH Subsidiaries under certain agreements relating to the Balaji/Madurai Project and the LICA Project, as each such guaranty may be amended, restated, supplemented or otherwise modified to the extent permitted hereunder.
"EXPANSION" means, with respect to any waste-to-energy Project in existence as of the date hereof, additions or improvements to the existing facilities of such Project that involve the addition of a boiler or a turbine generator.
"FACILITIES" means any and all real property (including all buildings, fixtures or other improvements located thereon) now, hereafter or heretofore owned, leased, operated or used by any Borrower or any of its Subsidiaries, by any of their respective predecessors or by any Person who was an Affiliate of Borrower or any of its Subsidiaries prior to the Closing Date.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago time) for such day on such transactions received by Administrative Agent from three Federal funds brokers of recognized standing selected by Administrative Agent.
"FIFRA" means the Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. Section 136 et seq.), or any successor statute, and all implementing regulations promulgated thereunder.
"FIRST PRIORITY" means, with respect to any Lien purported to be created in any Collateral pursuant to any Collateral Document, that (i) such Lien is perfected and has priority over any other Lien on such Collateral (other than Liens permitted pursuant to subsections 7.2A(iii) through (xi)) and (ii) such Lien is the only Lien (other than Liens permitted pursuant to subsection 7.2) to which such Collateral is subject.
"FISCAL QUARTER" means a fiscal quarter of any Fiscal Year.
"FISCAL YEAR" means the fiscal year of Company and its Subsidiaries ending on December 31st of each calendar year.
"FLOOD HAZARD PROPERTY" means any real property that is subject to a Mortgage and is located in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards.
"FOREIGN SUBSIDIARY" means any Subsidiary of any Borrower that is not a Domestic Subsidiary.
"FUND" means any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.
"FUNDING AND PAYMENT OFFICE" means (i) the office of Administrative Agent located at 120 South LaSalle Street, 8th Floor, Mail Code L1-1713, Chicago, Illinois 60603 or (ii) such other office of Administrative Agent as may from time to time hereafter be designated as such in a written notice delivered by Administrative Agent to Company and each Lender.
"FUNDING BORROWER" has the meaning assigned to that term in subsection 2.10C.
"FUNDING DATE" means the date of funding of a Revolving Loan.
"FUNDING DEFAULT" has the meaning assigned to that term in subsection 2.9.
"GAAP" means, subject to the limitations on the application thereof set forth in subsection 1.2, accounting principles generally accepted in the United States set forth in opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as are approved by the American Institute of Certified Public Accountants.
"GEOTHERMAL SALE" means (i) the sale or other disposition by Company and its Subsidiaries of all or substantially all of their respective (1) Capital Stock in Heber Geothermal Company, Heber Field Company and Second Imperial Geothermal Company, L.P. and (2) Capital Stock in non-debtor Affiliate Mammoth Pacific L.P., which entities own or lease geothermal plants and facilities in California (the "GEOTHERMAL BUSINESS") and (ii) the assumption and/or assignment by Company and its Subsidiaries of certain contracts related to the Geothermal Business, in the case of both clauses (i) and (ii) occurring prior to or concurrently with the consummation of the Plan of Reorganization.
"GOVERNING BODY" means the board of directors or other body having the power to direct or cause the direction of the management and policies of a Person that is a corporation, partnership, trust or limited liability company.
"GOVERNMENT AUTHORITY" means any political subdivision or department thereof, any other governmental or regulatory body, commission, central bank, board, bureau, organ or instrumentality or any court, in each case whether federal, state, local or foreign.
"GOVERNMENTAL AUTHORIZATION" means any permit, license, registration, authorization, plan, directive, consent, order or consent decree of or from, or notice to, any Government Authority.
"GREENWAY L/C" means, collectively, the letter of credit outstanding on the Closing Date in the stated amount of $820,000 issued under the DIP Credit Agreement as a "Tranche B Letter of Credit" (as defined in the DIP Credit Agreement), and shall not mean or include any amendment, reissuance, renewal or extension of such letter of credit after the Closing Date.
"GROSS RECEIPTS" means, in respect of any Asset Sale, the total cash payments (including any cash received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) received from such Asset Sale minus any repayment of debt related to the assets sold in such Asset Sale which is made in connection therewith and is not prohibited under this Agreement.
"HAVERHILL DEFERRED INCOME" means, for any period, all non-cash income resulting from payments made in 1998 by the counterparty to the power purchase agreement relating to the Haverhill Project in order to "buydown" its obligations under such agreement, to the extent such non-cash income is included in consolidated revenue or consolidated earnings of Company and its Subsidiaries during such period.
"HAZARDOUS MATERIALS" means (i) any chemical, material or
substance at any time defined as or included in the definition of (a) "hazardous
wastes" or "mixed wastes" as defined in RCRA or in any other Environmental Law;
(b) "hazardous substances", "pollutants" or "contaminants" as defined in CERCLA
or in any other Environmental Law; (c) "chemical substances" or "mixtures" as
defined in TSCA or any other substance which is tested pursuant to TSCA or any
other Environmental Law, or the manufacture, processing, distribution, use or
disposal of which is regulated or prohibited pursuant to TSCA or any other
Environmental Law, including without limitation polychlorinated biphenyls and
electrical equipment which contains any oil or dielectric fluid containing
regulated concentrations of polychlorinated biphenyls; (d) "insecticides",
"fungicides", "pesticides" or "rodenticides" as defined in FIFRA or any other
Environmental Law; or (e) "infectious waste" or "biohazardous waste" as defined
in any Environmental Law; (ii) asbestos or any asbestos-containing materials;
(iii) urea formaldehyde foam insulation; (iv) any oil, petroleum, petroleum
fraction or petroleum derived substance; (v) any drilling fluids, produced
waters and other wastes associated with the exploration, development or
production of crude oil, natural gas or geothermal resources; (vi) any flammable
substances or explosives; (vii) any radioactive materials; and (viii) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any Government Authority or which may or could pose a hazard to the
health and safety of the owners,
occupants or any Persons in the vicinity of any Facility or to the indoor or outdoor environment.
"HAZARDOUS MATERIALS ACTIVITY" means any past, current, proposed or threatened activity, event or occurrence involving any Hazardous Materials, including the use, manufacture, possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, construction, treatment, abatement, removal, remediation, disposal, disposition or handling of any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing.
"HEDGE AGREEMENT" means (i) an Interest Rate Agreement or a Currency Agreement designed to hedge against fluctuations in interest rates or currency values, respectively, or (ii) a forward agreement or arrangement designed to hedge against fluctuation in electricity rates pertaining to electricity produced by a Project, so long as the contractual arrangements relating to such Project contemplate that Company or its Subsidiaries shall deliver such electricity to third parties.
"HIGH YIELD INDENTURE" means (i) the indenture pursuant to which the High Yield Notes are issued and (ii) any replacement indenture entered into in connection with a refinancing, renewal, replacement or extension of the High Yield Notes permitted under subsection 7.1(xiii), in each case as such indenture or replacement indenture may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under subsection 7.12.
"HIGH YIELD NOTES" means (i) the $230,000,000 in aggregate principal amount at maturity of 8.25% Senior Notes due 2010 of Company issued pursuant to the High Yield Indenture, and (ii) any Indebtedness incurred to refinance, renew, replace or extend the High Yield Notes permitted to be incurred under subsection 7.1(xiii); provided, that the initial principal amount (and issue price) of such High Yield Notes on the Closing Date shall be $205,000,000.
"IMMATERIAL FOREIGN SUBSIDIARY" means any of the following Foreign Subsidiaries, in each case so long as such Subsidiary (i) has engaged in substantially no business or operations in the most recent fiscal year of Company and its Subsidiaries, (ii) in the most recent fiscal year of Company and its Subsidiaries, accounted for less than $100,000 of revenues, and (iii) holds at the time of determination less than $100,000 of assets: Covanta Energy Europe, Ltd. (United Kingdom), OPI Carmona Ltd. (Cayman Islands), OPI Carmona One Ltd. (Cayman Islands), and Covanta Waste to Energy Asia Investments (Mauritius).
"INDEBTEDNESS", as applied to any Person, means (i) all
indebtedness for borrowed money, (ii) that portion of obligations with respect
to Capital Leases that is properly classified as a liability on a balance sheet
in conformity with GAAP, (iii) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed money,
(iv) any obligation owed for all or any part of the deferred
purchase price of property or services received by such Person (excluding any such obligations incurred under ERISA), which purchase price is (a) due more than six months from the date of incurrence of the obligation in respect thereof or (b) evidenced by a promissory note or similar written instrument, but excluding in either case current trade payables incurred in the ordinary course of business and payable in accordance with customary practices, (v) Synthetic Lease Obligations, and (vi) all indebtedness secured by any Lien on any property or asset owned by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person. Any obligations under Interest Rate Agreements and Currency Agreements (and Hedge Agreements that protect against fluctuation in electricity rates) constitute (1) in the case of Hedge Agreements, Contingent Obligations, and (2) in all other cases, Investments, and in neither case constitute Indebtedness. For purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer, unless the Indebtedness of such partnership or joint venture is expressly Limited Recourse Debt of such partnership or joint venture.
"INDEMNIFIED LIABILITIES" has the meaning assigned to that term in subsection 10.3.
"INDEMNITEE" has the meaning assigned to that term in subsection 10.3.
"INSURANCE PREMIUM FINANCERS" means Persons who are non-Affiliates of Company that advance insurance premiums for Company and its Subsidiaries pursuant to Insurance Premium Financing Arrangements.
"INSURANCE PREMIUM FINANCING ARRANGEMENTS" means, collectively, such agreements as Company and its Subsidiaries shall enter into after the Closing Date with Insurance Premium Financers pursuant to which such Insurance Premium Financers shall advance insurance premiums for Company and its Subsidiaries. Such Insurance Premium Financing Arrangements (i) shall provide for the benefit of such Insurance Premium Financers a security interest in no property of Company or any of its Subsidiaries other than gross unearned premiums for the insurance policies, (ii) shall not purport to prohibit any portion of the Liens created in favor of Collateral Agent (for the benefit of Secured Parties) pursuant to the Collateral Documents, and (iii) shall not contain any provision or contemplate any transaction prohibited by this Agreement and shall otherwise be in form and substance reasonably satisfactory to Administrative Agent.
"INTELLECTUAL PROPERTY" means all patents, trademarks, tradenames, copyrights, technology, software, know-how and processes used in or necessary for the conduct of the business of Borrowers and their Subsidiaries as currently conducted that are material to the condition (financial or otherwise), business or operations of Borrowers and their Subsidiaries, taken as a whole.
"INTERCOMPANY MASTER NOTE" means a promissory note evidencing Indebtedness of Company and each of its Subsidiaries which (a) to the extent the
Indebtedness evidenced thereby is owed to any Borrower, is pledged pursuant to the Collateral Documents, and (b) to the extent the Indebtedness evidenced thereby is owed by a Subsidiary of Company, is senior Indebtedness of such Subsidiary (except to the extent that requiring such Indebtedness to be senior would breach a contractual obligation binding on such Subsidiary), except that any such Indebtedness owed by any Borrower to any Subsidiary which is not a Borrower shall be subordinated in right of payment to the payment in full of the Obligations pursuant to the terms of such note.
"INTERCREDITOR AGREEMENT" means that certain Intercreditor Agreement executed and delivered on the Closing Date by Credit Parties, Lenders, Administrative Agent, Collateral Agent, the agents and the lenders under the Detroit L/C Facility Documents, the Investor Parties and the trustee under the High Yield Indenture, in the form of Exhibit XIII annexed hereto, as it may thereafter be amended, restated, supplemented or otherwise modified from time to time.
"INTEREST PAYMENT DATE" means (i) with respect to any Base Rate Loan, the last Business Day of each month, commencing on the first such date to occur after the Closing Date and (ii) with respect to any Eurodollar Rate Loan, the last day of each Interest Period applicable to such Eurodollar Rate Loan.
"INTEREST PERIOD" has the meaning assigned to that term in subsection 2.2B.
"INTEREST RATE AGREEMENT" means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement to which any Borrower or any of Subsidiary of any Borrower is a party.
"INTEREST RATE DETERMINATION DATE" means, with respect to any Interest Period, the second Business Day prior to the first day of such Interest Period.
"INTER-LENDER AGREEMENT" means that certain Inter-Lender Agreement of even date herewith among Administrative Agent, Lenders and Issuing Lender, as the same may be amended from time to time in accordance with its terms.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter, and any successor statute.
"INVESTMENT" means (i) any direct or indirect purchase or
other acquisition by Company or any of its Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person (including any Subsidiary of
Company), (ii) any direct or indirect redemption, retirement, purchase or other
acquisition for value, by any Subsidiary of Company from any Person other than
Company or any of its Subsidiaries, of any equity Securities of such Subsidiary,
(iii) any direct or indirect loan, advance (other than advances to employees for
moving, entertainment and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business) or capital contribution by
Company or any of its Subsidiaries to any other Person, including all
indebtedness and accounts receivable from that other Person that are not current
assets or did not arise from sales or services to that other Person in the
ordinary course of business, (iv) Interest Rate Agreements or Currency Agreements not constituting Hedge Agreements, (v) Commodities Agreements not constituting Hedge Agreements, or (vi) any Expansion of any Project by Company or any of its Subsidiaries to the extent that the costs of such Expansion are borne, directly or indirectly, by Company or any of its Subsidiaries. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment. No account receivable owed by a Person to Company or any of its Subsidiaries that on the relevant date of determination constitutes a current asset and arose from sales or services to such Person in the ordinary course of business shall constitute an Investment on such date.
"INVESTOR PARTIES" means D.E. Shaw, SZ Investments, L.L.C., a Delaware limited liability company, and Third Avenue Trust, on behalf of the Third Avenue Value Fund Series
"IP COLLATERAL" means, collectively, the Intellectual Property that constitutes Collateral.
"IPP INTERNATIONAL BUSINESS" means the assets and operations of the business of Company and its Subsidiaries referred to by Company as the "IPP International business" prior to the Closing Date, including the Haripur Project, the Samalpatti Project, the Trezzo Project, the Quezon Project, the Balaji/Madurai Project, the Linasa Project, the Don Pedro Project, the Rio Volcan Project, the Bataan Project, the Magellan Project, the Linan Project, the Huantai Project, the Yanjiang Project and the Island Power Project.
"IPP INTERNATIONAL SALES" means one or more sales or dispositions of (i) the assets and/or operations of CPIH and its Subsidiaries and/or (ii) the Capital Stock of CPIH or any of its Subsidiaries.
"ISSUING LENDER" means Bank One, in its capacity as Issuing Lender and any successor Issuing Lender hereunder.
"JOINT VENTURE" means a joint venture, partnership or other similar arrangement, whether in corporate, partnership or other legal form.
"JPMORGAN" means J.P. Morgan Chase Bank, NA.
"LAKE SUBSIDIARY" means Covanta Lake II, Inc., a Florida corporation.
"LANDLORD CONSENT AND ESTOPPEL" means, with respect to any Leasehold Property, a letter, certificate or other instrument in writing from the lessor under the related lease, satisfactory in form and substance to Administrative Agent, pursuant to which such lessor agrees, for the benefit of Administrative Agent, (i) that without any further consent of such lessor or any further action on the part of the Borrower holding such Leasehold Property, such Leasehold Property may be encumbered pursuant to a Mortgage and may be assigned to the purchaser at a foreclosure sale or in a transfer in lieu of such a sale (and to a subsequent third party assignee if Administrative Agent, any Lender, or an Affiliate of either
so acquires such Leasehold Property), (ii) that such lessor shall not terminate such lease as a result of a default by such Borrower thereunder without first giving Administrative Agent notice of such default and at least 60 days (or, if such default cannot reasonably be cured by Administrative Agent within such period, such longer period as may reasonably be required) to cure such default, and (iii) to such other matters relating to such Leasehold Property and the Collateral located thereon as Administrative Agent may reasonably request.
"LEASEHOLD PROPERTY" means any leasehold interest of any Borrower as lessee under any lease of real property.
"LENDER" and "LENDERS" means the Persons identified as "Lenders" and listed on the signature pages of this Agreement, together with their successors and permitted assigns pursuant to subsection 10.1.
"LETTER OF CREDIT" or "LETTERS OF CREDIT" means (i) letters of credit issued under this Agreement by Issuing Lender pursuant to subsection 3.1 and (ii)(a) letters of credit issued by Issuing Lender to replace Closing Date Letters of Credit pursuant to subsection 3.1B(ii)(a) and (b) amendments to Letters of Credit issued by Issuing Lender to extend the expiration date of such Letters of Credit pursuant to subsection 3.1B(ii)(a).
"LETTER OF CREDIT COMMITMENT" means the commitment of a Lender to purchase and fund participations in Letters of Credit pursuant to Section 3, and "LETTER OF CREDIT COMMITMENTS" means such commitments of all Lenders in the aggregate.
"LETTER OF CREDIT EXPOSURE" means, with respect to any Lender as of any date of determination, the sum of (a) in the event that Lender is the Issuing Lender, the aggregate Letter of Credit Usage in respect of all Letters of Credit issued by that Lender (in each case net of any participations purchased by other Lenders in such Letters of Credit or in any drawings thereunder not theretofore reimbursed by Borrowers) plus (b) the aggregate amount of all participations purchased by that Lender in any other outstanding Letters of Credit or any drawings under any such other Letters of Credit not theretofore reimbursed by Borrowers.
"LETTER OF CREDIT LENDER" means any Lender having or holding Letter of Credit Exposure.
"LETTER OF CREDIT USAGE" means, as at any date of determination, the sum of (i) the maximum aggregate amount which is or at any time thereafter may become available for drawing under all Letters of Credit then outstanding plus (ii) the aggregate amount of all drawings under all Letters of Credit honored by Issuing Lender and not theretofore reimbursed by Borrowers.
"LIEN" means any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest)
and any option, trust or other preferential arrangement having the practical effect of any of the foregoing.
"LIMITED RECOURSE DEBT" means, with respect to any Subsidiary of Company, Indebtedness of such Subsidiary with respect to which the recourse of the holder or obligee of such Indebtedness is limited to (i) assets associated with the Project (which in any event shall not include assets held by any Borrower other than a Borrower, if any, whose sole business is the ownership and/or operation of such Project and substantially all of whose assets are associated with such Project) in respect of which such Indebtedness was incurred and/or (ii) such Subsidiary or the equity interests in such Subsidiary, but in the case of clause (ii) only if such Subsidiary's sole business is the ownership and/or operation of such Project and substantially all of such Subsidiary's assets are associated with such Project. For purposes of this Agreement, Indebtedness of a Subsidiary of Company shall not fail to be Limited Recourse Debt solely by virtue of the fact that the holders of such Limited Recourse Debt have recourse to Company or another Subsidiary of Company pursuant to a Contingent Obligation supporting such Limited Recourse Debt or a Performance Guaranty, so long as such Contingent Obligation or Performance Guaranty is permitted under subsection 7.4 of this Agreement.
"MANAGEMENT SERVICES AND REIMBURSEMENT AGREEMENT" means the management services and reimbursement agreement entered into by CPIH, Company and certain of their respective Subsidiaries on the Closing Date, in form and substance satisfactory to Administrative Agent, as such agreement may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted thereunder and under subsection 7.12.
"MANDATORY PAYMENT" means any amount described in subsections 2.4A(iii)(a)-(g) to be applied as a prepayment of the Revolving Loans, as a permanent reduction of the Commitments, to repay funded amounts under Letters of Credit and/or to cash collateralize Letter of Credit Exposure, in each case as determined pursuant to subsection 2.4A.
"MARGIN STOCK" has the meaning assigned to that term in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect upon the business, operations, properties, assets, condition (financial or otherwise) or prospects of Borrowers, taken as a whole, or Company and its Subsidiaries, taken as a whole, or (ii) the impairment of the ability of Credit Parties taken as a whole to perform, or of Administrative Agent or Lenders to enforce, the Obligations.
"MATERIAL CONTRACT" means (i) the principal lease agreement, if any, and the principal service or operating agreement, if any, with respect to each waste-to-energy Project and the principal lease agreement, if any, with respect to each independent power plant Project to which Company or any of its Subsidiaries is a party, each of which is in existence as of the Closing Date and is described on Schedule 1.1B annexed hereto, and (ii) any other
contract or other arrangement to which Company or any of its Subsidiaries is a party (other than the Credit Documents) for which breach, nonperformance, cancellation or failure to renew would reasonably be expected to have a Material Adverse Effect.
"MATERIAL LEASEHOLD PROPERTY" means a Leasehold Property reasonably determined by Administrative Agent to be of material value as Collateral or of material importance to the operations of Company or any of its Subsidiaries.
"MATERIAL SUBSIDIARY" means, with respect to any Person, any
Subsidiary of such Person now existing or hereafter acquired or formed by such
Person which, on a consolidated basis for such Subsidiary and all of its
Subsidiaries, (i) for the most recent fiscal year of such Person accounted for
more than 1% of the consolidated revenues of such Person and its Subsidiaries,
(ii) as at the end of such fiscal year, was the owner of more than 1% of the
consolidated assets of such Person and its Subsidiaries, or (iii) is capitalized
with more than $500,000 of equity.
"MATURITY DATE" means March 10, 2009.
"MONTGOMERY CLOSING DATE LETTER OF CREDIT" means the Closing Date Letter of Credit issued by Issuing Lender and confirmed by JPMorgan that supports obligations of Company under the Montgomery Service Agreement and any Letter of Credit issued to replace or extend the same pursuant to subsection 3.1B(ii)(a).
"MONTGOMERY SERVICE AGREEMENT" means that certain Service Agreement between Northeast Maryland Waste Disposal Authority and Covanta Montgomery, Inc. (formerly known as Ogden Martin Systems of Montgomery, Inc.) dated November 16, 1990, as such agreement is in effect on the Closing Date and as it may thereafter be amended, restated, supplemented or otherwise modified from time to time to the extent permitted thereunder.
"MORTGAGE" means (i) a security instrument (whether designated as a deed of trust or a mortgage or by any similar title) executed and delivered by any Borrower, substantially in the form of Exhibit XIV annexed hereto or in such other form as may be approved by Administrative Agent in its sole discretion, in each case with such changes thereto as may be recommended by Administrative Agent's local counsel based on local laws or customary local mortgage or deed of trust practices, or (ii) at Administrative Agent's option, in the case of any real property or Material Leasehold Property that is the subject of subsection 6.9, an amendment to an existing Mortgage, in form satisfactory to Administrative Agent, in either case as such security instrument or amendment may be amended, restated, supplemented or otherwise modified from time to time. "MORTGAGES" means all such instruments collectively, whether executed as of or subsequent to the Closing Date.
"MULTIEMPLOYER PLAN" means any Employee Benefit Plan that is a "multiemployer plan" as defined in Section 3(37) of ERISA.
"NET ASSET SALE PROCEEDS" means, with respect to any Asset Sale, Gross Receipts received from such Asset Sale, net of any bona fide direct costs incurred in connection with such Asset Sale, including (i) income taxes reasonably estimated to be actually payable prior to the earlier of (a) the date which is eighteen months from the date of such Asset Sale and (b) the Maturity Date as a result of any gain recognized in connection with such Asset Sale, (ii) additional Taxes actually payable upon the closing of such Asset Sale (including any transfer Taxes or Taxes on gross receipts), (iii) actual, reasonable and documented out-of-pocket fees and expenses (including reasonable legal fees, reasonable fees to advisors and severance costs that are due (pursuant to a Contractual Obligation, or written employment policy applicable to terminated employees generally, of Company or any of its Subsidiaries in effect prior to such Asset Sale or pursuant to applicable law) and payable immediately upon consummation of such Asset Sale to employees of Company and its Subsidiaries that are terminated as a result thereof) paid to Persons other than Company and its Subsidiaries and their respective Affiliates in connection with such Asset Sale (including fees necessary to obtain any required consents of such Persons to such Asset Sale), and (iv) payment of the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness that is (x) secured by a valid, enforceable and perfected Lien on the stock or assets in question that is permitted under subsection 7.2 and (y) required to be repaid under the terms of such Indebtedness as a result of such Asset Sale (without duplication of amounts deducted in calculating the Gross Receipts from such Asset Sale) and is permitted to be paid under the Credit Documents.
"NET DEPRECIATION AND AMORTIZATION EXPENSE" means, for any period, (i) the sum of the amounts (each expressed as a positive number) for such period of "Depreciation" and "Amortization", as each such line item is reflected in Company's consolidated statement of cash flows prepared in conformity with GAAP and reported in a manner consistent with Company's reporting of such amount in its quarterly or annual report (as the case may be) on Form 10Q or 10K, respectively, prior to the Closing Date, whether such line items are so titled or otherwise titled, minus (iii)Haverhill Deferred Income.
"NET INSURANCE/CONDEMNATION PROCEEDS" means any cash payments
or proceeds received by Company or any of its Subsidiaries (i) under any
business interruption or casualty insurance policy in respect of a covered loss
thereunder or (ii) as a result of the taking of any assets of Company or any of
its Subsidiaries by any Person pursuant to the power of eminent domain,
condemnation or otherwise, or pursuant to a sale of any such assets to a
purchaser with such power under threat of such a taking, in each case net of (a)
income taxes reasonably estimated to be actually payable prior to the earlier of
(1) the date which is eighteen months from the date of such receipt and (2) the
Maturity Date as a result of the receipt of such payments or proceeds and (b)
any actual, reasonable and documented out-of-pocket fees and expenses (including
reasonable legal fees, reasonable fees to advisors and severance costs that are
due (pursuant to a Contractual Obligation, or written employment policy
applicable to terminated employees generally, of Company or any of its
Subsidiaries in effect prior to the event causing or relating to the payment
referred to in clause (i) or (ii) above or pursuant to applicable law) and
payable on or prior to the receipt of such payment or proceeds to employees of
Company and its Subsidiaries that have
been terminated as a result of the relevant loss, taking or sale) paid to Persons other than Company and its Subsidiaries and their respective Affiliates in connection with the relevant loss, taking or sale or the adjustment or settlement of any claims of Company or such Subsidiary in respect thereof; provided, however, that Net Insurance/Condemnation Proceeds shall be reduced in an amount equal to the amount of proceeds Subsidiaries of Company are legally bound or required, pursuant to agreements in effect on the Closing Date, or which were entered into after the Closing Date with respect to the financing or acquisition of a Project, to use for purposes other than a Mandatory Payment.
"NET INDEBTEDNESS PROCEEDS" means the cash proceeds (net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith (including reasonable legal fees and expenses)) from the incurrence of Indebtedness by Company or any of its Subsidiaries.
"9.25% DEBENTURES" means the "9.25% Debenture Claims" as such term is defined in the Plan of Reorganization.
"NON-BORROWER CASH FLOW" means, for any period with respect to Subsidiaries of Company that are not Borrowers, (i) the aggregate amount of cash from such Subsidiaries paid as dividends or otherwise distributed to Borrowers, minus (ii) the aggregate amount of cash expenditures made by such Subsidiaries from amounts received from Borrowers to fund operations and capital expenditures of such Subsidiaries (whether such amounts are received from Borrowers as the proceeds of Indebtedness incurred by such non-Borrower Subsidiary or as the proceeds of equity contributions or both). Amounts included in the calculation of the Development Expenses with respect to a Project shall not be included in the calculation of clause (ii) of Non-Borrower Cash Flow.
"NON-US LENDER" means a Lender that is organized under the laws of any jurisdiction other than the United States or any state or other political subdivision thereof.
"NOTICE OF BORROWING" means a notice substantially in the form of Exhibit I annexed hereto.
"NOTICE OF CONVERSION/CONTINUATION" means a notice
substantially in the form of Exhibit IV annexed hereto.
"OBLIGATIONS" means all obligations of every nature of Credit Parties under the Credit Documents, including any liability of such Credit Party on any claim arising out of or relating to the Credit Documents, whether or not the right to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed or contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any bankruptcy, insolvency, reorganization or other similar proceeding. Without limiting the generality of the foregoing, the Obligations of the Credit Parties under the Credit Documents include (a) the obligation to pay principal, interest (including all interest which accrues after the commencement of any case or proceeding in bankruptcy after the insolvency of, or for the reorganization of, any Credit
Party, whether or not allowed in such case or proceeding), charges, expenses, fees, attorneys' fees and disbursements, indemnities and other amounts payable by any Borrower and any other Credit Party under any Credit Document and (b) the obligation to reimburse any amount in respect of any of the foregoing that Administrative Agent or any Lender, in its sole discretion, may elect to pay or advance on behalf of such Borrower or other Credit Party; provided, that nothing in this definition shall be construed as creating any obligations of DHC under the Credit Documents that are not expressly set forth in such Credit Documents.
"OFFICER" means the president, chief executive officer, a vice president, chief financial officer, treasurer, general partner (if an individual), managing member (if an individual) or other individual appointed by the Governing Body or the Organizational Documents of a corporation, partnership, trust or limited liability company to serve in a similar capacity as the foregoing.
"OFFICER'S CERTIFICATE" means, as applied to any Person that is a corporation, partnership, trust or limited liability company, a certificate executed on behalf of such Person by one or more Officers of such Person or one or more Officers of a general partner or a managing member if such general partner or managing member is a corporation, partnership, trust or limited liability company; provided, that any Officer's Certificate delivered pursuant to subsection 2.4A(iii)(h) or 6.1(v) shall be executed by a senior financial officer of Company reasonably acceptable to Administrative Agent.
"ORGANIZATIONAL DOCUMENTS" means the documents (including Bylaws, if applicable) pursuant to which a Person that is a corporation, partnership, trust or limited liability company is organized.
"PARTICIPANT" means a purchaser of a participation in the rights and obligations under this Agreement pursuant to subsection 10.1C.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto.
"PENSION PLAN" means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to section 412 of the Internal Revenue Code or section 302 of ERISA.
"PERFORMANCE GUARANTY" means any agreement entered into by Company or any of its Subsidiaries under which Company or any such Subsidiary guarantees the performance of a Subsidiary of Company under a principal lease, service or operating agreement relating to a Project. The Existing IPP International Project Guaranties shall not constitute Performance Guaranties.
"PERMANENT L/C OBLIGATION REDUCTION" means a cancellation, termination or reduction in the amount of any Closing Date Letter of Credit (including any such reduction, cancellation or termination resulting from a drawing under such Closing Date Letter of
Credit) issued on the Closing Date, other than such a cancellation, termination or reduction (i) in the amount of the Montgomery Closing Date Letter of Credit not resulting from a drawing under such Letter of Credit or (ii) concurrently with a reissuance of the relevant cancelled, terminated or reduced portion of the applicable Closing Date Letter of Credit pursuant to subsection 3.1B(ii)(a). Notwithstanding the foregoing, any scheduled reduction in the stated amount of any Closing Date Letter of Credit shall be a Permanent L/C Obligation Reduction only to the extent the maximum amount available for drawing at any time thereafter under such Closing Date Letter of Credit is permanently reduced.
"PERMITTED ENCUMBRANCES" means the following types of Liens (excluding any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or by ERISA, any such Lien relating to or imposed in connection with any Environmental Claim, and any such Lien expressly prohibited by any applicable terms of any of the Collateral Documents):
(i) Liens for taxes, assessments or governmental charges or claims the payment of which is not, at the time, required by subsection 6.3;
(ii) statutory Liens of landlords, statutory Liens and rights of set-off of banks, statutory Liens of carriers, warehousemen, mechanics, repairmen, workmen and materialmen, and other Liens imposed by law, in each case incurred in the ordinary course of business (a) for amounts not yet overdue or (b) for amounts that are overdue and that (in the case of any such amounts overdue for a period in excess of 5 days) are being contested in good faith by appropriate proceedings, so long as (1) such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts, and (2) in the case of a Lien with respect to any portion of the Collateral, such contest proceedings conclusively operate to stay the sale of any portion of the Collateral on account of such Lien;
(iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money), so long as no foreclosure, sale or similar proceedings have been commenced with respect to any portion of the Collateral on account thereof;
(iv) any attachment or judgment Lien not constituting an Event of Default under subsection 8.8;
(v) leases or subleases granted to third parties in accordance with any applicable terms of the Collateral Documents and not interfering in any material respect with the ordinary conduct of the business of Company or any of its
Subsidiaries or resulting in a material diminution in the value of any Collateral as security for the Secured Obligations;
(vi) easements, rights-of-way, restrictions, encroachments, and other minor defects or irregularities in title to the real property of Company and its Subsidiaries, in each case which do not and will not interfere in any material respect with the ordinary conduct of the business of Company or any of its Subsidiaries or result in a material diminution in the value of any Collateral as security for the Secured Obligations;
(vii) any (a) interest or title of a lessor or sublessor under any lease not prohibited by this Agreement, (b) restriction or encumbrance that the interest or title of such lessor or sublessor may be subject to, or (c) subordination of the interest of the lessee or sublessee under such lease to any restriction or encumbrance referred to in the preceding clause (b), so long as the holder of such restriction or encumbrance agrees to recognize the rights of such lessee or sublessee under such lease;
(viii) Liens arising from filing UCC financing statements relating solely to leases not prohibited by this Agreement;
(ix) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;
(x) any zoning or similar law or right reserved to or vested in any governmental office or agency to control or regulate the use of any real property;
(xi) Liens securing obligations (other than obligations representing Indebtedness for borrowed money) under operating, reciprocal easement or similar agreements entered into in the ordinary course of business of Company and its Subsidiaries; and
(xii) licenses of Intellectual Property granted by Company or any of its Subsidiaries in the ordinary course of business and not interfering in any material respect with the ordinary conduct of the business of Company or such Subsidiary.
Other Liens on assets of Borrowers and their Subsidiaries permitted under this Agreement (which are not Permitted Encumbrances) are described in subsection 7.2A.
"PERSON" means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, Joint Ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments (whether federal, state or local, domestic or foreign, and including political subdivisions thereof) and agencies or other administrative or regulatory bodies thereof.
"PETITION DATE" has the meaning assigned to that term in the recitals to this Agreement.
"PLAN OF REORGANIZATION" means the Debtors' Second Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code as filed with the Bankruptcy Court on January 14, 2004 (and as revised and amended through March 2, 2004), together with the Reorganization Plan Supplement to Debtors' Second Joint Plan of Reorganization filed with the Bankruptcy Court on February 18, 2004 in connection therewith.
"PLEDGED COLLATERAL" means the "Pledged Collateral" as defined in the Security Agreement.
"POTENTIAL EVENT OF DEFAULT" means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default.
"PREPETITION CREDIT AGREEMENT" means the Revolving Credit and Participation Agreement dated as of March 14, 2001, among Company, certain of its Subsidiaries, the financial institutions listed on the signature pages thereof, Deutsche Bank, as Documentation Agent, and Bank of America, as Administrative Agent, as amended, restated, supplemented or otherwise modified through the Closing Date and as it may hereafter be amended, restated, supplemented or otherwise modified.
"PREPETITION CREDIT DOCUMENTS" means all "Loan Documents" as defined in the Prepetition Credit Agreement.
"PREPETITION LENDERS" means the Persons identified as "Lenders" under the Prepetition Credit Agreement, in their capacities as lenders under the Prepetition Credit Agreement, together with their successors and permitted assigns.
"PREPETITION OBLIGATIONS" means all "Obligations" as defined in the Prepetition Credit Agreement.
"PREPETITION SECURED CLAIMS" means, collectively, the "Secured Bank Claims" and the "9.25% Debenture Claims", as such terms are defined in the Plan of Reorganization.
"PREPETITION UNSECURED CLAIMS" means "Parent and Holding Company Unsecured Claims" that are "Allowed," as such terms are defined in the Plan of Reorganization.
"PRIME RATE" means the rate per annum equal to the prime rate of interest announced from time to time by Bank One or its parent (which is not necessarily the lowest rate charged to any customer), changing when and as said prime rate changes. Bank One or any other Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Rate.
"PROCEEDINGS" means any action, suit, proceeding (whether administrative, judicial or otherwise), governmental investigation or arbitration.
"PROJECT" means any waste-to-energy facility, electrical generation plant, cogeneration plant, water treatment facility or other facility for the generation of electricity or engaged in another line of business in which Company and its Subsidiaries are permitted to be engaged hereunder for which a Subsidiary or Subsidiaries of Company (including CPIH Subsidiaries) was, is or will be (as the case may be) an owner, operator, manager or builder, and shall also mean any two or more of such plants or facilities in which an interest has been acquired in a single transaction, so long as such interest constitutes an existing Investment on the Closing Date permitted under this Agreement; provided, however, that a Project shall cease to be a Project of Company and its Subsidiaries at such time that Company or any of its Subsidiaries ceases to have any existing or future rights or obligations (whether direct or indirect, contingent or matured) associated therewith.
"PRO RATA SHARE" means (i) with respect to all payments, computations and other matters relating to the Revolving Loan Commitment or the Revolving Loans of any Lender, the percentage obtained by dividing (x) the Revolving Loan Exposure of that Lender by (y) the aggregate Revolving Loan Exposure of all Lenders, in any such case as the applicable percentage may be adjusted by assignments permitted pursuant to subsection 10.1; (ii) with respect to all payments, computations and other matters relating to the Letter of Credit Commitment of any Lender or any Letters of Credit issued or participations therein deemed purchased by any Lender, the percentage obtained by dividing (a) the Letter of Credit Exposure of that Lender by (b) the aggregate Letter of Credit Exposure of all Lenders, in any such case as the applicable percentage may be adjusted by assignments permitted pursuant to subsection 10.1 and (iii) with respect to all payments, computations and other matters relating to the Commitments of Lenders generally, the percentage obtained by dividing (x) the aggregate Credit Exposure of that Lender by (y) the aggregate Credit Exposure of all Lenders, in any such case as the applicable percentage may be adjusted by assignments permitted pursuant to subsection 10.1. The initial Pro Rata Share of each Lender is set forth opposite the name of that Lender in Schedule 2.1 annexed hereto.
"PTO" means the United States Patent and Trademark Office or any successor or substitute office in which filings are necessary or, in the opinion of Administrative Agent, desirable in order to create or perfect Liens on any IP Collateral.
"PURPA" means the Public Utility Regulatory Policies Act of 1978, as amended.
"RCRA" means the Resource Conservation and Recovery Act, as amended (42 U.S.C. Section 6901 et seq.), or any successor statute, and all implementing regulations promulgated thereunder.
"REAL PROPERTY ASSET" means, at any time of determination, any interest then owned by any Borrower in any real property.
"RECORDED LEASEHOLD INTEREST" means a Leasehold Property with respect to which a Record Document (as hereinafter defined) has been recorded in all places necessary or desirable, in Administrative Agent's reasonable judgment, to give constructive notice of
such Leasehold Property to third-party purchasers and encumbrancers of the affected real property. For purposes of this definition, the term "RECORD DOCUMENT" means, with respect to any Leasehold Property, (a) the lease evidencing such Leasehold Property or a memorandum thereof, executed and acknowledged by the owner of the affected real property, as lessor, or (b) if such Leasehold Property was acquired or subleased from the holder of a Recorded Leasehold Interest, the applicable assignment or sublease document, executed and acknowledged by such holder, in each case in form sufficient to give such constructive notice upon recordation and otherwise in form reasonably satisfactory to Administrative Agent.
"REGISTER" has the meaning assigned to that term in subsection 2.1E.
"REGULATION D" means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System.
"REIMBURSEMENT DATE" has the meaning assigned to that term in subsection 3.3B.
"RELATED AGREEMENTS" means the Detroit L/C Facility Documents, the High Yield Indenture, the High Yield Notes, the Corporate Services Reimbursement Agreement, the Management Services and Reimbursement Agreement and the DHC Tax Sharing Agreement as such agreements and instruments may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under subsection 7.12.
"RELEASE" means any releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing or migrating of Hazardous Materials into the indoor or outdoor environment (including the abandonment, discarding or disposal of any barrels, containers or other closed receptacles containing any Hazardous Materials), including the movement of any Hazardous Materials through the air, soil, surface water or groundwater.
"REPLACEMENT CLOSING DATE LETTER OF CREDIT" means a Closing Date Letter of Credit issued to replace a DIP Tranche A L/C or a DIP Tranche B L/C and any Letter of Credit issued to replace or extend the same pursuant to subsection 3.1B(ii)(a).
"REQUEST FOR ISSUANCE" means a request substantially in the form of Exhibit III annexed hereto.
"REQUISITE DIP LENDERS" means DIP Lenders having or holding more than 50% of the aggregate credit exposure under the DIP Tranche A L/Cs and the DIP Tranche B L/Cs.
"REQUISITE LENDERS" means Lenders having or holding more than 50% of the aggregate Credit Exposure of all Lenders.
"RESERVE REQUIREMENT" means, with respect to an Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on eurocurrency liabilities.
"RESTRICTED ACCOUNT" means any account that is either (i) a collateral account, debt service reserve account or other Deposit Account to which the access of Company and its Subsidiaries is restricted pursuant to a valid and enforceable Contractual Obligation, so long as such account is (a) related to a Project of Company and its Subsidiaries, (b) is required to be opened or maintained by Company or any of its Subsidiaries pursuant to a Contractual Obligation binding on such Person and (c) is permitted to be maintained under this Agreement, or (ii) a reserve account established in accordance with the Approved Plan of Reorganization.
"RESTRICTED PAYMENT" means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of Company now or hereafter outstanding, except a dividend payable solely in shares of that class of stock to the holders of that class, (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of Company now or hereafter outstanding, (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock of Company now or hereafter outstanding, and (iv) any payment or prepayment of principal of, premium, if any, or interest on, or redemption, purchase, retirement, defeasance (including in-substance or legal defeasance), sinking fund or similar payment with respect to, any Indebtedness of Company and its Subsidiaries other than (a) the Obligations, (b) Indebtedness owed by a Subsidiary to a Borrower, (c) Indebtedness under the Detroit L/C Facility Documents or the High Yield Notes, and (d) other amounts required to be paid under this Agreement.
"REVOLVING LENDER" means any Lender having or holding Revolving Loan Exposure.
"REVOLVING LOAN COMMITMENT" and "REVOLVING LOAN COMMITMENTS"
have the respective meanings assigned to such terms in subsection 2.1(A).
"REVOLVING LOAN EXPOSURE" means, with respect to any Lender as of any date of determination (i) prior to the termination of the Revolving Loan Commitments, that Lender's Revolving Loan Commitment, and (ii) after the termination of the Revolving Loan Commitments, the aggregate outstanding principal amount of the Revolving Loans of that Lender.
"REVOLVING LOANS" means the loans made (or deemed made) by Revolving Lenders to Borrowers pursuant to subsection 2.1A.
"REVOLVING NOTES" means any promissory notes of Borrowers issued pursuant to subsection 2.1F to evidence the Revolving Loans of any Lenders, substantially in the form
of Exhibit II annexed hereto, as they may be amended, restated, supplemented or otherwise modified from time to time.
"SECURED OBLIGATIONS" means the obligations secured by the Collateral pursuant to the Collateral Documents.
"SECURED PARTIES" means the "Secured Parties" as defined in the Intercreditor Agreement.
"SECURITIES" means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated, certificated or uncertificated, or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to time, and any successor statute.
"SECURITIES ACCOUNT" means an account to which a financial asset is or may be credited in accordance with an agreement under which the Person maintaining the account undertakes to treat the Person for whom the account is maintained as entitled to exercise the rights that comprise the financial asset.
"SECURITY AGREEMENT" means the Security Agreement executed and delivered on the Closing Date by Credit Parties (except as otherwise contemplated in Section 5.18) other than DHC, substantially in the form of Exhibit VII annexed hereto, as such Security Agreement may thereafter be amended, restated, supplemented or otherwise modified from time to time.
"SEIU PENSION PLAN" means the Pension Plan referred to generally by Company on and prior to the Closing Date as the "Service Employees International Union Pension Trust for Employees of Allied Plant Maintenance Company, Inc. Defined Benefit Pension Plan".
"SETTLEMENT" has the meaning assigned to that term in subsection 2.1D.
"SETTLEMENT DATE" has the meaning assigned to that term in subsection 2.1D.
"SOLVENT" means, with respect to any Person, that as of the
date of determination, in light of all of the facts and circumstances existing
at such time, (i) the then fair saleable value of the property of such Person is
(a) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (b) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and due considering all financing alternatives and
potential asset sales reasonably available to such Person; (ii) such Person's
capital is not unreasonably small in
relation to its business or any contemplated or undertaken transaction; and
(iii) such Person does not intend to incur, or believe (nor should it reasonably
believe) that it will incur, debts beyond its ability to pay such debts as they
become due. For purposes of this definition, the amount of any contingent
liability at any time shall be computed as the amount that, in light of all of
the facts and circumstances existing at such time, represents the amount that
can reasonably be expected to become an actual or matured liability.
"SUBORDINATED INDEBTEDNESS" means, collectively, (i) Indebtedness under the Unsecured Creditor Notes and the Unsecured Creditor Notes Indenture, and (ii) any other Indebtedness of Company or any of its Subsidiaries incurred from time to time and subordinated by its terms in right of payment to the Obligations.
"SUBSIDIARY" means, with respect to any Person, any corporation, partnership, trust, limited liability company, association, joint venture or other business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the members of the Governing Body is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof. Any reference contained herein to one or more Subsidiaries of Company or of Company's Domestic Subsidiaries shall, unless otherwise expressly indicated, not include any CPIH Subsidiaries and Greenway Insurance Company of Vermont.
"SWEEP DATE" has the meaning assigned to that term in subsection 2.4A(iii)(f).
"SWINGLINE LOAN" has the meaning assigned to that term in subsection 2.1D.
"SYNTHETIC LEASE OBLIGATION" means the monetary obligation of a Person under (i) a so-called synthetic, off-balance sheet or tax retention lease, or (ii) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).
"TAMPA SUBSIDIARIES" means Covanta Tampa Construction, Inc., a Delaware corporation, and Covanta Tampa Bay, Inc., a Florida corporation.
"TAX" or "TAXES" means any present or future tax, levy, impost, duty, charge, fee, deduction or withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed, including interest, penalties, additions to tax and any similar liabilities with respect thereto; except that, in the case of a Lender, there shall be excluded franchise taxes and all taxes that are imposed on the overall income or profits of such Lender by the United States or by any other Government Authority under the laws of which Lender is organized or has its principal office or maintains its applicable lending office.
"TAX NOTE" has the meaning assigned to that term in subsection 4.1F(iv).
"TOTAL DEBT" means, as at any date of determination, (i) the
aggregate stated balance sheet amount of all Indebtedness of Company and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP, minus
(ii) the amounts of "Current portion of project debt" and "Project Debt",
whether such line items are so titled or otherwise titled, as such line items
are or would be reflected in Company's consolidated balance sheet as at such
date prepared in conformity with GAAP and reported in a manner consistent with
Company's reporting of such amounts in its quarterly or annual report (as the
case may be) on Form 10Q or 10K, respectively, prior to the Closing Date, minus
(iii) any portion of Indebtedness of Company and its Subsidiaries under the CPIH
Stock Pledge Agreement or the Corporate Services Reimbursement Agreement
included in the amount described in clause (i) above, minus (iv) any portion of
the amount described in clause (i) above that represents a funded drawing under
a letter of credit (otherwise permitted to be outstanding under this Agreement)
supporting obligations of Company and its Subsidiaries (including CPIH
Subsidiaries) in respect of the Quezon Project.
"TREASURY REGULATIONS" means the Treasury Regulations promulgated under the Internal Revenue Code.
"TSCA" means the Toxic Substances Control Act of 1976, as amended (15 U.S.C. Section 2601 et seq.), or any successor statute, and all implementing regulations promulgated thereunder.
"UBS BANK" means UBS AG, Stamford Branch.
"UCC" means the Uniform Commercial Code (or any similar or equivalent legislation) as in effect in any applicable jurisdiction.
"UNITED STATES" means the United States of America.
"UNSECURED CREDITOR NOTES" has the meaning assigned to that term in subsection 4.1F(iv).
"UNSECURED CREDITOR NOTES INDENTURE" means the Indenture pursuant to which the Unsecured Creditor Notes are issued.
"WARREN SUBSIDIARIES" means Covanta Warren Energy Resource Co. LP, a Delaware limited partnership, Covanta Warren Holdings I, Inc., a Virginia corporation, and Covanta Warren Holdings II, Inc., a California corporation.
1.2. ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS UNDER AGREEMENT.
Except as otherwise expressly provided in this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP. Financial statements and other information
required to be delivered by Company to Lenders pursuant to clauses (iii) and
(iv) of subsection 6.1 shall be prepared in accordance with GAAP as in effect at
the time of such preparation (and delivered together
with the reconciliation statements provided for in subsection 6.1(vi)). Except as otherwise permitted by this Agreement, calculations in connection with the definitions, covenants and other provisions of this Agreement shall utilize GAAP as in effect on the date of determination, applied in a manner consistent with that used in preparing the financial statements referred to in subsection 5.3. If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Credit Document, and Company, Administrative Agent or Requisite Lenders shall so request, Administrative Agent, Lenders and Company shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of Requisite Lenders), provided, that until so amended, such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and Company shall provide to Administrative Agent and Lenders reconciliation statements provided for in subsection 6.1(vi).
1.3. OTHER DEFINITIONAL PROVISIONS AND RULES OF CONSTRUCTION.
A. Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference.
B. References to "Sections" and "subsections" shall be to Sections and subsections, respectively, of this Agreement unless otherwise specifically provided.
C. The use in any of the Credit Documents of the word "include" or "including", when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation" or "but not limited to" or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter.
SECTION 2. REVOLVING LOANS; INTEREST RATES; FEES; AND CERTAIN TERMS OF PAYMENT AND REPAYMENT AND OTHER MATTERS
2.1. REVOLVING LOAN COMMITMENTS; MAKING OF REVOLVING LOANS; THE REGISTER; OPTIONAL NOTES.
A. REVOLVING LOAN COMMITMENTS. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Borrowers herein set forth, each Lender severally, and not jointly and severally, agrees to make a portion of its Letter of Credit Commitment available as Revolving Loans to be made to Borrowers from time to time during the period from the Closing Date to but excluding the Maturity Date in an aggregate amount not exceeding such Lender's Pro Rata Share of the aggregate amount of the Revolving Loan Commitments (as hereinafter defined) to be used for the purposes identified in subsection 2.5A. The original amount of the portion of each Lender's Letter of Credit Commitment that is available for the making of Revolving Loans to Borrowers (such Lender's "REVOLVING LOAN COMMITMENT") is set forth opposite its name on
Schedule 2.1 annexed hereto and the aggregate original amount of such portions of the Letter of Credit Commitments that are available for the making of Revolving Loans to Borrowers is $10,000,000 (the "REVOLVING LOAN COMMITMENTS"); provided, however, that the Revolving Loan Commitments of Lenders shall be adjusted to give effect to any assignments of the Revolving Loan Commitments pursuant to subsection 10.1B and shall be reduced from time to time by the amount of any reductions thereto made pursuant to subsection 2.4. Each Lender's Revolving Loan Commitment shall expire on the day before the Maturity Date and all Revolving Loans and all other amounts owed hereunder with respect to the Revolving Loans and the Revolving Loan Commitments shall be paid in full no later than the Maturity Date. Amounts borrowed under this subsection 2.1A may be repaid and reborrowed up to but excluding the Maturity Date. Anything contained in this Agreement to the contrary notwithstanding, in no event shall any Revolving Loan be requested or made if, after giving effect thereto, (i) the aggregate principal amount of all Revolving Loans outstanding would exceed the aggregate Revolving Loan Commitments then in effect or (ii) the aggregate Credit Utilization then in effect would exceed the aggregate Letter of Credit Commitments then in effect.
B. BORROWING MECHANICS. Revolving Loans made on any Funding Date shall be in an aggregate minimum amount of $200,000 and integral multiples of $100,000 in excess of that amount (or, if the amount of the Revolving Loan Commitments unfunded and available for borrowing is less than such aggregate minimum amount, an amount equal to the amount of the Revolving Loan Commitments unfunded and available for borrowing); provided that Revolving Loans made on any Funding Date as Eurodollar Rate Loans with a particular Interest Period shall be in an aggregate minimum amount of $500,000 and integral multiples of $200,000 in excess of that amount. Whenever Borrowers desire that Lenders make Revolving Loans they shall deliver to Administrative Agent a Notice of Borrowing no later than 10:00 A.M. (Chicago time) at least three Business Days in advance of the proposed Funding Date (in the case of a Eurodollar Rate Loan) or at least one Business Day in advance of the proposed Funding Date (in the case of a Base Rate Loan). Revolving Loans may be continued as or converted into Base Rate Loans and Eurodollar Rate Loans in the manner provided in subsection 2.2D. In lieu of delivering a Notice of Borrowing, Borrowers may give Administrative Agent telephonic notice by the required time of any proposed borrowing under this subsection 2.1B; provided that such notice shall be promptly confirmed in writing by delivery of a duly executed Notice of Borrowing to Administrative Agent on or before the applicable Funding Date.
Neither Administrative Agent nor any Lender shall incur any liability to any Borrower in acting upon any telephonic notice referred to above that Administrative Agent believes in good faith to have been given by an Officer of a Borrower or for otherwise acting in good faith under this subsection 2.1B or under subsection 2.2D, and upon funding of Revolving Loans by Lenders, and upon conversion or continuation of the applicable basis for determining the interest rate with respect to any Revolving Loans pursuant to subsection 2.2D, in each case in accordance with this Agreement, pursuant to any such telephonic notice Borrowers shall have effected Revolving Loans or a conversion or continuation thereof, as the case may be.
Borrowers shall notify Administrative Agent prior to the funding of any Revolving Loans in the event that any of the matters to which Borrowers are required to certify in the applicable Notice of Borrowing is no longer true and correct as of the applicable Funding Date, and the acceptance by Borrowers of the proceeds of any Revolving Loans shall constitute a re-certification by Borrowers, as of the applicable Funding Date, as to the matters to which Borrowers are required to certify in the applicable Notice of Borrowing.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice of Borrowing for, or a Notice of Conversion/Continuation for conversion to, or continuation of, a Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and Borrowers shall be bound to make a borrowing or to effect a conversion or continuation in accordance therewith.
Notwithstanding the foregoing provisions of this subsection 2.1B, no Eurodollar Rate Loans may be made and no Base Rate Loan may be converted into a Eurodollar Rate Loan until the third Business Day after the Closing Date.
C. DISBURSEMENT OF FUNDS. All Revolving Loans under this Agreement shall be made by Lenders simultaneously and proportionately to their respective Pro Rata Shares, it being understood that neither Administrative Agent nor any Lender shall be responsible for any default by any other Lender in that other Lender's obligation to make a Revolving Loan requested hereunder nor shall the Commitment of any Lender to make a Revolving Loan requested be increased or decreased as a result of a default by any other Lender in that other Lender's obligation to make a Revolving Loan requested hereunder. Promptly after receipt by Administrative Agent of a Notice of Borrowing pursuant to subsection 2.1B (or telephonic notice in lieu thereof) or a notice deemed to be a Notice of Borrowing pursuant to subsection 2.1B, Administrative Agent shall notify each Lender of the proposed borrowing. Each such Lender shall make the amount of its Revolving Loan available to Administrative Agent not later than 12:00 Noon (Chicago time) on the applicable Funding Date, in same day funds in Dollars, at the Funding and Payment Office. Upon satisfaction or waiver of the conditions precedent specified in subsections 4.1 (in the case of Revolving Loans made on the Closing Date) and 4.2 (in the case of all Revolving Loans), Administrative Agent shall make the proceeds of such Revolving Loans available to Borrowers on the applicable Funding Date by causing an amount of same day funds in Dollars equal to the proceeds of all such Revolving Loans received by Administrative Agent from Lenders to be credited to the account of Borrowers at the Funding and Payment Office.
Unless Administrative Agent shall have been notified by any Lender prior to a Funding Date that such Lender does not intend to make available to Administrative Agent the amount of such Lender's Revolving Loan requested on such Funding Date, Administrative Agent may assume that such Lender has made such amount available to Administrative Agent on such Funding Date and Administrative Agent may, in its sole discretion, but shall not be obligated to, make available to Borrowers a corresponding amount on such Funding Date. If such corresponding amount is not in fact made available to Administrative Agent by such Lender, Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Lender together with interest thereon, for each day from such Funding Date until the date such amount is paid to Administrative Agent, at the customary rate set by Administrative Agent for the correction of errors among banks for three Business Days and thereafter at the Base Rate. If such Lender does not pay such corresponding amount forthwith upon Administrative Agent's demand therefor, Administrative Agent shall promptly notify Borrowers and Borrowers shall immediately pay such corresponding amount to Administrative Agent together with interest thereon, for each day from such Funding Date until the date such amount is paid to Administrative Agent, at the rate payable under this Agreement for Base Rate Loans. Nothing in this subsection 2.1C shall be deemed to relieve any Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights that Borrowers may have against any Lender as a result of any default by such Lender hereunder.
D. SWINGLINE LOANS. Subject to each of the terms and conditions set forth herein, Administrative Agent shall make each Revolving Loan, on behalf of Revolving Lenders and in the amount requested, available to Borrowers on the applicable Funding Date in the manner set forth in subsection 2.1C. Each Revolving Loan made solely by Administrative Agent pursuant to this subsection 2.1D is referred to in this Agreement as a "SWINGLINE LOAN" and such Revolving Loans are referred to in this Agreement collectively as "SWINGLINE LOANS". Each Swingline Loan shall be subject to all of the terms and conditions applicable to other Revolving Loans funded by Revolving Lenders (including, without limitation, the conditions set forth in Section 4), except that all payments thereon shall be payable to Administrative Agent solely for its own account (other than as expressly set forth in the Inter-Lender Agreement). All Swingline Loans shall be secured by the Liens under the Collateral Documents and shall constitute Revolving Loans for all purposes hereunder and under each other Credit Document. At any time upon the occurrence and during the continuance of an Event of Default, Administrative Agent may request settlement of any Swingline Loans (a "SETTLEMENT") with the Revolving Lenders by notifying the Revolving Lenders of such requested Settlement by telecopy or telephone no later than 12:00 Noon (Chicago time) on the date of such requested Settlement (the "SETTLEMENT DATE"). Each Revolving Lender (excluding Administrative Agent in all events) agrees to transfer in immediately available funds the entire amount of such Revolving Lender's Pro Rata Share of the outstanding principal balance of the Swingline Loan with respect to which a Settlement has been requested to Administrative Agent, at such account of Administrative Agent as Administrative Agent may designate, no later than 2:00 p.m. (Chicago time) on the Settlement Date. The foregoing obligations of the Revolving Lenders in respect of Settlements shall be unconditional (it being understood for the avoidance of doubt that Settlements may occur during the existence of an Event of Default or Potential Event of Default and regardless of whether the applicable conditions set forth in Section 4 have been satisfied). Such amounts that are transferred by the Revolving Lenders to Administrative Agent shall be applied against the outstanding principal balance of the applicable Swingline Loan and shall constitute Revolving Loans of such Revolving Lenders, respectively. If any such amount in respect of a Swingline Loan is not transferred to Administrative Agent by any Revolving
Lender on the Settlement Date applicable thereto, then Administrative Agent shall be unconditionally entitled to recover such amount on demand from such Revolving Lender together with interest thereon at the rate applicable to such Swingline Loan hereunder.
E. THE REGISTER. Administrative Agent, acting for these purposes solely as an agent of Borrowers (it being acknowledged that Administrative Agent, in such capacity, and its officers, directors, employees, agent and affiliates shall constitute Indemnitees under subsection 10.3), shall maintain (and make available for inspection by Borrowers and Lenders upon reasonable prior notice at reasonable times) at its address referred to in subsection 10.8 a register for the recordation of, and shall record, the names and addresses of Lenders and the Revolving Loan Commitment, Letter of Credit Commitment, Revolving Loans and participations in Letters of Credit of each Lender from time to time (the "REGISTER"). Borrowers, Administrative Agent and Lenders shall deem and treat the Persons listed as Lenders in the Register as the holders and owners of the corresponding Commitments, Revolving Loans and participations listed therein for all purposes hereof; all amounts owed with respect to any Commitment, Revolving Loan or participation shall be owed to the Lender listed in the Register as the owner thereof; and any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is listed in the Register as a Lender shall be conclusive and binding on any subsequent holder, assignee or transferee of the corresponding Commitments or Revolving Loans. Each Lender shall record on its internal records the amount of its participation, Revolving Loans and Commitments and each payment in respect hereof, and any such recordation shall be conclusive and binding on Borrowers, absent manifest error, subject to the entries in the Register, which shall, absent manifest error, govern in the event of any inconsistency with any Lender's records. Failure to make any recordation in the Register or in any Lender's records, or any error in such recordation, shall not affect any participations, Revolving Loans or Commitments or any Obligations in respect of any Revolving Loans or participations.
F. OPTIONAL NOTES. If so requested by any Lender by written notice to Company (with a copy to Administrative Agent) at least two Business Days prior to the Closing Date or at any time thereafter, Borrowers shall execute and deliver to such Lender (and/or, if applicable and if so specified in such notice, to any Person who is an assignee of such Lender pursuant to subsection 10.1) on the Closing Date (or, if such notice is delivered after the date which is two Business Days prior to the Closing Date, promptly after Company's receipt of such notice) a promissory note or promissory notes to evidence such Lender's Revolving Loans, substantially in the form of Exhibit II annexed hereto, with appropriate insertions, including the principal amount of that Lender's Revolving Loan Commitment.
2.2. INTEREST ON THE REVOLVING LOANS.
A. RATE OF INTEREST. Subject to the provisions of subsections 2.6 and 2.7, each Revolving Loan shall bear interest on the unpaid principal amount thereof from the date made until repayment in full at a rate determined by reference to the Base Rate or the Eurodollar Rate. The applicable basis for determining the rate of interest with respect to any Revolving Loan shall be selected by Borrowers initially at the time a Notice of Borrowing is
given with respect to such Revolving Loan pursuant to subsection 2.2B (subject to the last sentence of subsection 2.1B), and the basis for determining the interest rate with respect to any Revolving Loan may be changed from time to time pursuant to subsection 2.2B (subject to the last sentence of subsection 2.1B); provided, that if an Event of Default or Potential Event of Default then exists, Borrowers shall not be entitled to request that any Revolving Loan be made as a Eurodollar Rate Loan. If on any day a Revolving Loan is outstanding with respect to which notice has not been delivered to Administrative Agent in accordance with the terms of this Agreement specifying the applicable basis for determining the rate of interest, then for that day that Revolving Loan shall bear interest determined by reference to the Base Rate. Subject to the provisions of subsections 2.2E, 2.2G and 2.7, the Revolving Loans shall bear interest through maturity as follows:
(i) if a Base Rate Loan, then at the sum of the Base Rate plus the Base Rate Margin; or
(ii) if a Eurodollar Rate Loan, then at the sum of the Eurodollar Rate plus the Eurodollar Rate Margin.
B. INTEREST PERIODS. In connection with each Eurodollar Rate Loan, Borrowers shall, pursuant to the applicable Notice of Borrowing or Notice of Conversion/Continuation, as the case may be, select an the interest period (each, an "INTEREST PERIOD") to be applicable to such Revolving Loan, which Interest Period shall be a one-, two- or three-month period; provided that:
(i) the initial Interest Period for any Eurodollar Rate Loan shall commence on the Funding Date in respect of such Revolving Loan, in the case of a Revolving Loan initially made as a Eurodollar Rate Loan, or on the date specified in the applicable Notice of Conversion/Continuation, in the case of a Revolving Loan converted to a Eurodollar Rate Loan;
(ii) in the case of immediately successive Interest Periods applicable to a Eurodollar Rate Loan continued as such pursuant to a Notice of Conversion/Continuation, each successive Interest Period shall commence on the day on which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided that, if any Interest Period would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day;
(iv) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (v) of this subsection 2.2B, end on the last Business Day of a calendar month;
(v) no Interest Period with respect to any portion of the Revolving Loans shall extend beyond the Maturity Date in effect at the commencement of such Interest Period; and
(vi) there shall be no more than four Interest Periods outstanding at any time.
C. INTEREST PAYMENTS. Subject to the provisions of subsection 2.2E, interest on each Revolving Loan shall be payable in arrears on and to each Interest Payment Date applicable to that Revolving Loan, upon any prepayment of that Revolving Loan (to the extent accrued on the amount being prepaid) and at maturity (including final maturity).
D. CONVERSION OR CONTINUATION. Subject to the provisions of
subsection 2.6, Borrowers shall have the option (i) to convert at any time all
or any part of their outstanding Revolving Loans equal to $200,000 and integral
multiples of $100,000 in excess of that amount from Revolving Loans bearing
interest at a rate determined by reference to one basis to Revolving Loans
bearing interest at a rate determined by reference to an alternative basis or
(ii) upon the expiration of any Interest Period applicable to a Eurodollar Rate
Loan, to continue all or any portion of such Revolving Loan equal to $500,000
and integral multiples of $200,000 in excess of that amount as a Eurodollar Rate
Loan; provided, however, that (a) no Base Rate Loan may be converted into a
Eurodollar Rate Loan and no Eurodollar Rate Loan may be continued as a
Eurodollar Rate Loan if an Event of Default or Potential Event of Default then
exists and (b) a Eurodollar Rate Loan may only be converted into a Base Rate
Loan on the expiration date of an Interest Period applicable thereto.
Borrowers shall deliver a Notice of Conversion/Continuation to Administrative Agent no later than 10:00 A.M. (Chicago time) at least one Business Day in advance of the proposed conversion date (in the case of a conversion to a Base Rate Loan) and at least three Business Days in advance of the proposed conversion/continuation date (in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan). In lieu of delivering a Notice of Conversion/Continuation Borrowers may give Administrative Agent telephonic notice by the required time of any proposed conversion/continuation under this subsection 2.2D; provided that such notice shall be promptly confirmed in writing by delivery of a Notice of Conversion/Continuation to Administrative Agent on or before the proposed conversion/continuation date. Administrative Agent shall promptly notify each Lender of any Revolving Loan subject to the Notice of Conversion/Continuation.
E. DEFAULT RATE. Upon the occurrence and during the continuation of any Event of Default and notice to Borrowers from Administrative Agent, the outstanding principal amount of all Revolving Loans and, to the extent permitted by applicable law, any interest payments thereon not paid when due and any fees and other amounts then due and payable hereunder (but not including amounts drawn under any Letter of Credit that are not reimbursed by Borrowers when required under subsection 3.3), shall thereafter bear interest (including post petition interest in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws) payable upon demand at a rate that is (i) in the case of any
Revolving Loans, 2.00% per annum in excess of the interest rate otherwise payable under this Agreement with respect to such Revolving Loans or (ii) in the case of fees and other amounts, 2.00% per annum in excess of the interest rate otherwise payable under this Agreement for Base Rate Loans. Payment or acceptance of the increased rates of interest provided for in this subsection 2.2E is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Administrative Agent or any Lender.
F. COMPUTATION OF INTEREST. Interest on the Revolving Loans and other amounts bearing interest with reference to the Base Rate shall be computed on the basis of a 360-day year, in each case for the actual number of days elapsed in the period during which it accrues. In computing interest on any Revolving Loan or amount funded in a drawing under a Letter of Credit, the date of the making of such Revolving Loan or the date of funding of such drawing or the first day of an Interest Period applicable to such Revolving Loan or, with respect to a Base Rate Loan being converted from a Eurodollar Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate Loan, as the case may be, shall be included; and the date of payment of such Revolving Loan or funded drawing or the expiration date of an Interest Period applicable to such Revolving Loan or, with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the case may be, shall be excluded; provided that if a Revolving Loan or funded drawing is repaid on the same day on which it is made, one day's interest shall be paid on that Revolving Loan or funded drawing.
G. MAXIMUM RATE. Notwithstanding the foregoing provisions of this subsection 2.2, in no event shall the rate of interest payable by Borrowers with respect to any Revolving Loan or funded drawing under any Letter of Credit exceed the maximum rate of interest permitted to be charged under applicable law.
2.3. FEES.
A. AGENCY FEE. Borrowers, jointly and severally, agree to pay to Administrative Agent on the Closing Date and each anniversary of the Closing Date (excluding the Maturity Date), for Administrative Agent's own account and in advance for the forthcoming year, an annual agency fee in an amount equal to $30,000. Each such annual maintenance fee shall be fully-earned and non-refundable when due.
B. COMMITMENT FEE. Borrowers, jointly and severally, agree to pay to Administrative Agent, for distribution to Issuing Lender and Lenders (with the allocation among Issuing Lender and Lenders to be as set forth in the Inter-Lender Agreement and the allocation among Lenders to be in proportion to their respective Pro Rata Shares), commitment fees for the period from and including the Closing Date to but excluding the Maturity Date equal to (i) the daily excess of the aggregate Letter of Credit Commitments over the aggregate Credit Utilization, multiplied by (ii) the Commitment Fee Percentage, expressed as a daily rate. Such commitment fees shall be payable in arrears on and to (but excluding) the last day of each fiscal quarter and on the Maturity Date and computed on the basis of a 360-day year, for the actual number of days elapsed.
C. CLOSING FEE. Borrowers, jointly and severally, agree to pay on the Closing Date to Lenders, in proportion to their respective Pro Rata Shares, a closing fee in an aggregate amount that is equal to two percent (2.00%) of the total amount of the Letter of Credit Commitments of Lenders hereunder as of the Closing Date.
D. OTHER FEES. Borrowers, jointly and severally, agree to pay to Administrative Agent such fees in the amounts and at the times separately agreed upon between Company and Administrative Agent. All fees referenced in this subsection 2.3 shall be earned when payable and shall be non-refundable.
2.4. MANDATORY PAYMENTS, REDUCTIONS IN COMMITMENTS; GENERAL PROVISIONS REGARDING PAYMENTS; APPLICATION OF PROCEEDS OF COLLATERAL.
A. PREPAYMENTS AND REDUCTIONS IN COMMITMENTS.
(i) Voluntary Prepayments. Borrowers may, upon not less than one Business Day's prior written or telephonic notice, in the case of Base Rate Loans, and three Business Days' prior written or telephonic notice, in the case of Eurodollar Rate Loans, in each case given to Administrative Agent by 12:00 Noon (Chicago time) on the date required and, if given by telephone, promptly confirmed in writing to Administrative Agent, who will promptly notify each Lender whose Revolving Loans are to be prepaid of such prepayment, at any time and from time to time prepay any Revolving Loans on any Business Day in whole or in part in an aggregate minimum amount of $1,000,000 and integral multiples of $1,000,000 in excess of that amount (or, if the amount of the Revolving Loans is less than such aggregate minimum amount, an amount equal to the amount of the Revolving Loans); provided that voluntary prepayments of Eurodollar Rate Loans made on a date other than an Interest Payment Date applicable to such Eurodollar Rate Loan shall be subject to breakage fees, costs and expenses, if any, in accordance with subsection 2.6D. Notice of prepayment having been given as aforesaid, the principal amount of the Revolving Loans specified in such notice shall become due and payable on the prepayment date specified therein. Any such voluntary prepayment shall be applied as specified in subsection 2.4A(iv).
(ii) Voluntary Reductions of Commitments. Borrowers may, upon not less than one Business Day's prior written or telephonic notice confirmed in writing to Administrative Agent, at any time and from time to time, terminate in whole or permanently reduce in part, without premium or penalty, (a) the Revolving Loan Commitments in an amount up to the amount by which the Revolving Loan Commitments exceed the aggregate Revolving Loans outstanding at the time of such proposed termination or reduction or (b) the Letter of Credit Commitments in an amount up to the amount by which the Letter of Credit Commitments exceed the Letter of Credit Usage at the time of such proposed termination or reduction; provided that any such partial reduction of either the Revolving Loan Commitments or the Letter of Credit Commitments shall be in an aggregate minimum amount of $1,000,000 and integral multiples of $1,000,000 in excess of that amount. Borrowers'
notice to Administrative Agent (who shall promptly notify each Revolving Lender or Letter of Credit Lender, as applicable, of such notice) shall designate the date (which shall be a Business Day) of such termination or reduction and the amount of any partial reduction, and such termination or reduction of any of the Commitments shall be effective on the date specified in Company's notice and shall reduce the particular type of Commitment of each Lender proportionately to its Pro Rata Share. No such voluntary reduction of the Commitments shall be permitted if such reduction would result in (1) the Revolving Loan Commitments being less than the aggregate principal amount of all outstanding Revolving Loans, or (2) the aggregate Letter of Credit Commitments being less than the aggregate Letter of Credit Usage then in effect.
(iii) Mandatory Payments. Mandatory Payments shall be made in the amounts and under the circumstances set forth below, all such Mandatory Payments to be applied to repay the Obligations and/or permanently reduce the Commitments as set forth below or as more specifically provided in subsection 2.4A(iv), except to the extent that the Intercreditor Agreement requires application thereof in a different manner than as set forth in this subsection 2.4A(iii) or subsection 2.4A(iv) (it being understood that if a payment is made in accordance with the terms of the Intercreditor Agreement, a duplicate payment shall not be required hereunder and the application required under the terms of the Intercreditor Agreement shall apply as if set forth herein):
(a) Net Asset Sale Proceeds. No later than 2 days after the date of receipt by Company or any of its Subsidiaries of any Net Asset Sale Proceeds in respect of any Asset Sale, Company shall make a Mandatory Payment in an aggregate amount equal to (1) to the extent that aggregate Net Asset Sale Proceeds in respect of all Asset Sales made on or prior to such date is $7,500,000 or less, 33.33% of such Net Asset Sale Proceeds, or (2) to the extent that aggregate Net Asset Sale Proceeds in respect of all Asset Sales made on or prior to such date exceeds $7,500,000, 100% of such excess (without duplication).
(b) Net Insurance/Condemnation Proceeds. No later than the fifth Business Day following the date of receipt by Administrative Agent or by Company or any of its Subsidiaries of any Net Insurance/Condemnation Proceeds that are required to be used for a Mandatory Payment pursuant to the provisions of subsection 6.4C, Company shall make a Mandatory Payment in an aggregate amount equal to the amount of such Net Insurance/Condemnation Proceeds.
(c) Issuance of Indebtedness. On the date of receipt of the Net Indebtedness Proceeds from the issuance of any Indebtedness of Company or any of its Subsidiaries after the Closing Date, other than Indebtedness permitted pursuant to subsections 7.1(i) through (xvi), Company shall make a Mandatory Payment in an aggregate amount equal to such Net Indebtedness Proceeds.
(d) Tax Refunds. If after the Closing Date, Company or any of its Subsidiaries receives any payment of a cash refund or rebate of any Tax, the Borrowers shall no later than the Business Day following the date of receipt of such refund or rebate make a Mandatory Payment in the amount of such Tax refund or rebate, except to the extent such application would constitute a material violation of a valid Contractual Obligation in connection with a Project of Company or any of its Subsidiaries to remit such refund or rebate to the client of such Project.
(e) Annual Free Cash Flow. In the event that there shall be Annual Free Cash Flow for any Fiscal Year (commencing with Fiscal Year 2004), Company shall, no later than 60 days after the end of such Fiscal Year, make a Mandatory Payment in an aggregate amount equal to 50% (or, during the continuance of an Event of Default, 100%) of such Annual Free Cash Flow; provided, however, that the amount of such Mandatory Payment shall be reduced by the amount of cash, if any, applied to cash collateralize Letter of Credit Exposure pursuant to subsection 2.4A(iii)(f) during the four Fiscal Quarters most recently preceding the date of such Mandatory Payment.
(f) Excess Cash. Any amounts on deposit in the Cash Management System (such amounts, in any event, not to include amounts, if any, on deposit in the Collateral Accounts or required to be held in Deposit Accounts which are Restricted Accounts described on Schedule 2.4A(iii)(f) annexed hereto, as said Schedule 2.4A(iii)(f) may be supplemented from time to time pursuant to the provisions of subsection 6.1(xvii)) (the aggregate of such amounts on deposit at any time (excluding any amounts on deposit in accounts set forth on said Schedule at such time) being referred to herein as "Cash On Hand") in excess of $60,000,000 (plus the Closing Date Retained Amount) for each Sweep Date (as defined below) in 2004 and 2005, $70,000,000 (plus the Closing Date Retained Amount) for each Sweep Date in 2006, $75,000,000 (plus the Closing Date Retained Amount) for each Sweep Date in 2007 and $80,000,000 (plus the Closing Date Retained Amount) for each Sweep Date in 2008, on June 30 and December 31 of each of the aforementioned years (each such date, a "Sweep Date"), shall be applied to repay the Obligations and/or permanently reduce the Commitments on the next succeeding Business Day in the following manner: first, to Letter of Credit Exposure, with the amount applied to Letter of Credit Exposure being applied to repay all funded amounts, if any, under the Letters of Credit and then to cash collateralize the Letter of Credit Exposure outstanding after giving effect to the foregoing repayment of all funded amounts under the Letters of Credit in an amount, taken together with all then existing cash collateral for such Letter of Credit Exposure, equal to 105% of such Letter of Credit Exposure; second, to repay outstanding Revolving Loans to the full extent thereof; and third, to cash collateralize the unutilized Letter of Credit Commitments in an amount, taken together with all then existing cash collateral for such unutilized Letter of
Credit Commitments, equal to 105% of such unutilized Letter of Credit Commitment.
(g) Prepayments Due to Certain Changes of Control. Upon the date on which any "change of control" or "change in control" or event, however titled, shall occur that requires under the High Yield Indenture a repurchase of the High Yield Notes or an offer to repurchase High Yield Notes as a result of a change in ownership of all or some portion of the Capital Stock of Company or any of its Subsidiaries or all or substantially all of the assets of Company and its Subsidiaries, (1) Borrowers shall repay all funded amounts, if any, under the Letters of Credit, then deposit into the Collateral Account an amount equal to 105% of the Letter of Credit Exposure outstanding after giving effect to the foregoing repayment of all funded amounts under the Letters of Credit and repay the principal balance of any outstanding Revolving Loans, and (2) the right or obligation of Issuing Lender to issue, renew or extend any Letter of Credit hereunder shall terminate and the right or obligation of any Lender to make any new Revolving Loans hereunder shall terminate.
(h) Calculations of Net Proceeds Amounts; Additional Prepayments and Reductions Based on Subsequent Calculations. Concurrently with the receipt of any amount which would require a Mandatory Payment pursuant to subsections 2.4A(iii)(a) - (f), Company shall deliver to Administrative Agent an Officer's Certificate demonstrating the calculation of the amount of the applicable Net Asset Sale Proceeds, Net Insurance/Condemnation Proceeds, Net Indebtedness Proceeds, cash in the Cash Management System, Annual Free Cash Flow or Tax refund or rebate, as the case may be, that gave rise to such Mandatory Payment. In the event that Company shall subsequently determine that the actual amount was greater than the amount set forth in such Officer's Certificate, Company shall promptly make an additional Mandatory Payment in an amount equal to the amount of such excess, and Company shall concurrently therewith deliver to Administrative Agent an Officer's Certificate demonstrating the derivation of the additional amount resulting in such excess.
(iv) Application of Prepayments; Reduction of Commitments.
(a) Application of Prepayments; Reduction of Commitments. Except as provided in subsection 2.4C and the last sentence of this subsection 2.4A(iv)(a) and to the extent that the Intercreditor Agreement requires application of such Mandatory Payment in a different manner than as set forth in this sentence (it being understood that if a payment is made in accordance with the terms of the Intercreditor Agreement, a duplicate payment shall not be required hereunder and the application required under the terms of the Intercreditor Agreement shall apply as if set forth herein), (1) any voluntary prepayments of the Revolving Loans made pursuant to subsection 2.4A shall be applied to repay outstanding Revolving Loans to the full extent thereof, and (2) the aggregate amount of any Mandatory Payments
made pursuant to subsections 2.4A(iii)(a) - (e) shall be
applied to repay the Obligations and/or permanently
reduce the Commitments in the following manner: first, to
Letter of Credit Exposure, with the amount applied to Letter
of Credit Exposure being applied to repay all funded amounts,
if any, under the Letters of Credit and then to cash
collateralize the Letter of Credit Exposure outstanding after
giving effect to the foregoing repayment of all funded amounts
under the Letters of Credit in an amount, taken together with
all then existing cash collateral for such Letter of Credit
Exposure, equal to 105% of such Letter of Credit Exposure;
second, to repay outstanding Revolving Loans to the full
extent thereof (and as a concurrent, permanent reduction of
(x) the unutilized Letter of Credit Commitments and (y) to the
extent that the unutilized Letter of Credit Commitments have
been reduced to an amount of $10,000,000 or less, the
Revolving Loan Commitments); and third, to permanently reduce
the unutilized Letter of Credit Commitments (and, to the
extent that the unutilized Letter of Credit Commitments have
been reduced to an amount of $10,000,000 or less, to
permanently and concurrently reduce the Revolving Loan
Commitments). Notwithstanding the foregoing, Borrowers and
Lenders hereby agree that any cash applied to collateralize
Letter of Credit Exposure pursuant to subsection 2.4A(iii)(f)
with respect to a cash balance on June 30 or December 31 of
any Fiscal Year (the "Subject Fiscal Year") shall in the event
that the amount of such cash applied to collateralize Letter
of Credit Exposure exceeds 50% of the Annual Free Cash Flow
for the Subject Fiscal Year, be released to Borrowers to the
extent of such excess (but in no event shall more cash be so
released than the aggregate amount applied pursuant to
subsection 2.4A(iii)(f) with respect to the Subject Fiscal
Year) after the 60th day of the following Fiscal Year,
promptly following Borrowers' certification of such excess;
provided, however, that such release shall not be required if,
at the time such release would otherwise be required, an Event
of Default shall have occurred and be continuing; and
provided, further, that to the extent that the Intercreditor
Agreement requires application of such amounts in a different
manner than as set forth in this sentence, such amounts shall
be applied in accordance with the Intercreditor Agreement.
(b) Application of Prepayments to Base Rate Loans and Eurodollar Rate Loans. Any prepayment of Revolving Loans shall be applied first to Base Rate Loans to the full extent thereof before application to Eurodollar Rate Loans, in each case in a manner which minimizes the amount of any payments required to be made by Borrowers pursuant to subsection 2.6D.
(v) Mandatory Reduction of Letter of Credit Commitments. Immediately upon the occurrence of any Permanent L/C Obligation Reduction, the Letter of Credit Commitments shall be permanently reduced in an amount equal to the amount of such Permanent L/C Obligation Reduction, and such reduction of the Letter of Credit Commitments shall reduce each Lender's Letter of Credit Commitment ratably. In
addition, the Commitments shall be reduced as specifically provided in subsections 2.4A(ii), 2.4A(iii) and 2.4A(iv) above.
B. GENERAL PROVISIONS REGARDING PAYMENTS.
(i) Manner and Time of Payment. All payments by Borrowers of principal, interest, fees and other Obligations shall be made in Dollars in same day funds, without defense, setoff or counterclaim, free of any restriction or condition, and delivered to Administrative Agent not later than 12:00 Noon (Chicago time) on the date due at the Funding and Payment Office for the account of Lenders; funds received by Administrative Agent after that time on such due date shall be deemed to have been paid by Borrowers on the next succeeding Business Day. Each Borrower hereby authorizes Administrative Agent to charge its accounts with Administrative Agent in order to cause timely payment to be made to Administrative Agent of all principal, interest, fees and expenses due hereunder (subject to sufficient funds being available in its accounts for that purpose). Anything contained herein to the contrary notwithstanding, Borrowers jointly and severally promise to repay all Revolving Loans and honored drawings under the Letters of Credit when due in accordance with the terms hereof and agree that, to the extent any Letters of Credit have not been returned and cancelled, on the Maturity Date (a) the unpaid principal amount of, and accrued interest on, any funded amounts under such Letters of Credit and on any Revolving Loans, (b) an amount equal to the maximum available amount that may at any time on or after such date be drawn under all such Letters of Credit then outstanding (whether or not any beneficiary under any such Letter of Credit shall have presented, or shall be entitled at such time to present, the drafts or other documents or certificates required to draw under such Letter of Credit), and (c) all other Obligations shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by Borrowers, and any amounts so due and payable with respect to Letters of Credit shall be cash collateralized in an amount equal to 105% of the amount thereof.
(ii) Application of Payments to Principal and Interest. All payments in respect of the principal amount of any Revolving Loan or any honored drawing under a Letter of Credit shall include payment of accrued interest on the principal amount being repaid or prepaid, and all such payments (and, in any event, any payments in respect of any Revolving Loan on a date when interest is due and payable with respect to such Revolving Loan) shall be applied to the payment of interest before application to principal.
(iii) Apportionment of Payments. Aggregate payments of principal and interest shall be apportioned among all outstanding Revolving Loans to which such payments relate, in each case proportionately to Lenders' respective Pro Rata Shares. Administrative Agent shall promptly distribute to each Lender, at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Lender may request, its Pro Rata Share of all such payments received
by Administrative Agent and the commitment fees and letter of credit fees of such Lender, if any, when received by Administrative Agent pursuant to subsection 2.3 and subsection 3.2. Notwithstanding the foregoing provisions of this subsection 2.4B(iii), if, pursuant to the provisions of subsection 2.6C, any Notice of Conversion/Continuation is withdrawn as to any Affected Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any Eurodollar Rate Loans, Administrative Agent shall give effect thereto in apportioning payments received thereafter.
(iv) Payments on Business Days. Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest hereunder or of the commitment fees hereunder, as the case may be.
C. APPLICATION OF PROCEEDS OF COLLATERAL AND PAYMENTS AFTER EVENT OF DEFAULT. Except to the extent that the Intercreditor Agreement requires application in a different manner than as set forth in this subsection 2.4C, upon the occurrence and during the continuation of an Event of Default, either if requested by Requisite Lenders or upon termination of the Commitments (a) all Mandatory Payments or other payments received on account of the Obligations, whether from any Borrower or otherwise, shall be applied by Administrative Agent against the Obligations and (b) all proceeds received by Administrative Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the discretion of Administrative Agent, be held by Administrative Agent as Collateral for, and/or (then or at any time thereafter) applied in full or in part by Administrative Agent against, the applicable Secured Obligations (as defined in the Collateral Documents), in each case in the following order of priority:
(i) to the payment of all costs and expenses of such sale, collection or other realization, all other expenses, liabilities and advances made or incurred by Administrative Agent in connection therewith, and all amounts for which Administrative Agent is entitled to compensation (including the fees described in subsection 2.3), reimbursement and indemnification under any Credit Document and all advances made by Administrative Agent thereunder for the account of the applicable Credit Party, and to the payment of all costs and expenses paid or incurred by Administrative Agent in connection with the Credit Documents, all in accordance with subsections 9.4, 10.2 and 10.3 and the other terms of this Agreement and the Credit Documents;
(ii) thereafter, to the extent of any excess such proceeds, ratably to repay owed and outstanding amounts (subject to the provisions of subsection 2.4B(ii) hereof) with respect to Revolving Loan Exposure and Letter of Credit Exposure, with the remainder applied to cash collateralize Letter of Credit Exposure and unutilized Letter of Credit Commitments (it being understood that for purposes of determining the ratable portion of such excess proceeds to be applied to Letter of Credit Exposure, the portion of such Letter of
Credit Exposure that consists of unutilized Letter of Credit Commitments or undrawn amounts under outstanding Letters of Credit shall be measured at 105% of the amount thereof), for the ratable benefit of the holders thereof; and
(iii) thereafter, to the extent of any excess such proceeds, to the payment to or upon the order of such Credit Party or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.
2.5. USE OF PROCEEDS.
A. REVOLVING LOANS. The proceeds of any Revolving Loans shall be applied by Borrowers to fund working capital requirements and general corporate purposes. Borrowers shall use the entire amount of the proceeds of each Revolving Loan in accordance with this subsection 2.5A.
B. MARGIN REGULATIONS. No portion of the proceeds of any borrowing under this Agreement shall be used by any Borrower or any Subsidiary of any Borrower in any manner that might cause the borrowing or the application of such proceeds to violate Regulation U, Regulation T or Regulation X of the Board of Governors of the Federal Reserve System or any other regulation of such Board or to violate the Exchange Act, in each case as in effect on the date or dates of such borrowing and such use of proceeds.
2.6. SPECIAL PROVISIONS GOVERNING EURODOLLAR RATE LOANS.
Notwithstanding any other provision of this Agreement to the contrary, the following provisions shall govern with respect to Eurodollar Rate Loans as to the matters covered:
A. DETERMINATION OF APPLICABLE INTEREST RATE. On each Interest Rate Determination Date, Administrative Agent shall determine in accordance with the terms of this Agreement (which determination shall, absent manifest error, be conclusive and binding upon all parties) the interest rate that shall apply to the Eurodollar Rate Loans for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to Borrowers and each Lender.
B. INABILITY TO DETERMINE APPLICABLE INTEREST RATE. In the event that Administrative Agent shall have determined (which determination shall be conclusive and binding upon all parties hereto) on any Interest Rate Determination Date that by reason of circumstances affecting the interbank Eurodollar market adequate and fair means do not exist for ascertaining the interest rate applicable to such Revolving Loans on the basis provided for in the definition of Eurodollar Rate, Administrative Agent shall on such date give notice (by telefacsimile or by telephone confirmed in writing) to Borrowers and each Lender of such determination, whereupon (i) no Revolving Loans may be made as, or converted to, Eurodollar Rate Loans until such time as Administrative Agent notifies Borrowers and Lenders that the circumstances giving rise to such notice no longer exist and (ii) any Notice
of Borrowing or Notice of Conversion/Continuation given by Borrowers with respect to the Revolving Loans in respect of which such determination was made shall be deemed to be for a Base Rate Loan.
C. ILLEGALITY OR IMPRACTICABILITY OF EURODOLLAR RATE LOANS. In the event that on any date any Lender shall have determined (which determination shall be conclusive and binding upon all parties hereto but shall be made only after consultation with Borrowers and Administrative Agent) that the making, maintaining or continuation of its Eurodollar Rate Loans (i) has become unlawful as a result of compliance by such Lender in good faith with any law, treaty, governmental rule, regulation, guideline or order (or would conflict with any such treaty, governmental rule, regulation, guideline or order not having the force of law even though the failure to comply therewith would not be unlawful) or (ii) has become impracticable, or would cause such Lender material hardship, as a result of contingencies occurring after the date of this Agreement which materially and adversely affect the interbank Eurodollar market or the position of such Lender in that market, then, and in any such event, such Lender shall be an "AFFECTED LENDER" and it shall on that day give notice (by telefacsimile or by telephone confirmed in writing) to Borrowers and Administrative Agent of such determination. Administrative Agent shall promptly notify each other Lender of the receipt of such notice. Thereafter (a) the obligation of the Affected Lender to make Revolving Loans as, or to convert Revolving Loans to, Eurodollar Rate Loans shall be suspended until such notice shall be withdrawn by the Affected Lender, (b) to the extent such determination by the Affected Lender relates to a Eurodollar Rate Loan then being requested by Borrowers pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation, the Affected Lender shall make such Revolving Loan as (or convert such Revolving Loan to, as the case may be) a Base Rate Loan, (c) the Affected Lender's obligation to maintain its outstanding Eurodollar Rate Loans (the "AFFECTED LOANS") shall be terminated at the earlier to occur of the expiration of the Interest Period then in effect with respect to the Affected Loans or when required by law, and (d) the Affected Loans shall automatically convert into Base Rate Loans on the date of such termination. Notwithstanding the foregoing, to the extent a determination by an Affected Lender as described above relates to a Eurodollar Rate Loan then being requested by Borrowers pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation, Borrowers shall have the option, subject to the provisions of subsection 2.2D, to rescind such Notice of Borrowing or Notice of Conversion/Continuation as to all Lenders by giving notice (by telefacsimile or by telephone confirmed in writing) to Administrative Agent of such rescission on the date on which the Affected Lender gives notice of its determination as described above. Administrative Agent shall promptly notify each other Lender of the receipt of such notice. Except as provided in the immediately preceding sentence, nothing in this subsection 2.6C shall affect the obligation of any Lender other than an Affected Lender to make or maintain Revolving Loans as, or to convert Revolving Loans to, Eurodollar Rate Loans in accordance with the terms of this Agreement.
D. COMPENSATION FOR BREAKAGE OR NON-COMMENCEMENT OF INTEREST PERIODS. Borrowers shall, jointly and severally, compensate each Lender (or, if applicable, Administrative Agent), upon written request by such Person, for all reasonable losses,
expenses and liabilities (including any interest paid by such Person to lenders of funds borrowed by it to make or carry its Eurodollar Rate Loans and any loss, expense or liability sustained by such Person in connection with the liquidation or re-employment of such funds) which such Person may sustain: (i) if for any reason (other than a default by such Person) a borrowing of any Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of Borrowing or a telephonic request therefor, or a conversion to or continuation of any Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of Conversion/Continuation or a telephonic request therefor, (ii) if any prepayment (including any prepayment or conversion occasioned by the circumstances described in subsection 2.6C) or other principal payment or any conversion of any of its Eurodollar Rate Loans occurs on a date prior to the last day of an Interest Period applicable to that Loan, (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on any date specified in a notice of prepayment given by Borrowers, or (iv) as a consequence of any other default by Borrowers in the repayment of Eurodollar Rate Loans when required by the terms of this Agreement.
2.7. INCREASED COSTS; TAXES; CAPITAL ADEQUACY.
A. COMPENSATION FOR INCREASED COSTS. Subject to the provisions of subsection 2.4B (which shall be controlling with respect to the matters covered thereby), in the event that any Lender (including Issuing Lender) shall determine (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or other Government Authority, in each case that becomes effective after the date hereof, or compliance by such Lender with any guideline, request or directive issued or made after the date hereof by any central bank or other Government Authority (whether or not having the force of law):
(i) subjects such Lender to any additional Tax (other than any withholding tax with respect to which subsection 2.7B applies) with respect to this Agreement or any of its obligations hereunder (including with respect to issuing or maintaining any Letters of Credit or purchasing or maintaining any participations therein or maintaining any Letter of Credit Commitment hereunder) or any payments to such Lender of principal, interest, fees or any other amount payable hereunder;
(ii) imposes, modifies or holds applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets held by, or deposits or other liabilities in or for the account of, or advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Lender (other than any such reserve or other requirements with respect to Eurodollar Rate Loans that are reflected in the definition of Eurodollar Rate); or
(iii) imposes any other condition (other than with respect to Taxes) on or affecting such Lender or its obligations hereunder or the interbank Eurodollar market;
and the result of any of the foregoing is to increase the cost to such Lender of agreeing to make, making or maintaining its Revolving Loans or Commitments or agreeing to issue, issuing or maintaining any Letter of Credit or agreeing to purchase, purchasing or maintaining any participation therein or to reduce any amount received or receivable by such Lender with respect thereto; then, in any such case, Borrowers shall promptly pay, on a joint and several basis, to such Lender, upon receipt of the statement referred to in subsection 2.8A, such additional amount or amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall determine) as may be necessary to compensate such Lender on an after-tax basis for any such increased cost or reduction in amounts received or receivable hereunder.
B. TAXES.
(i) Payments to Be Free and Clear. All sums payable by Borrowers under this Agreement and the other Credit Documents shall be paid free and clear of, and without any deduction or withholding on account of, any Tax imposed, levied, collected, withheld or assessed by or within the United States or any political subdivision in or of the United States or any other jurisdiction from or to which a payment is made by or on behalf of Borrowers or by any federation or organization of which the United States or any such jurisdiction is a member at the time of payment.
(ii) Grossing-up of Payments. If any Borrower or any other Person is required by law to make any deduction or withholding on account of any such Tax from any sum paid or payable by Borrowers to Administrative Agent or any Lender under any of the Credit Documents:
(a) Borrowers shall notify Administrative Agent of any such requirement or any change in any such requirement as soon as Borrowers become aware of it;
(b) Borrowers shall pay any such Tax when such Tax is due, such payment to be made (if the liability to pay is imposed on any Borrower) for their own account or (if that liability is imposed on Administrative Agent or such Lender, as the case may be) on behalf of and in the name of Administrative Agent or such Lender;
(c) the sum payable by Borrowers in respect of which the relevant deduction, withholding or payment is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, Administrative Agent or such Lender, as the case may be, receives on the due date a net sum equal to what it would have received had no such deduction, withholding or payment been required or made; and
(d) within 30 days after paying any sum from which any or all of them are required by law to make any deduction or withholding, and within 30 days after the due date of payment of any Tax which any or all of them are
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required by clause (b) above to pay, Borrowers shall deliver to Administrative Agent evidence satisfactory to the other affected parties of such deduction, withholding or payment and of the remittance thereof to the relevant taxing or other authority.
(iii) Evidence of Exemption from U.S. Withholding Tax.
(a) Each Lender that is organized under the laws of any jurisdiction other than the United States or any state or other political subdivision thereof (for purposes of this subsection 2.4B(iii), a "NON-US LENDER") shall deliver to Administrative Agent and to Company, on or prior to the Closing Date (in the case of any Non-U.S. Lenders listed on the signatures pages hereto on the date hereof) or on or prior to the date of the Assignment Agreement pursuant to which it becomes a Lender (in the case of each other Non-U.S. Lender), and at such other times as may be necessary in the determination of Company or Administrative Agent (each in the reasonable exercise of its discretion), two original copies of Internal Revenue Service Form W-8BEN or W-8ECI (or any successor forms) properly completed and duly executed by such Lender, together with any other certificate or statement of exemption required under the Internal Revenue Code or the regulations issued thereunder to establish that such Lender is not subject to United States withholding tax with respect to any payments to such Lender of interest payable under any of the Credit Documents.
(b) Each Non-US Lender hereby agrees, from time to time after the initial delivery by such Lender of such forms, whenever a lapse in time or change in circumstances renders such forms, certificates or other evidence so delivered obsolete or inaccurate in any material respect, that such Lender shall promptly (1) deliver to Administrative Agent and to Company two original copies of renewals, amendments or additional or successor forms, properly completed and duly executed by such Lender, together with any other certificate or statement of exemption required in order to confirm or establish that such Lender is not subject to United States withholding tax with respect to payments to such Lender under the Credit Documents or (2) notify Administrative Agent and Company of its inability to deliver any such forms, certificates or other evidence.
(c) Borrowers shall not be required to pay any additional amount to any Non-US Lender under clause (c) of subsection 2.7B(ii) if such Lender shall have failed to satisfy the requirements of clause (a) or (b)(1) of this subsection 2.7B(iii); provided, that if such Lender shall have satisfied the requirements of subsection 2.7B(iii)(a) on the date such Lender became a Lender, nothing in this subsection 2.7B(iii)(c) shall relieve Borrowers of their obligation to pay any amounts pursuant to subsection 2.7B(ii)(c) in the event that, as a result of any change in any applicable law, treaty or governmental rule, regulation or order, or any change in the interpretation, administration or
application thereof, such Lender is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent date establishing the fact that such Lender is not subject to withholding as described in subsection 2.7B(iii)(a).
(iv) Indemnity for Withheld Amounts. Borrowers hereby agree to indemnify Lenders and Administrative Agent for the full amount of any deduction or withholding on account of any Taxes imposed, levied, collected, withheld or assessed by or within the United States or any political subdivision in or of the United States or any other jurisdiction from or to which a payment is made by or on behalf of Borrowers or by any federation or organization of which the United States or any such jurisdiction is a member at the time of payment (including any such Taxes imposed by any jurisdiction on amounts payable under this subsection 2.7B) that Borrowers are required to pay pursuant to subsection 2.7B(ii) but were paid by Administrative Agent or Lenders with respect to sums payable by Borrowers under this Agreement and the other Credit Documents and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made promptly, and in any event within 10 days after, the relevant Lender or Administrative Agent makes demand therefor in writing.
C. CAPITAL ADEQUACY ADJUSTMENT. If any Lender shall have determined that the adoption, effectiveness, phase-in or applicability after the date hereof of any law, rule or regulation (or any provision thereof) regarding capital adequacy, or any change therein or in the interpretation or administration thereof by any Government Authority charged with the interpretation or administration thereof, or compliance by any Lender with any guideline, request or directive regarding capital adequacy (whether or not having the force of law) of any such Government Authority, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of, or with reference to, such Lender's Revolving Loans, Commitments, Letters of Credit, participations therein or other Obligations to a level below that which such Lender or such controlling corporation could have achieved but for such adoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of such Lender or such controlling corporation with regard to capital adequacy), then from time to time, within 5 Business Days after receipt by Borrowers from such Lender of the statement referred to in subsection 2.8A, Borrowers shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling corporation on an after-tax basis for such reduction.
2.8. STATEMENT OF LENDERS; OBLIGATION OF LENDERS AND ISSUING LENDER TO MITIGATE.
A. STATEMENTS. Each Lender claiming compensation or reimbursement pursuant to subsection 2.6, 2.7 or 2.8B shall deliver to Company (with a copy to Administrative Agent) a written statement, setting forth in reasonable detail the basis of the calculation of such compensation or reimbursement, which statement shall be conclusive and binding upon all parties hereto absent manifest error; provided, that a Lender claiming
compensation or reimbursement pursuant to subsection 2.7B(ii) due to circumstances in effect as of the Closing Date shall not be required to deliver more than one such statement to Borrowers or Administrative Agent, and such statement shall remain effective with respect to this Agreement until all Obligations have been paid in full.
B. MITIGATION. Each Lender (including Issuing Lender) agrees that, as promptly as practicable after the officer of such Lender or Issuing Lender responsible for administering the Revolving Loans or Letters of Credit of such Lender or Issuing Lender, as the case may be, becomes aware of the occurrence of an event or the existence of a condition that would entitle such Lender or Issuing Lender to receive payments under subsection 2.4 (other than subsection 2.7B(ii)), it will use reasonable efforts to make, issue, fund or maintain the Letter of Credit Commitments of such Lender or the Revolving Loans or Letters of Credit of such Lender or Issuing Lender through another lending or letter of credit office of such Lender or Issuing Lender, if (i) as a result thereof the additional amounts which would otherwise be required to be paid to such Lender or Issuing Lender pursuant to subsection 2.7 would be materially reduced and (ii) as determined by such Lender or Issuing Lender in its sole discretion, such action would not otherwise be disadvantageous to such Lender or Issuing Lender; provided, that such Lender or Issuing Lender will not be obligated to utilize such other lending or letter of credit office pursuant to this subsection 2.8B unless Borrowers agree to pay, on a joint and several basis, all incremental expenses incurred by such Lender or Issuing Lender as a result of utilizing such other lending or letter of credit office as described above.
2.9. DEFAULTING LENDER
Anything contained herein to the contrary notwithstanding, in the event that any Lender (any such Lender being a "DEFAULTING LENDER") defaults (a "FUNDING DEFAULT") in its obligation to fund its participation in any Letter of Credit (a "DEFAULTED PARTICIPATION") or to fund any Revolving Loan (a "DEFAULTED LOAN") in accordance with the terms of this Agreement, then (i) during any Default Period (as defined below) with respect to such Defaulting Lender, such Defaulting Lender shall not be deemed a "Lender" for purposes of voting on any matters (including the granting of any consents or waivers) with respect to any of the Credit Documents (provided, however, that nothing in this clause (i) shall be construed as permitting, without the consent of the relevant Defaulting Lender, a reduction in the principal amount of such Defaulting Lender's funded Revolving Loans or other outstanding funded Obligations, an increase in the amount of such Lender's Revolving Loan Commitment or Letter of Credit Commitment or participation in any Letters of Credit, a reduction or postponement of the due date of any amount funded by such Defaulting Lender and payable in respect of any Letter of Credit, an extension of the expiration date of any Letter of Credit beyond the Maturity Date, or an extension of the Maturity Date), (ii) to the extent permitted by applicable law, until such time as the Default Excess (as defined below) with respect to such Defaulting Lender shall have been reduced to zero, any payment of amounts with respect to the Revolving Loans and any payment or reimbursement of amounts with respect to a drawing under a Letter of Credit shall be applied first, to amounts funded by Administrative Agent, Issuing Lender or other Lenders (together with unpaid interest accrued thereon) in lieu of such amounts required to be funded by Defaulting
Lenders and second, to the Revolving Loans or Letter of Credit participations,
as the case may be, of other Lenders (other than any other Defaulting Lenders)
as if such Defaulting Lender (and any other Defaulting Lenders) had no Revolving
Loans outstanding and the Credit Exposure of such Defaulting Lender were zero,
(iii) such Defaulting Lender's Commitments, Revolving Loans and Pro Rata Share
with respect thereto shall be excluded for purposes of calculating the
commitment fee in respect of any day during any Default Period with respect to
such Defaulting Lender, such Defaulting Lender's Commitments, Revolving Loans
and Pro Rata Shares with respect thereto shall be excluded for purposes of
calculating the letter of credit fees under subsection 3.2 in respect of any day
during any Default Period with respect to such Defaulting Lender, and such
Defaulting Lender shall not be entitled to receive any such commitment fee or
letter of credit fee with respect to such Defaulting Lender's Commitments in
respect of any Default Period with respect to such Defaulting Lender, and (iv)
the Credit Utilization as at any date of determination shall be calculated as if
such Defaulting Lender had funded all Defaulted Loans of such Defaulting Lender.
For purposes of this Agreement, (I) "DEFAULT PERIOD" means,
with respect to any Defaulting Lender, the period commencing on the date of the
applicable Funding Default and ending on the earliest of the following dates:
(A) the date on which all Commitments are cancelled or terminated and/or the
Obligations are declared or become immediately due and payable, (B) the date on
which (1) the Default Excess with respect to such Defaulting Lender shall have
been reduced to zero (whether by the funding by such Defaulting Lender of any
Defaulted Loans or Defaulted Participations, as the case may be, of such
Defaulting Lender or by the non-pro rata application of any payments of amounts
with respect to the Revolving Loans or any payments or reimbursements of amounts
with respect to drawings under Letters of Credit in accordance with the terms
hereof or any combination thereof), and (2) such Defaulting Lender shall have
delivered to Company and Administrative Agent a written reaffirmation of its
intention to honor its obligations under this Agreement with respect to its
Commitments, and (C) the date on which Company, Administrative Agent and Issuing
Lender waive all Funding Defaults of such Defaulting Lender in writing, and (II)
"DEFAULT EXCESS" means, with respect to any Defaulting Lender, the excess, if
any, of (x) such Defaulting Lender's applicable Pro Rata Share of the aggregate
outstanding principal amount of Revolving Loans of all Lenders and all funded
participations in Letters of Credit of Lenders (calculated as if all Defaulting
Lenders (other than such Defaulting Lender) had funded all of their respective
Defaulted Loans and Defaulted Participations) over (y) the aggregate outstanding
principal amount of Revolving Loans of such Defaulting Lender and the aggregate
funded amount of such Defaulting Lender's participations in Letters of Credit.
No Commitment of any Lender shall be increased or otherwise affected, and, except as otherwise expressly provided in this subsection 2.9, performance by any Borrower of its obligations under this Agreement and the other Credit Documents shall not be excused or otherwise modified, as a result of any Funding Default or the operation of this subsection 2.9. The rights and remedies against a Defaulting Lender under this subsection 2.9 are in addition to other rights and remedies that Borrowers may have against such Defaulting Lender with respect to any Funding Default and that Administrative Agent,
Issuing Lender or any Lender may have against such Defaulting Lender with respect to any Funding Default.
2.10. JOINT AND SEVERAL LIABILITY; PAYMENT INDEMNIFICATIONS.
A. JOINT AND SEVERAL OBLIGATIONS. All Obligations of Borrowers under the Credit Documents shall be the joint and several Obligations of each Borrower.
B. NO IMPAIRMENT OR RELEASE. The Obligations of and the Liens granted by any Borrower under the Credit Documents shall not be impaired or released by any action or inaction on the part of Administrative Agent or any Lender with respect to any other Credit Party, including any action or inaction which would otherwise release a surety.
C. CONTRIBUTION RIGHTS. In order to provide for just and equitable contribution among Borrowers if any payment is made by a Borrower (a "FUNDING BORROWER") in discharging any of the Obligations, that Funding Borrower shall be entitled to a contribution from the other Borrowers for all payments, damages and expenses incurred by that Funding Borrower in discharging the Obligations, in the manner and to the extent required to allocate liabilities in an equitable manner among Borrowers on the basis of the relative benefits received by Borrowers. If and to the extent that a Funding Borrower makes any payment to any Lender or any other Person in respect of the Obligations, any claim which said Funding Borrower may have against the other Borrowers by reason thereof shall be subject and subordinate to the prior cash payment in full of the Obligations. The parties hereto acknowledge that the right to contribution hereunder shall constitute an asset of the party to which such contribution is owing and shall be subject to the Liens and security interests of the Administrative Agent. Notwithstanding any of the foregoing to the contrary, such contribution arrangements shall not limit in any manner the joint and several nature of the Obligations, limit, release or otherwise impair any rights of Administrative Agent or any Lender under the Credit Documents, or alter, limit or impair the obligation of each Borrower, which is absolute and unconditional, to repay the Obligations.
2.11. RIGHTS OF SUBROGATION, CONTRIBUTION, ETC.
Except as prohibited under applicable law, Company hereby waives any claim, right or remedy, direct or indirect, that Company now has or may hereafter have against any other Borrower or any guarantor of the Obligations in connection with this Agreement or the performance by Company of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including (a) any right of subrogation, reimbursement or indemnification that Company now has or may hereafter have against any other Borrower or guarantor of the Obligations, (b) any right to enforce, or to participate in, any claim, right or remedy that Administrative Agent or any Lender now has or may hereafter have against any other Borrower or guarantor of the Obligations, and (c) any benefit of, and any right to participate in, any collateral or security now or hereafter held by Administrative Agent or any Lender. In addition, until the Obligations shall have been indefeasibly paid in full and all Commitments shall have terminated and all Letters of Credit shall have expired or been cancelled, Company shall
withhold exercise of any right of contribution Company may have against any other Borrower or Credit Party. Company further agrees that, to the extent the waiver or agreement to withhold the exercise of its rights of subrogation, reimbursement, indemnification and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification Company may have against any other Borrower or Credit Party or against any collateral or security shall be junior and subordinate to any rights Administrative Agent or any Lender may have against any other Borrower, to all right, title and interest Administrative Agent or any Lender may have in any such collateral or security, and to any right Administrative Agent or any Lender may have against such Credit Party. If any amount shall be paid to Company on account of any such subrogation, reimbursement, indemnification or contribution rights at any time when all Obligations shall not have been paid in full, such amount shall be held in trust for Administrative Agent on behalf of Administrative Agent and Lenders and shall forthwith be paid over to Administrative Agent for the benefit of Administrative Agent and Lenders to be credited and applied against the Obligations, whether matured or unmatured, in accordance with the terms hereof.
SECTION 3. LETTERS OF CREDIT
3.1. LETTER OF CREDIT COMMITMENTS; ISSUANCE OF LETTERS OF CREDIT AND LENDERS' PURCHASE OF PARTICIPATIONS THEREIN.
A. LETTERS OF CREDIT.
Borrowers may request, in accordance with the provisions of this subsection 3.1, from time to time during the period from the Closing Date to but excluding the 30th day prior to the Maturity Date, that Issuing Lender issue Letters of Credit for the account of Borrowers (in the case of Closing Date Letters of Credit, for the purposes of supporting obligations of the type set forth on Schedule 3.1A(i) annexed hereto, and, in the case of all other Letters of Credit, for the purposes described in subsection 3.1B(ii)(b)). The original amount of each Lender's Letter of Credit Commitment is set forth opposite its name on Schedule 2.1 annexed hereto and the aggregate original amount of the Letter of Credit Commitments is $118,000,000; provided, however, that the Letter of Credit Commitments of Lenders shall be adjusted to give effect to any assignments of the Letter of Credit Commitments pursuant to subsection 10.1B and shall be reduced from time to time by the amount of any reductions thereto made pursuant to subsection 2.4. Notwithstanding anything herein to the contrary, Borrowers shall not request that Issuing Lender issue (and Issuing Lender shall not issue) any Letter of Credit:
(a) if, after giving effect to such issuance, the aggregate Credit Utilization would exceed the aggregate Letter of Credit Commitments then in effect;
(b) with respect to Closing Date Letters of Credit only, if the obligations to be supported by such Letter of Credit are not of a type identified on Schedule 3.1A(i) annexed hereto;
(c) with respect to Closing Date Letters of Credit only, if, after giving effect to such issuance, the maximum aggregate amount which is or at any time thereafter may be available for drawing under Letters of Credit issued to support an obligation of a type identified on Schedule 3.1A(i) annexed hereto would exceed the correlative amount set forth for such obligation on such Schedule (as such amount may be reduced from time to time pursuant to subsection 2.4A(v));
(d) having an expiration date later than the earlier of (a) the 5th Business Day prior to the Maturity Date and (b) the date which is three years from the date of issuance of such Letter of Credit; provided that the immediately preceding clause (b) shall not prevent Issuing Lender from agreeing that a Letter of Credit will automatically be extended to a date not later than the 5th Business Day prior to the Maturity Date unless Issuing Lender elects not to extend for any such additional period; and provided, further that Issuing Lender shall elect not to extend such Letter of Credit if it has knowledge that an Event of Default has occurred and is continuing (and has not been waived in accordance with subsection 10.6) at the time Issuing Lender must elect whether or not to allow such extension (with it being agreed and understood that Issuing Lender shall provide Borrowers with prompt notice of any such extension of a Letter of Credit having been denied); or
(e) denominated in a currency other than Dollars.
B. MECHANICS OF ISSUANCES.
(i) Issuance of Closing Date Letters of Credit on the Closing Date. Issuing Lender shall, on or about the Closing Date, issue the Closing Date Letters of Credit as follows: (1) Issuing Lender shall issue the Montgomery Letter of Credit, (2) Issuing Lender shall issue the Back-Up Closing Date Letters of Credit and (3) Issuing Lender shall issue the Replacement Closing Date Letters of Credit upon Issuing Lender's receipt of evidence satisfactory to it that the DIP Tranche A L/Cs and DIP Tranche B L/Cs being replaced by such Replacement Closing Date Letters of Credit are concurrently therewith being returned undrawn and cancelled.
(ii) Request for Issuance of Letter of Credit.
(a) Letters of Credit to Replace Closing Date Letters of Credit. After the issuance of any Closing Date Letter of Credit, whenever Borrowers desire to have Issuing Lender issue a Letter of Credit to extend or replace such outstanding Closing Date Letter of Credit (or, in the case of a Back-Up Closing Date Letter of Credit, to replace such Back-Up Closing Date Letter of Credit and the corresponding DIP Tranche A L/C or DIP Tranche B L/C), or Administrative Agent requests (with a copy of such request to Company) that Issuing Lender issue a Letter of Credit to extend or to replace such outstanding Closing Date Letter of Credit (or, in the case of a Back-Up Closing Date Letter of Credit, to replace such Back-Up Closing Date Letter
of Credit and the corresponding DIP Tranche A L/C or DIP Tranche B L/C), Borrowers shall deliver to Issuing Lender (and Administrative Agent, if Administrative Agent is not such Issuing Lender) a Request for Issuance no later than 12:00 Noon (Chicago time) at least 10 Business Days (or in each case such shorter period as may be agreed to by Administrative Agent in any particular instance) in advance of the proposed date of issuance, which Request for Issuance shall describe the relevant Closing Date Letter of Credit and the verbatim text of the Letter of Credit proposed to be issued or of such extension, as the case may be, and shall specify such proposed date of issuance or extension; provided, that Borrowers shall not request that Issuing Lender issue or extend (and Issuing Lender shall not issue or extend) any such Letter of Credit:
(1) if the underlying Contractual Obligation to provide any such Closing Date Letter of Credit or a replacement thereto to the beneficiary thereof (or, in the case of a Back-Up Closing Date Letter of Credit, the beneficiary of the DIP Tranche A L/C or DIP Tranche B L/C to which such Back-Up Closing Date Letter of Credit corresponds) has terminated, and/or the beneficiary of such Closing Date Letter of Credit (or, in the case of a Back-Up Closing Date Letter of Credit, the beneficiary of the DIP Tranche A L/C or DIP Tranche B L/C to which such Back-Up Closing Date Letter of Credit corresponds) has otherwise returned the same for cancellation without the expectation that a Letter of Credit will be issued contemporaneously with such cancellation in substitution therefor;
(2) if the terms of such Letter of Credit as so replaced or extended (other than the stated amount and expiration date thereof) are not substantially identical to the terms of the corresponding Closing Date Letter of Credit being replaced or extended (it being agreed and understood that any such Letter of Credit issued to replace a Back-Up Closing Date Letter of Credit and the DIP Tranche A L/C or DIP Tranche B L/C to which it corresponds shall have as its beneficiary the beneficiary of such DIP Tranche A L/C or DIP Tranche B L/C but shall otherwise comply with the requirements of this clause (2)); or
(3) if the stated amount of such Letter of Credit as so replaced or extended exceeds the stated amount of the corresponding Closing Date Letter of Credit being replaced or extended, as the case may be.
(b) Letters of Credit Not to Replace Closing Date Letters of Credit. Whenever Borrowers desire the issuance of a Letter of Credit (other than a Closing Date Letter of Credit), they shall deliver to Issuing Lender (and Administrative Agent, if Administrative Agent is not such Issuing Lender) a Request for Issuance no later than 12:00 Noon (Chicago time) at least 10 Business Days, or in each case such shorter period as may be agreed to by Administrative Agent in any particular instance, in advance of the proposed date of issuance. Upon receipt by Issuing Lender (and Administrative Agent,
if Administrative Agent is not such Issuing Lender) of a Request for Issuance pursuant to this subsection 3.1B(ii)(b) requesting the issuance of a Letter of Credit, Issuing Lender shall be the Issuing Lender with respect thereto. In respect of a Letter of Credit requested pursuant to this subsection 3.1B(ii)(b), Issuing Lender, in its reasonable discretion, may require changes in the text of a proposed Letter of Credit or any documents described in or attached to the relevant Request for Issuance so long as any such changes do not conflict with the applicable requirements of the Contractual Obligation to provide such Letter of Credit. Letters of Credit requested pursuant to this subsection 3.1B(ii)(b) shall be used solely for general corporate purposes. No Letter of Credit requested pursuant to this subsection 3.1B(ii)(b) shall require payment against a conforming demand for payment to be made thereunder on the same Business Day (under the laws of the jurisdiction in which the office of Issuing Lender to which such demand for payment is required to be presented is located) that such demand for payment is presented if such presentation is made after 10:00 A.M. (in the time zone of such office of Issuing Lender) on such Business Day.
(iii) Recertification. Borrowers shall notify Issuing Lender (and Administrative Agent, if Administrative Agent is not such Issuing Lender) prior to the issuance or extension of any Letter of Credit in the event that any of the matters to which Borrowers are required to certify in the applicable Request for Issuance is no longer true and correct as of the proposed date of issuance or extension of such Letter of Credit, and upon the issuance or extension of any Letter of Credit Borrowers shall be deemed to have re-certified, as of the date of such issuance or extension, as to the matters to which Borrowers are required to certify in the applicable Request for Issuance (except to the extent such requirement to re-certify as to such matters shall have been waived in accordance with subsection 10.6 hereof).
(iv) Issuance of Letter of Credit. Upon satisfaction or waiver (in accordance with subsection 10.6) of the conditions set forth in subsection 4.3, Issuing Lender shall issue the requested Letter of Credit in accordance with Issuing Lender's standard operating procedures.
(v) Notification to Lenders. No later than 10 Business Days prior to the decision to extend or reissue any Letter of Credit, Issuing Lender shall notify Administrative Agent in writing of the date on which Issuing Lender expects such decision will be made and of the date by which such decision must be made in order to avoid a drawing under such Letter of Credit. Promptly after the issuance, amendment or extension of any Letter of Credit Issuing Lender shall promptly notify Administrative Agent and each Lender of such issuance, amendment or extension in writing. Upon receipt of such notice (or, if Administrative Agent is the Issuing Lender, together with such notice), Administrative Agent shall notify each Lender in writing of the amount of such Lender's respective participation in such Letter of Credit, determined in accordance with subsection 3.1C and, if so requested by a
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Lender, Administrative Agent shall provide such Lender with a copy of such Letter of Credit, amendment or extension.
C. LENDERS' PURCHASE OF PARTICIPATIONS IN LETTERS OF CREDIT. Immediately upon the issuance of each Letter of Credit, each Letter of Credit Lender shall be deemed to, and hereby agrees to, have irrevocably purchased from Issuing Lender a participation in such Letter of Credit and any drawings honored thereunder in an amount equal to such Letter of Credit Lender's Pro Rata Share (with respect to Letter of Credit Exposure) of the maximum amount which is or at any time may become available to be drawn thereunder.
3.2. LETTER OF CREDIT FEES.
Borrowers jointly and severally agree to pay,
(i) with respect to each Letter of Credit, a letter of credit fee, payable to Administrative Agent for the account of Administrative Agent and Lenders (with the allocation among Administrative Agent and Lenders to be as set forth in the Inter-Lender Agreement and the allocation among Lenders to be in proportion to their respective Pro Rata Shares), equal to 6.50% per annum (expressed as a daily rate) multiplied by the daily amount available to be drawn under such Letter of Credit, each such letter of credit fee to be payable in arrears on and to (but excluding) the last day of each fiscal quarter and computed on the basis of a 360-day year, for the actual number of days elapsed, and
(ii) with respect to the issuance, negotiation, amendment or transfer of each Letter of Credit and each payment of a drawing made thereunder (without duplication of the fees payable under clause (i) above), Borrowers jointly and severally agree to pay customary processing documentation and other like charges payable directly to Issuing Lender (and, if applicable, to any confirming bank) for its own account in accordance with Issuing Lender's (and, if applicable, such confirming bank's) standard schedule for such charges in effect at the time of such issuance, amendment, transfer or payment, as the case may be.
For purposes of calculating any fees payable under this subsection 3.2, the daily amount available to be drawn under any Letter of Credit shall be determined as of the close of business on any date of determination. Promptly upon receipt by Administrative Agent of any amount described in clause (ii) of this subsection 3.2 with respect to a Letter of Credit, Administrative Agent shall distribute to each Lender its Pro Rata Share of such amount. All fees referenced in this subsection 3.2 shall be earned when payable and shall be non-refundable. Upon the occurrence and during the continuation of any Event of Default and notice from Administrative Agent to Borrowers, all fees set forth in this subsection 3.2 shall accrue at a rate that is 2.00% per annum in excess of the rate otherwise set forth in this subsection and shall, if Administrative Agent so requests, be payable upon demand. Payment or acceptance of the increased rates provided for in this paragraph shall not
constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Administrative Agent or any Lender.
3.3. DRAWINGS AND REIMBURSEMENT OF AMOUNTS PAID UNDER LETTERS OF CREDIT.
A. RESPONSIBILITY OF ISSUING LENDER WITH RESPECT TO DRAWINGS. In determining whether to honor any drawing under any Letter of Credit by the beneficiary thereof, Issuing Lender shall be responsible only to examine the documents delivered under such Letter of Credit with reasonable care so as to ascertain whether they appear on their face to be in compliance with the terms and conditions of such Letter of Credit.
B. REIMBURSEMENT OF AMOUNTS PAID UNDER LETTERS OF CREDIT. In the event Issuing Lender has determined to honor a drawing under a Letter of Credit issued by it, Issuing Lender shall immediately notify Borrowers and Borrowers shall reimburse Issuing Lender on or before the Business Day immediately following the date on which such drawing is honored (the "REIMBURSEMENT DATE") in an amount in Dollars and in same day funds equal to the amount of such payment.
C. PAYMENT BY LENDERS OF UNREIMBURSED AMOUNTS PAID UNDER
LETTERS OF CREDIT.
(i) Payment by Lenders. In the event that Borrowers shall fail for any reason to reimburse Issuing Lender as provided in subsection 3.3B in an amount equal to the amount of any payment by Issuing Lender under a Letter of Credit issued by it, Issuing Lender shall promptly notify Administrative Agent of the unreimbursed amount of such drawing and upon receipt of such notice, Administrative Agent shall promptly notify each Lender (other than Issuing Lender) of such unreimbursed amount and of such Lender's respective participation therein based on such Lender's Pro Rata Share; provided, that no Lender's funding of its participation in any such drawing shall exceed its Pro Rata Share of the amount of such drawing, and the aggregate principal amount of all participations funded by a Lender with respect to Letters of Credit shall in no event exceed the amount of such Lender's Letter of Credit Commitment. Each Lender shall make available to Issuing Lender an amount equal to its respective participation, in Dollars and in same day funds, at the office of Issuing Lender specified in such notice, not later than 12:00 Noon (Chicago time) on the first Business Day (under the laws of the jurisdiction in which such office of Issuing Lender is located) after the date notified by Administrative Agent. In the event that any Lender fails to make available to Issuing Lender on such Business Day the amount of such Lender's participation in such Letter of Credit as provided in this subsection 3.3C, Issuing Lender shall be entitled to recover such amount on demand from such Lender together with interest thereon at the rate customarily used by Issuing Lender for the correction of errors among banks for 3 Business Days and thereafter at the Base Rate. Nothing in this subsection 3.3C shall be deemed to prejudice the right of any Lender to recover from Issuing Lender any amounts made available by such Lender to Issuing Lender pursuant to this subsection 3.3C in the
event that it is determined by the final judgment of a court of competent jurisdiction that the payment with respect to a Letter of Credit by Issuing Lender in respect of which payment was made by such Lender constituted gross negligence or willful misconduct on the part of Issuing Lender.
(ii) Distribution to Lenders of Reimbursements Received From Borrowers. In the event Issuing Lender shall have been reimbursed by other Lenders pursuant to subsection 3.3C(i) for all or any portion of any payment by Issuing Lender under a Letter of Credit issued by it, Issuing Lender shall deliver to Administrative Agent for distribution to any other Lender that has paid all amounts payable by it under subsection 3.3C(i) with respect to such payment such other Lender's Pro Rata Share of all payments subsequently received by Issuing Lender from Borrowers in reimbursement of such payment under the Letter of Credit when such payments are received. Any such distribution shall be made to a Lender at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Lender may request.
D. INTEREST ON AMOUNTS PAID UNDER LETTERS OF CREDIT.
(i) Payment of Interest by Borrowers. Borrowers agree to pay
to Issuing Lender, with respect to payments under any Letters of Credit
issued by it, interest on the amount paid by such Issuing Lender in
respect of each such payment from the date a drawing is honored to but
excluding the date such amount is reimbursed by Borrowers at a rate
equal to (1) for the period from the date such drawing is honored to
but excluding the Reimbursement Date, the Base Rate plus the Base Rate
Margin per annum and ---- (2) thereafter, a rate which is 2% per annum
in excess of the rate of interest set forth in the foregoing clause
(i)(1). Interest payable pursuant to this subsection 3.3D(i) shall be
computed on the basis of a 360-day year, for the actual number of days
elapsed in the period during which it accrues and shall be payable on
demand or, if no demand is made, on the date on which the related
drawing under a Letter of Credit is reimbursed in full. All payments by
Borrowers in respect of payments made by Issuing Lender under a Letter
of Credit issued by it shall include payment of accrued interest on the
principal amount being repaid or prepaid, and all such payments shall
be applied to the payment of interest before application to principal.
Payment or acceptance of the increased rates of interest provided for
in this subsection 3.3D is not a permitted alternative to timely
payment and shall not constitute a waiver of any Event of Default or
otherwise prejudice or limit any rights or remedies of Administrative
Agent or any Lender.
(ii) Distribution of Interest Payments by Issuing Lender. Promptly upon receipt by Issuing Lender of any payment of interest pursuant to subsection 3.3D(i) with respect to a payment under a Letter of Credit issued by it, (a) such Issuing Lender shall distribute to Administrative Agent for distribution to each other Lender, out of the interest received by Issuing Lender in respect of the period from the date such drawing is honored to but excluding the date on which Issuing Lender is reimbursed for the amount of such payment, the amount that such other Lender would
have been entitled to receive in respect of the letter of credit fee that would have been payable in respect of such Letter of Credit for such period pursuant to subsection 3.2 if no drawing had been honored under such Letter of Credit, and (b) in the event Issuing Lender shall have been reimbursed by other Lenders pursuant to subsection 3.3C(i) for all or any portion of such payment, Issuing Lender shall distribute to Administrative Agent for distribution to each other Lender that has paid all amounts payable by it under subsection 3.3C(i) with respect to such payment such other Lender's Pro Rata Share of any interest received by Issuing Lender in respect of that portion of such payment so reimbursed by other Lenders for the period from the date on which Issuing Lender was so reimbursed by other Lenders to but excluding the date on which such portion of such payment is reimbursed by Borrowers. Any such distribution shall be made to a Lender at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Lender may request.
3.4. OBLIGATIONS ABSOLUTE.
The obligation of Borrowers to reimburse Issuing Lender for payments under the Letters of Credit issued by it and the obligations of Lenders under subsection 3.3C(i) shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances including any of the following circumstances:
(i) any lack of validity or enforceability of any Letter of Credit;
(ii) the existence of any claim, set-off, defense or other right which any Borrower or any Lender may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Persons for whom any such transferee may be acting), Issuing Lender or other Lender or any other Person or, in the case of a Lender, against any Borrower, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between any Borrower or one of its Subsidiaries and the beneficiary for which any Letter of Credit was procured);
(iii) any draft or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;
(iv) payment by Issuing Lender under any Letter of Credit against presentation of a draft or other document which does not substantially comply with the terms of such Letter of Credit;
(v) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company or any of its Subsidiaries (including CPIH Subsidiaries);
(vi) any breach of this Agreement or any other Credit Document by any party thereto;
(vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing; or
(viii) the fact that an Event of Default or a Potential Event of Default shall have occurred and be continuing;
provided, in each case, that payment by Issuing Lender under the applicable Letter of Credit shall not have constituted gross negligence or willful misconduct of Issuing Lender under the circumstances in question (as determined by a final judgment of a court of competent jurisdiction).
3.5. NATURE OF ISSUING LENDER'S DUTIES.
A. INDEMNIFICATION. In addition to amounts payable as provided in subsection 2.7, Borrowers hereby jointly and severally agree to protect, indemnify, pay and save harmless Issuing Lender from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of outside counsel and allocated costs of internal counsel) which Issuing Lender may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit by Issuing Lender, other than as a result of (a) the gross negligence or willful misconduct of Issuing Lender as determined by a final judgment of a court of competent jurisdiction or (b) subject to the following clause (ii), the wrongful dishonor by Issuing Lender of a proper demand for payment made under any Letter of Credit issued by it or (ii) the failure of Issuing Lender to honor a drawing under any such Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto Government Authority.
B. NATURE OF ISSUING LENDER'S DUTIES. As between Borrowers and Issuing Lender, Borrowers assume all risks of the acts and omissions of, or misuse of the Letters of Credit issued by Issuing Lender by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, Issuing Lender shall not be responsible for: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) failure of the beneficiary of any such Letter of Credit to comply fully with any conditions required in order to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of
Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond the control of Issuing Lender, including any act or omission by a Government Authority specified in subsection 3.5A, and none of the above shall affect or impair, or prevent the vesting of, any of Issuing Lender's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific provisions set forth in the first paragraph of this subsection 3.5B, any action taken or omitted by Issuing Lender under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted in good faith, shall not put Issuing Lender under any resulting liability to any Borrower.
Notwithstanding anything to the contrary contained in this subsection 3.5, Borrowers shall retain any and all rights they may have against Issuing Lender for any liability arising solely out of the gross negligence or willful misconduct of Issuing Lender, as determined by a final judgment of a court of competent jurisdiction.
3.6. CASH COLLATERAL FOR LETTERS OF CREDIT.
A. RELEASES OF CASH COLLATERAL. If (i) (a) the underlying Contractual Obligation to provide a Letter of Credit or a replacement thereto to the beneficiary thereof has terminated (other than by drawing under such Letter of Credit), and/or (b) the beneficiary of such Letter of Credit has otherwise returned the same for cancellation without the expectation that a Letter of Credit will be issued contemporaneously with such cancellation in substitution for such cancelled Letter of Credit, and/or the maximum amount available for drawing under a Letter of Credit is permanently reduced (other than such a reduction concurrently with a reissuance or replacement of the relevant reduced portion of a Closing Date Letter of Credit pursuant to subsection 3.1(B)(ii)(a)), and (ii) the Letter of Credit Commitments are permanently reduced by the amount of such Letter of Credit or such reduction in the stated amount of such Letter of Credit, as the case may be, then, to the extent that the amount of cash collateral securing the Letter of Credit Exposure pursuant to the Collateral Account Agreement exceeds 105% of the Letter of Credit Commitments then in effect after such permanent reduction, the excess cash collateral shall be applied to the payment to or upon the order of Borrowers or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, except to the extent that the Intercreditor Agreement requires application in a different manner than as set forth in this subsection 3.6A.
B. CASH COLLATERAL ON THE MATURITY DATE. On the Maturity Date, any outstanding Letter of Credit Exposure shall be cash collateralized in an amount equal to 105% of the amount thereof by Borrowers or otherwise supported, in either case in a manner satisfactory to the Lenders.
SECTION 4. CONDITIONS
4.1. CONDITIONS TO CLOSING DATE.
The obligations of Lenders with respect to their respective Commitments and to make any Revolving Loans to be made on the Closing Date, and the issuance of any Letters of Credit to be issued on the Closing Date, are, in addition to the conditions precedent specified in subsections 4.2 and 4.3 (as applicable), subject to prior or concurrent satisfaction of the following conditions:
A. CREDIT PARTY DOCUMENTS. On or before the Closing Date, Borrowers shall, and shall cause each other Credit Party to, deliver to Lenders (or to Administrative Agent with sufficient originally executed copies, where appropriate, for each Lender) the following with respect to Borrowers or such Credit Party, as the case may be, each, unless otherwise noted, dated the Closing Date:
(i) Copies of the Organizational Documents of such Person, certified by the Secretary of State of its jurisdiction of organization or, if such document is of a type that may not be so certified, certified by the secretary or similar officer of the applicable Credit Party, together with a good standing certificate from the Secretary of State of its jurisdiction of organization and each other state in which such Person is qualified to do business and, to the extent generally available, a certificate or other evidence of good standing as to payment of any applicable franchise or similar taxes from the appropriate taxing authority of each of such jurisdictions, each dated a recent date prior to the Closing Date;
(ii) Resolutions of the Governing Body of such Person approving and authorizing the execution, delivery and performance of the Credit Documents to which it is a party certified as of the Closing Date by the secretary or similar officer of such Person as being in full force and effect without modification or amendment;
(iii) Signature and incumbency certificates of the officers of such Person executing the Credit Documents to which it is a party;
(iv) Executed originals of the Credit Documents to which such Person is a party; and
(v) Such other documents as Administrative Agent may reasonably request.
B. FEES. Borrowers shall have paid out of Debtors' estates to Administrative Agent, for distribution (as appropriate) to Administrative Agent, Issuing Lender and Lenders, any fees payable on the Closing Date referred to in subsection 2.3 and all reasonable and documented costs and expenses (including legal fees, due diligence fees, recordation expenses, other out-of-pocket expenses and taxes) of Administrative Agent incurred in connection with the negotiation, preparation, recordation, execution and
completion of the Credit Documents and the transactions contemplated thereby, including such fees and expenses of counsel to Administrative Agent.
C. CORPORATE AND CAPITAL STRUCTURE; MANAGEMENT; OWNERSHIP.
(i) Corporate Structure. DHC shall own all of the issued and outstanding Capital Stock of Company. The corporate organizational structure of Company and its Subsidiaries (including CPIH Subsidiaries) on the Closing Date, after giving effect to the Plan of Reorganization, shall be satisfactory to Requisite Lenders, shall be consistent in all material respects with the Plan of Reorganization and the Disclosure Statement related thereto.
(ii) Capital Structure and Ownership. DHC shall have made a cash equity contribution to Company of not less than $30,000,000 (including cash equity contributed in connection with the "Lake Transaction" (as defined in the DIP Credit Agreement)). The capital structure and ownership of Company and its Subsidiaries (including CPIH Subsidiaries) on the Closing Date, after giving effect to the Plan of Reorganization, shall be satisfactory to Requisite Lenders, shall be consistent in all material respects with the Plan of Reorganization and the Disclosure Statement related thereto.
(iii) Management. The Governing Bodies, officers and management structure of Company and its Subsidiaries (including CPIH Subsidiaries) on the Closing Date, after giving effect to the Plan of Reorganization, shall be satisfactory to Requisite Lenders, shall be consistent in all material respects with the Plan of Reorganization and the Disclosure Statement related thereto and shall be as set forth on Schedule 4.1C annexed hereto. Lenders shall have received copies of, and Requisite Lenders shall be satisfied with the form and substance of, any employment agreements with and any incentive arrangements for senior management of Company and its Subsidiaries.
D. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENTS. Company shall have delivered to Administrative Agent an Officer's Certificate, in form and substance satisfactory to Administrative Agent, to the effect that the representations and warranties in Section 5 are true, correct and complete in all material respects on and as of the Closing Date to the same extent as though made on and as of that date (or, to the extent such representations and warranties specifically relate to an earlier date, that such representations and warranties were true, correct and complete in all material respects on and as of such earlier date) and that Borrowers shall have performed in all material respects all agreements and satisfied all conditions which this Agreement provides shall be performed or satisfied by it on or before the Closing Date.
E. PLAN OF REORGANIZATION; CONFIRMATION ORDER; DISCHARGE OF
EXISTING CREDIT FACILITIES.
(i) Plan of Reorganization. The Plan of Reorganization and all amendments, modifications, revisions and restatements thereof, if any, shall have been approved by the creditors of Borrowers (including the DIP Lenders and the Prepetition Lenders) in requisite number and percentage and confirmed by the Bankruptcy Court pursuant to the Confirmation Order and delivered to Administrative Agent (the "APPROVED PLAN OF REORGANIZATION"). Except as set forth in modifications filed with the Bankruptcy Court and approved by Administrative Agent, there shall have been no modifications, amendments, revisions or restatements of the Approved Plan of Reorganization. Any representation and warranty made by Company or any of its Subsidiaries in the Approved Plan of Reorganization shall be accurate, true, correct and complete in all material respects as of the Closing Date. The Approved Plan of Reorganization (a) shall provide for the payments on the Closing Date described in subsection 4.1T, the corporate reorganization described in subsection 4.1S, and the making of Revolving Loans and the issuance of the Letters of Credit under this Agreement and the Indebtedness described in subsection 4.1F; and (b) upon satisfaction of all conditions to the effectiveness of this Agreement, shall become effective in accordance with its terms without waiver of any condition to such effectiveness that, in Administrative Agent's reasonable judgment, is material.
(ii) Confirmation Order. The Confirmation Order shall have been delivered to Lenders, shall address the matters set forth in subsections 4.1F, 4.1S and 4.1T, the issuance of the Letters of Credit under this Agreement and the terms hereof and the granting of all Liens and consents required under this Agreement and the other Credit Documents and otherwise be in form and substance satisfactory to Requisite Lenders. The Confirmation Order shall be in full force and effect and no portion thereof shall have been stayed pending any appeal or petition for review or for rehearing, and Administrative Agent shall have received evidence satisfactory to each demonstrating such facts. Debtors' Second Amended Joint Plan of Liquidation under Chapter 11 of the Bankruptcy Code and the Liquidation Plan Supplement to Debtors' Second Amended Joint Plan of Liquidation, as filed with the Bankruptcy Court on December 18, 2003 and February 18, 2004, respectively, and as amended, supplemented or otherwise modified from time to time thereafter to the extent permitted under the DIP Credit Agreement, shall have been confirmed by the Bankruptcy Court pursuant to an order in form and substance satisfactory to Requisite Lenders.
(iii) Approval of Fees Related to Exit Financing. The Bankruptcy Court order approving the fees payable to Administrative Agent and the Lenders described in subsection 4.1B shall be in full force and effect, without modification or amendment except to the extent approved by Administrative Agent.
(iv) Material Agreements. The terms and conditions of any Material Contracts to be entered into by the Borrowers or any of their Subsidiaries pursuant
to the Approved Plan of Reorganization shall be in form and substance satisfactory to Requisite Lenders and Administrative Agent.
F. MATTERS RELATING TO EXISTING INDEBTEDNESS.
(i) Termination of DIP Credit Agreement and Related Liens. (a) Indebtedness consisting of funded amounts outstanding under the DIP Credit Agreement on the Closing Date shall have been repaid in full in cash, (b) all undrawn DIP Tranche A L/Cs and DIP Tranche B L/Cs (other than the Existing Detroit L/Cs) shall be replaced (or any further drawings thereunder shall be fully supported) with letters of credit issued under this Agreement, (c) the Existing Detroit L/Cs shall be replaced with Letters of Credit issued under the Detroit L/C Facility Agreement, (d) each letter of credit (if any) issued or deemed issued under the DIP Credit Agreement other than the DIP Tranche A L/Cs and DIP Tranche B L/Cs shall have been cash collateralized pursuant to arrangements reasonably satisfactory to the issuer of such letter of credit, or cancelled and returned undrawn, or reimbursed, (e) all commitments to lend or make other extensions of credit under the DIP Credit Agreement shall have terminated (except that the participations of DIP Lenders purchased in the letters of credit, if any, referred to in clause (d) above shall continue), and (f) all documents or instruments necessary to release all Liens securing Indebtedness or other obligations of Borrowers and their Subsidiaries (including CPIH Subsidiaries) under the DIP Credit Agreement shall have been delivered to Administrative Agent to the extent required by Administrative Agent.
(ii) Termination of Prepetition Credit Agreement, 9.25% Debentures and Related Liens. (a) Indebtedness consisting of the 9.25% Debentures and the Prepetition Obligations on the Closing Date shall be satisfied by application of the High Yield Notes and the CPIH Term Loans and by application of Cash On Hand of Borrowers (as described in subsection 4.1T), and (b) all documents or instruments necessary to release all Liens securing Indebtedness or other obligations of Borrowers and their Subsidiaries (including CPIH Subsidiaries) under the Prepetition Credit Agreement and the 9.25% Debentures shall have been delivered to Administrative Agent to the extent required by the Administrative Agent.
(iii) CPIH Facilities. Indebtedness under the CPIH Revolver Agreement and Indebtedness under the CPIH Term Loan Agreement shall be secured as set forth in the CPIH Revolver Documents and the CPIH Term Loan Documents and shall be non-recourse to the Borrowers or their assets other than pursuant to the CPIH Stock Pledge Agreement. The CPIH Revolver Documents and the CPIH Term Loan Documents shall be in full force and effect, the "Closing Date" as defined in each of the CPIH Revolver Documents and the CPIH Term Loan Documents shall have occurred, and the CPIH Revolver Documents and the CPIH Term Loan Documents shall provide for $10,000,000 in revolving loan commitments and $90,000,000 in term loans (subject to increase to up to $95,000,000 pursuant to and in accordance with the Approved Plan of Reorganization), respectively, and shall otherwise be in form and substance satisfactory to Requisite Lenders.
(iv) Existing Indebtedness to Remain Outstanding. After giving
effect to the Approved Plan of Reorganization, the Indebtedness and
Contingent Obligations of Borrowers (other than Indebtedness under the
Credit Documents) shall consist of (a) the Detroit L/C Facility
Documents, which shall provide for maximum aggregate commitments of
$138,191,554.19 for the issuance of letters of credit to be issued on
the Closing Date to replace the Existing Detroit L/Cs and for other
specified uses, shall have a final maturity date of 5 years from the
Closing Date, shall provide for fees on undrawn outstanding letters of
credit at a rate no greater than 2.50% per annum, and upfront fees not
greater than 1.0% of the entire amount of letter of credit commitments,
and shall be secured by a senior Lien on the Collateral, (b)
$205,000,000 in aggregate initial principal amount of High Yield Notes,
(c) a note issued by Company in a principal amount not to exceed
$35,000,000 (the "TAX NOTE"), representing the back tax liability of
Company and its Subsidiaries as of the Closing Date, which Tax Note
shall be unsecured and unguarantied, shall have a final maturity date
of 6 years from the Closing Date, shall bear interest payable in
arrears at a rate no greater than 7.5% per annum, and shall amortize on
a 30-year schedule for the first 5 years after the issuance thereof
with the balance due at maturity, (d) "Class 6 Unsecured Notes" (as
defined in the Approved Plan of Reorganization) in the aggregate
principal amount of $4,000,000 and subordinated notes issued by Company
(the "UNSECURED CREDITOR NOTES") in an aggregate principal amount equal
to the amount of "Operating Company Unsecured Claims" that are
"Allowed" (as such terms are defined in the Approved Plan of
Reorganization), which Unsecured Creditor Notes shall be unsecured and
unguarantied, shall have a final maturity date of 8 years from the
Closing Date, shall bear interest payable in arrears at a rate no
greater than 7.5% per annum, and shall amortize in an amount not to
exceed $3,900,000 annually commencing on the second anniversary of the
Closing Date with the remainder due at final maturity, (e) outstanding
Indebtedness described in Schedule 7.1(vi) and Schedule 7.1(ix)
---------------- ---------------- annexed hereto, and (f) Indebtedness
and Contingent Obligations under the CPIH Stock Pledge Agreement, and
outstanding Contingent Obligations described in Schedule 7.4(iv) and
Schedule 7.4(vi) annexed ---------------- ---------------- hereto. The
terms and conditions of all such Indebtedness and Contingent
Obligations (including payment terms, covenants, representations and
warranties, defaults and, in the case of the Unsecured Notes, payment
subordination provisions), and the definitive documentation therefor,
shall be in form and in substance satisfactory to Requisite Lenders.
(v) Related Agreements in Full Force and Effect. Lenders shall have received a fully executed or conformed copy of the Detroit L/C Facility Documents, the CPIH Revolver Documents, the CPIH Term Loan Documents, the CPIH Stock Pledge Agreement, the High Yield Indenture and the High Yield Notes, the Tax Note, the Unsecured Creditor Notes, the Unsecured Creditor Notes Indenture, the Intercreditor Agreement and any documents executed in connection therewith, each such Related Agreement, the Unsecured Creditor Notes, the CPIH Term Loan Documents, the CPIH Revolver Documents, the Intercreditor Agreement and the Unsecured Creditor Notes Indenture shall be in full force and effect and no provision
thereof shall have been modified or waived in any respect determined by Administrative Agent to be material.
G. FINANCIAL STATEMENTS; PROJECTIONS. On or before the Closing Date, Lenders shall have received the unaudited consolidated financial statements of Company and its Subsidiaries for the Fiscal Quarters ended June 30, 2003 and September 30, 2003, all in reasonable detail and certified by the chief executive officer or chief financial officer of Company that they fairly present, in all material respects, the financial condition of Company and its Subsidiaries as of the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments. Company shall have delivered to Administrative Agent and Lenders such projected financial statements as Administrative Agent may reasonably request for the period from the Closing Date through December 31, 2008, including the budget of monthly and quarterly cash receipts and expenditures for Fiscal Year 2004 and annual net cash flow for Fiscal Years 2005, 2006, 2007 and 2008 attached hereto as Schedule 1.1C, which budget and other projections shall be satisfactory to Administrative Agent and Requisite Lenders and shall be accompanied by a certificate from the chief executive officer or chief financial officer of Company certifying that they are based upon good faith estimates and assumptions believed by Company to be reasonable at the time made.
H. SOLVENCY ASSURANCES. On the Closing Date, Administrative Agent and Lenders shall have received an Officer's Certificate dated the Closing Date, substantially in the form of Exhibit IX annexed hereto and with appropriate attachments, demonstrating that, after giving effect to the consummation of the transactions contemplated by the Credit Documents, Borrowers, taken as a whole, and Company will be Solvent.
I. OPINIONS OF COUNSEL TO CREDIT PARTIES. Lenders shall have received originally executed copies of one or more favorable written opinions of Cleary, Gottlieb, Steen & Hamilton, LeBoeuf, Lamb, Greene & McRae, Morris, James, Hitchens & Williams LLP and Nixon Peabody LLP, counsel for Borrowers, and of Skadden, Arps, Slate, Meagher & Flom LLP and affiliates, counsel for DHC, in form and substance reasonably satisfactory to Administrative Agent and its counsel, dated as of the Closing Date and setting forth substantially the matters in the opinions designated in Exhibit X annexed hereto and as to such other matters as Administrative Agent acting on behalf of Lenders may reasonably request (this Agreement constituting a written request by Borrowers to such counsel to deliver such opinions to Administrative Agent and Lenders).
J. OPINIONS OF COUNSEL DELIVERED UNDER RELATED AGREEMENTS AND OTHER DOCUMENTS. Administrative Agent and its counsel shall have received copies of the opinions of counsel delivered to the parties under the Related Agreements, the CPIH Revolver Documents, the CPIH Term Loan Documents, the Unsecured Creditor Notes and the Unsecured Creditor Notes Indenture, and Borrowers shall have made reasonable efforts to obtain from each such counsel letters authorizing Lenders to rely on such opinions to the same extent as though such opinions were addressed to Lenders.
K. EVIDENCE OF INSURANCE. Administrative Agent shall have received a certificate from Company's insurance broker or other evidence satisfactory to it that all insurance required to be maintained pursuant to subsection 6.4 is in full force and effect and that Collateral Agent and/or Administrative Agent on behalf of Lenders has been named as additional insured and/or loss payee thereunder to the extent required under subsection 6.4.
L. NECESSARY GOVERNMENTAL AUTHORIZATIONS AND CONSENTS. Borrowers shall have obtained all Governmental Authorizations and all consents of other Persons, in each case that are necessary or advisable in connection with the transactions contemplated by the Credit Documents and the continued operation of the business conducted by Company and its Subsidiaries in substantially the same manner as conducted prior to the Closing Date. Each such Governmental Authorization or consent shall be in full force and effect, except in a case where the failure to obtain or maintain a Governmental Authorization or consent, either individually or in the aggregate, should not reasonably be expected to have a Material Adverse Effect. Administrative Agent shall have received an Officer's Certificate of Company in form and substance reasonably satisfactory to Administrative Agent certifying as to the foregoing matters and any other evidence reasonably requested by Administrative Agent in support thereof. All applicable waiting periods shall have expired without any action being taken or threatened by any competent authority that would restrain, prevent or otherwise impose adverse conditions on the transactions contemplated by the Credit Documents or the financing thereof. No action, request for stay, petition for review or rehearing, reconsideration, or appeal with respect to any of the foregoing shall be pending, and the time for any applicable Government Authority to take action to set aside its consent on its own motion shall have expired.
M. SECURITY INTERESTS IN PERSONAL AND MIXED PROPERTY. To the extent not otherwise satisfied pursuant to subsection 4.1N, Administrative Agent shall have received evidence satisfactory to it that Credit Parties (except as otherwise contemplated in subsection 5.18 hereof) shall have taken or caused to be taken all such actions, executed and delivered or caused to be executed and delivered all such agreements, documents and instruments, and made or caused to be made all such filings and recordings (other than the filing or recording of items described in clauses (ii) and (iii) below) that Administrative Agent may reasonably request in order to evidence, in favor of Collateral Agent, for the benefit of Secured Parties, a valid and perfected security interest in the entire personal and mixed property Collateral, with the priority set forth in the Collateral Documents (it being understood that such actions by DHC shall relate solely to its pledge of the Capital Stock of Company). Such actions shall include the following:
(i) Stock Certificates and Instruments. Delivery to Collateral Agent of (a) certificates (which certificates shall be accompanied by irrevocable undated stock powers, duly endorsed in blank and otherwise satisfactory in form and substance to Collateral Agent) representing all capital stock included in the Collateral and (b) all promissory notes or other instruments (duly endorsed, where appropriate, in a manner satisfactory to Collateral Agent) evidencing any Collateral;
(ii) Lien Searches and UCC Termination Statements. Delivery to Collateral Agent of (a) the results of a recent search, by a Person satisfactory to Collateral Agent, of all effective UCC financing statements and fixture filings and all judgment and tax lien filings which may have been made with respect to any personal or mixed property of any Borrower and of all effective UCC financing statements which may have been made with respect to Capital Stock of Borrowers or any Subsidiaries of any Borrower, in each case together with copies of all such filings disclosed by such search, and (b) UCC termination statements duly executed by all applicable Persons for filing in all applicable jurisdictions as may be necessary to terminate any effective UCC financing statements or fixture filings disclosed in such search (other than any such financing statements or fixture filings in respect of Liens permitted to remain outstanding pursuant to the terms of this Agreement);
(iii) UCC Financing Statements and Fixture Filings. Delivery to Collateral Agent of UCC financing statements and, where appropriate, fixture filings, duly executed by each applicable Borrower with respect to all personal and mixed property Collateral of such Borrower and by DHC with respect to the Capital Stock of Company, in each case for filing in all jurisdictions as may be necessary or in the opinion of Collateral Agent desirable to perfect the security interests in favor of Collateral Agent created in such Collateral pursuant to the Collateral Documents;
(iv) PTO Cover Sheets, Etc. Delivery to Collateral Agent of all cover sheets or other documents or instruments Collateral Agent may reasonably request to be filed with the PTO in order to evidence Liens in favor of Collateral Agent in respect of any IP Collateral; and
(v) Control Agreements. Delivery to Collateral Agent of such Control Agreements with financial institutions and other Persons in order to perfect Liens in respect of Deposit Accounts, Securities Accounts and other Collateral pursuant to the Collateral Documents;
(vi) Certificate. Delivery to Administrative Agent and Collateral Agent of an Officer's Certificate certifying that, as of the Closing Date, the foreign patent registrations held by Company and its Subsidiaries are not, individually or in the aggregate, material to the business of Company and its Subsidiaries as a whole.
N. CLOSING DATE MORTGAGES; CLOSING DATE MORTGAGE POLICIES;
ETC. Collateral Agent shall have received from each applicable Borrower:
(i) Closing Date Mortgages. Fully executed and notarized Mortgages (each a "CLOSING DATE MORTGAGE" and, collectively, the "CLOSING DATE MORTGAGES"), in proper form for recording in all appropriate places in all applicable jurisdictions, encumbering each Real Property Asset listed in Schedule 4.1N annexed hereto (each a "CLOSING DATE MORTGAGED PROPERTY" and, collectively, the "CLOSING DATE MORTGAGED PROPERTIES" (it being understood and agreed that (a) no Leasehold Property that is not a Material Leasehold Property shall be required to be a Closing
Date Mortgaged Property, and (b) no Real Property Asset the pledge of which would constitute a material violation of (1) a valid and enforceable Contractual Obligation in favor of or for the benefit of a Person other than Company or any of its Subsidiaries and their respective Affiliates for which the required consents have not been obtained or (2) applicable law affecting the Borrower holding such Real Property Asset, shall be required to be a Closing Date Mortgaged Property));
(ii) Opinions of Local Counsel. An opinion of counsel (which counsel shall be reasonably satisfactory to Administrative Agent) in each state in which a Closing Date Mortgaged Property is located with respect to the enforceability of the form(s) of Closing Date Mortgages to be recorded in such state and such other matters as Administrative Agent may reasonably request, in each case in form and substance reasonably satisfactory to Administrative Agent;
(iii) Landlord Consents and Estoppels; Recorded Leasehold Interests. In the case of each Closing Date Mortgaged Property consisting of a Leasehold Property, (a) a Landlord Consent and Estoppel with respect thereto, and (b) evidence that such Leasehold Property is a Recorded Leasehold Interest;
(iv) Title Insurance. (a) ALTA mortgagee title insurance policies or unconditional commitments therefor (the "CLOSING DATE MORTGAGE POLICIES") issued by the Title Company with respect to the Closing Date Mortgaged Properties listed in Part A of Schedule 4.1N annexed hereto, in amounts not less than the respective amounts designated therein with respect to any particular Closing Date Mortgaged Properties, insuring fee simple title to, or a valid leasehold interest in, each such Closing Date Mortgaged Property vested in such Borrower and assuring Collateral Agent that the applicable Closing Date Mortgages create valid and enforceable First Priority mortgage Liens on the respective Closing Date Mortgaged Properties encumbered thereby, subject only to a standard survey exception, which Closing Date Mortgage Policies (1) shall include an endorsement for mechanics' liens, for future advances under this Agreement and for any other matters reasonably requested by Collateral Agent and (2) shall provide for affirmative insurance and such reinsurance as Collateral Agent may reasonably request, all of the foregoing in form and substance reasonably satisfactory to Collateral Agent; and (b) evidence satisfactory to Collateral Agent that such Borrower has (i) delivered to the Title Company all certificates and affidavits required by the Title Company in connection with the issuance of the Closing Date Mortgage Policies and (ii) paid to the Title Company or to the appropriate governmental authorities all expenses and premiums of the Title Company in connection with the issuance of the Closing Date Mortgage Policies and all recording and stamp taxes (including mortgage recording and intangible taxes) payable in connection with recording the Closing Date Mortgages in the appropriate real estate records;
(v) Title Reports. With respect to each Closing Date Mortgaged Property listed in Part B of Schedule 4.1N annexed hereto, a title report issued by the Title
Company with respect thereto, dated not more than 30 days prior to the Closing Date and satisfactory in form and substance to Administrative Agent;
(vi) Copies of Documents Relating to Title Exceptions. Copies of all recorded documents listed as exceptions to title or otherwise referred to in the Closing Date Mortgage Policies or in the title reports delivered pursuant to subsection 4.1N(iv); and
(vii) Matters Relating to Flood Hazard Properties. (a) Evidence, which may be in the form of a letter from an insurance broker or a municipal engineer, as to whether (1) any Closing Date Mortgaged Property is a Flood Hazard Property and (2) the community in which any such Flood Hazard Property is located is participating in the National Flood Insurance Program, (b) if there are any such Flood Hazard Properties, such Borrower's written acknowledgement of receipt of written notification from Administrative Agent (1) as to the existence of each such Flood Hazard Property and (2) as to whether the community in which each such Flood Hazard Property is located is participating in the National Flood Insurance Program, and (c) in the event any such Flood Hazard Property is located in a community that participates in the National Flood Insurance Program, evidence that Company has obtained flood insurance in respect of such Flood Hazard Property to the extent required under the applicable regulations of the Board of Governors of the Federal Reserve System.
O. [INTENTIONALLY OMITTED].
P. CASH MANAGEMENT SYSTEM. The cash management system of Company and its Subsidiaries shall be as set forth on Schedule 4.1P annexed hereto.
Q. [INTENTIONALLY OMITTED].
R. GEOTHERMAL SALE. Company shall have consummated the Geothermal Sale on terms and conditions and pursuant to documentation in form and substance satisfactory to the Requisite DIP Lenders.
S. CPIH REORGANIZATION. On the Closing Date, (i) Company shall own directly or indirectly 100% of the outstanding Capital Stock of CEA, (ii) CEA shall own 100% of the outstanding common stock of CPIH, which shall own the Capital Stock of all Persons (including Persons holding the equity interests in other Persons) holding the assets and operations of the IPP International Business to the extent described in the Approved Plan of Reorganization and the Disclosure Statement related thereto, (iii) all relevant operating and administrative expenses associated with the IPP International Business shall be transferred into CPIH in accordance with the Management Services and Reimbursement Agreement, and (iv) not less than $5,000,000 of cash for working capital shall have been transferred from Company and its Subsidiaries to the CPIH Borrowers as an equity contribution.
T. DISTRIBUTION. All unrestricted Cash On Hand (including,
without limitation, net sale proceeds from the Geothermal Sale) of Borrowers
remaining prior to the equity contribution referred to in subsection 4.1C(ii)
but after (i) the transfer of working capital amounts to CPIH as described in
subsection 4.1S, (ii) the payment of the fees referred to in subsection 4.1B,
(iii) the disposition of those letters of credit referred to in subsection
4.1F(i)(d), (iv) the payment of allowed administrative expenses, (v) the
reimbursement of reasonable accrued fees and expenses of DHC not to exceed
$4,000,000 in the aggregate and reasonable accrued fees and expenses of D.E.
Shaw not to exceed $350,000 in the aggregate, and (vi) the payment of funded
outstanding obligations under the DIP Credit Agreement (if any) and (without
duplication of clauses (i) through (vi)) the payment of other "Exit Costs" (as
defined in the Approved Reorganization Plan), subject to an amount of cash
(which amount shall be determined in accordance with the terms set forth in the
draft Plan of Reorganization attached (on the date of execution thereof) to the
Investment and Purchase Agreement dated as of December 2, 2003 between DHC and
Company) to be retained in the domestic Cash Management System by Company and
its Subsidiaries (collectively, such Cash On Hand, net of such transferred
amount, such payments and reimbursements, such retained amount and such
reserves, is referred to herein as "DISTRIBUTABLE CASH"), shall have been
distributed as follows: first, to the extent of the first $60,000,000 of such
Distributable Cash, for the benefit of the holders of Prepetition Secured Claims
that are Lenders on the Closing Date, on account of their allowed pre-petition
exposure, in accordance with the Approved Plan of Reorganization, second, to the
extent of the next $7,200,000 of such Distributable Cash, for the benefit of
those holders of Prepetition Secured Claims that are not Lenders on the Closing
Date, on account of any remaining allowed pre-Petition Date exposure, in
accordance with the Approved Plan of Reorganization, and third, to the extent of
25% of any remaining Distributable Cash, to Company (the amount of Distributable
Cash so distributed to Company being referred to herein as the "CLOSING DATE
RETAINED AMOUNT"), and to the extent of the remaining 75%, for the benefit of
the holders of Prepetition Secured Claims, on account of any remaining allowed
pre-Petition Date exposure, in accordance with the Approved Plan of
Reorganization.
U. NOL AVAILABILITY. Company, its independent advisers, Administrative Agent and Administrative Agent's counsel shall have determined to their respective sole satisfaction that the net operating losses disclosed to Administrative Agent and Lenders prior to the Closing Date as being held by DHC are available and accessible to Company and its Subsidiaries.
V. LITIGATION. On the Closing Date, there shall be no action, suit, investigation, litigation or proceeding pending or threatened in any court or before any arbitrator or governmental instrumentality that purports to affect the Approved Plan of Reorganization, any of the Credit Documents or any of the CPIH Term Loan Documents that could reasonably be expected to have a Material Adverse Effect or a material adverse effect on the Approved Plan of Reorganization, any of the Credit Documents or any of the CPIH Term Loan Documents.
W. COMPLETION OF PROCEEDINGS. All corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Administrative Agent,
acting on behalf of Lenders, and their counsel shall be satisfactory in form and substance to Administrative Agent and such counsel, and Administrative Agent and such counsel shall have received all such counterpart originals or certified copies of such documents as Administrative Agent may reasonably request.
Each Lender, by delivering to Administrative Agent a signed counterpart to this Agreement, shall be deemed (unless such Lender indicates otherwise in writing to Administrative Agent and Company) to have acknowledged receipt of, and to have consented to, approved and be satisfied with, the documents, agreements, instruments or information which require approval, consent or satisfaction of the Lenders or Requisite Lenders, as applicable, in order for the conditions precedent contained in this subsection 4.1 to be satisfied.
Notwithstanding anything in this Section 4 to the contrary, it is understood and agreed that the conditions of subsection 4.1A(i) shall be deemed satisfied notwithstanding (i) failure to deliver all of the certificates or other evidence of good standing described in subsection 4.1A(i), (a) so long as Administrative Agent is notified which certificates or other evidence shall not have been delivered and, in its sole discretion, agrees that such certificates or other evidence may be delivered with respect to the relevant Persons after the Closing Date and (b) it being agreed and understood that failure to deliver all of the certificates or other evidence of good standing described in subsection 4.1A(i) on or prior to the date which is 90 days after the Closing Date shall constitute an immediate Event of Default on such date (unless such failure is due to failure to pay franchise taxes full payment of which has been tendered by such date), or (ii) failure to deliver all or any portion of the title insurance-related documents and instruments described in subsection 4.1N with respect to the Real Property Asset located in Lassen County, California, provided, that failure to deliver all of such documents and instruments with respect to such property on or prior to the date which is 360 days after the Closing Date shall constitute an immediate Event of Default on such date.
4.2. CONDITIONS TO ALL REVOLVING LOANS.
The obligations of Lenders to make Revolving Loans on each Funding Date are subject to the following further conditions precedent:
A. Administrative Agent shall have received before that Funding Date, in accordance with the provisions of subsection 2.1B, an originally executed Notice of Borrowing, in each case signed by a duly authorized Officer of Borrowers.
B. As of that Funding Date:
(i) The representations and warranties contained herein (except, as of the Closing Date only, the representation and warranty set forth in the first sentence of Section 5.4 hereof) and in the other Credit Documents shall be true, correct and complete in all material respects on and as of that Funding Date to the same extent as though made on and as of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true, correct and complete in all material respects on and as of such earlier date;
(ii) No event shall have occurred and be continuing or would result from the consummation of the borrowing contemplated by such Notice of Borrowing that would constitute an Event of Default or a Potential Event of Default;
(iii) No unstayed order, judgment or decree of any arbitrator or Government Authority (including the Bankruptcy Court) shall enjoin or restrain any Lender from making the Revolving Loans to be made by it on that Funding Date; and
(iv) After giving effect to the proposed borrowing, (1) the aggregate principal amount of all outstanding Revolving Loans shall not exceed the Revolving Loan Commitments then in effect and (2) the aggregate Credit Utilization then in effect shall not exceed the aggregate Letter of Credit Commitments then in effect.
4.3. CONDITIONS TO LETTERS OF CREDIT.
The issuance of any Letter of Credit hereunder is subject to the following conditions precedent:
A. On or before the date of issuance of such Letter of Credit, Administrative Agent shall have received, in accordance with the provisions of subsection 3.1B, an originally executed Request for Issuance (or a facsimile copy thereof), in each case signed by a duly authorized Officer of Borrowers, together with all other information specified in subsection 3.1B and such other documents or information as Issuing Lender may reasonably require in connection with the issuance of such Letter of Credit.
B. On the date of issuance of such Letter of Credit, all conditions precedent described in subsection 4.2B (other than subdivision (iv) thereof) shall be satisfied to the same extent as if the issuance of such Letter of Credit were the making of a Revolving Loan and the date of issuance of such Letter of Credit were a Funding Date.
C. As of the date of issuance of such Letter of Credit, after giving effect to the proposed issuance of such Letter of Credit, the aggregate Credit Utilization then in effect shall not exceed the aggregate Letter of Credit Commitments then in effect.
SECTION 5. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to make the Revolving Loans, to induce Issuing Lender to issue Letters of Credit and to induce Lenders to purchase participations therein, Company represents and warrants to each Lender, on the date of this Agreement, on the Closing Date, on each Funding Date and on the date of issuance of each Letter of Credit, that the following statements are true, correct and complete:
5.1. ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS AND SUBSIDIARIES.
A. ORGANIZATION AND POWERS. Each Credit Party is a corporation, partnership, trust or limited liability company duly organized, validly existing and in good standing under the laws of its jurisdiction of organization as specified in Schedule 5.1 annexed hereto (provided, however, that failure of any Credit Party to be in good standing in the relevant jurisdiction shall not be deemed a breach of this representation if (x) such failure is due solely to failure to pay franchise taxes and (y) full payment of such franchise taxes has been tendered no later than the date which is 90 days after the Closing Date). Each Credit Party has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to enter into the Credit Documents to which it is a party and to carry out the transactions contemplated thereby. Each Credit Party is in compliance with all material terms of its Organizational Documents.
B. QUALIFICATION AND GOOD STANDING. Each Credit Party is qualified to do business and in good standing in every jurisdiction necessary to carry out its business and operations, except in jurisdictions where the failure to be so qualified or in good standing has not had and could not reasonably be expected to have a Material Adverse Effect.
C. CONDUCT OF BUSINESS. Company and its Subsidiaries are engaged only in the businesses permitted to be engaged in pursuant to subsection 7.11.
D. SUBSIDIARIES. All of the Subsidiaries of Company as of the Closing Date and their jurisdictions of organization are identified in Schedule 5.1 annexed hereto. The Capital Stock of each of the Subsidiaries of Company identified in Schedule 5.1 annexed hereto is duly authorized, validly issued, fully paid and nonassessable and none of such Capital Stock constitutes Margin Stock. Each of the Subsidiaries of Company identified in Schedule 5.1 annexed hereto is a corporation, partnership, trust or limited liability company duly organized, validly existing and in good standing under the laws of its respective jurisdiction of organization set forth therein, has all requisite power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted, and is qualified to do business and in good standing in every jurisdiction necessary to carry out its business and operations, in each case except where failure to be so qualified or in good standing or a lack of such power and authority has not had and could not reasonably be expected to have a Material Adverse Effect. Schedule 5.1 annexed hereto correctly sets forth, as of the Closing Date, the ownership interest of Company and each of its Subsidiaries in each of the Subsidiaries of Company identified therein.
5.2. AUTHORIZATION OF BORROWING, ETC.
A. AUTHORIZATION OF BORROWING. The execution, delivery and performance of the Credit Documents have been duly authorized by all necessary action on the part of each Credit Party that is a party thereto.
B. NO CONFLICT. The execution, delivery and performance by Credit Parties of the Credit Documents to which they are parties and the consummation of the transactions contemplated by the Credit Documents do not and will not (i) violate any provision of any law or any governmental rule or regulation applicable to Company or any of its Subsidiaries, the Organizational Documents of Company or any of its Subsidiaries or any order, judgment or decree of any court or other Government Authority binding on Company or any of its Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of Company or any of its Subsidiaries, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of Company or any of its Subsidiaries, other than any Liens created under any of the Credit Documents in favor of Collateral Agent on behalf of Secured Parties, or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Company or any of its Subsidiaries, except for (x) such approvals or consents which will be obtained on or before the Closing Date and disclosed in writing to Lenders.
C. GOVERNMENTAL CONSENTS. The execution, delivery and performance by Credit Parties of the Credit Documents to which they are parties and the consummation of the transactions contemplated by the Credit Documents do not and will not require any Governmental Authorization, except for the entry of the Confirmation Order and except for filings expressly contemplated by the Credit Documents and those Governmental Authorizations which have been obtained.
D. BINDING OBLIGATION. Each of the Credit Documents has been duly executed and delivered by each Credit Party that is a party thereto and is the legally valid and binding obligation of such Credit Party, enforceable against such Credit Party in accordance with its respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability.
E. RESTRICTIONS ON TRANSFER. There are no restrictions on any
Borrower or any of its Subsidiaries which prohibit or otherwise restrict the
transfer of cash or other assets from one to another, other than (i)
prohibitions or restrictions existing under or by reason of (a) this Agreement
and the other Credit Documents, (b) applicable law, (c) customary non-assignment
provisions entered into in the ordinary course of business and consistent with
past practices, and (d) any documents or instruments governing the terms of any
Indebtedness or other obligations secured by Liens permitted by subsection 7.2A,
provided, that such prohibitions or restrictions apply only to the assets
subject to such Liens, and (ii) restrictions described in clauses (a) through
(d) of subsection 7.2D.
5.3. FINANCIAL CONDITION.
Company has heretofore delivered to Lenders, at Lenders' request, (i) the audited consolidated financial statements of Company and its Subsidiaries for the Fiscal Year ended December 31, 2002 and (ii) the unaudited consolidated financial statements of Company and its Subsidiaries for the Fiscal Quarters ended March 31, 2003, June 30, 2003
and September 30, 2003. All such statements were prepared in conformity with
GAAP and fairly present, in all material respects, the financial position (on a
consolidated and, where applicable, consolidating basis) of the entities
described in such financial statements as at the respective dates thereof and
the results of operations and cash flows (on a consolidated and, where
applicable, consolidating basis) of the entities described therein for each of
the periods then ended, subject, in the case of any such unaudited financial
statements, to changes resulting from audit and normal year-end adjustments. No
Borrower has, as of the Closing Date, any Contingent Obligation, contingent
liability or unusual long-term commitment that is not reflected in the foregoing
financial statements or the notes thereto and, as of any Funding Date subsequent
to the Closing Date, is not reflected in the most recent financial statements
delivered to Lenders pursuant to subsection 6.1 or the notes thereto (other than
(a) those liabilities reflected on the Schedules to this Agreement and (b)
Performance Guaranties and Contingent Obligations that are permitted to be
incurred under subsection 7.4) and that, in any such case, is material in
relation to the business, operations, properties, assets or financial condition
of Company or any of its Subsidiaries taken as a whole.
5.4. NO MATERIAL ADVERSE CHANGE; NO RESTRICTED PAYMENTS.
Since December 31, 2002, no event or change has occurred (other than as disclosed in reports delivered pursuant to subsection 6.1(i) of the DIP Credit Agreement) that has resulted in or evidences, either in any case or in the aggregate, a Material Adverse Effect. Since the Petition Date, neither Company nor any of its Subsidiaries has directly or indirectly declared, ordered, paid or made, or set apart any sum or property for, any Restricted Payment or agreed to do so except (i) as permitted by subsection 7.5, and (ii) as was permitted by subsection 7.5 of the DIP Credit Agreement.
5.5. TITLE TO PROPERTIES; LIENS; REAL PROPERTY; INTELLECTUAL PROPERTY.
A. TITLE TO PROPERTIES; LIENS. Company and its Subsidiaries have (i) good, sufficient and legal title to (in the case of fee interests in real property), (ii) valid leasehold interests in (in the case of leasehold interests in real or personal property), or (iii) good title to (in the case of all other personal property), all of their respective material properties and assets reflected in the financial statements referred to in subsection 5.3 or in the most recent financial statements delivered pursuant to subsection 6.1, in each case except for assets disposed of since the date of such financial statements in the ordinary course of business or as otherwise permitted under subsection 7.7. Except as permitted by this Agreement, all such properties and assets are free and clear of Liens.
B. REAL PROPERTY. As of the Closing Date, Schedule 5.5B annexed hereto contains a true, accurate and complete list of (i) all fee interests in any Real Property Assets and (ii) all leases, subleases or assignments of leases (together with all amendments, modifications, supplements, renewals or extensions of any thereof) affecting each Real Property Asset, regardless of whether a Borrower is the landlord or tenant (whether directly or as an assignee or successor in interest) under such lease, sublease or assignment. As of the Closing Date, except as specified in Schedule 5.5B annexed hereto, each agreement listed
in clause (ii) of the immediately preceding sentence is in full force and effect and no Borrower has knowledge of any material default that has occurred and is continuing thereunder, and each such agreement constitutes the legally valid and binding obligation of each applicable Borrower, enforceable against such Borrower in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles.
C. INTELLECTUAL PROPERTY. As of the Closing Date, Schedule 5.5C annexed hereto contains a true, accurate and complete list of all material Intellectual Property. Each of Company and its Subsidiaries owns or has the right to use all material Intellectual Property used in the conduct of its business, and none of such Intellectual Property conflicts with a right of any other Person to the extent such conflict could reasonably be expect to result in a Material Adverse Effect.
5.6. LITIGATION; ADVERSE FACTS.
Except as set forth in Schedule 5.6 annexed hereto, there are no Proceedings (whether or not purportedly on behalf of Company or any of its Subsidiaries) at law or in equity, or before or by any court or other Government Authority (including any Environmental Claims) that are pending or, to the knowledge of any Borrower, threatened against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries and that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. Neither Company nor any of its Subsidiaries (i) is in violation of any applicable laws (including Environmental Laws) that, individually or in the aggregate (together with all such Proceedings with respect to substantially similar or related matters), would reasonably be expected to result in a Material Adverse Effect, or (ii) is subject to or in default with respect to any final judgments, writs, injunctions, decrees, rules or regulations of any court or other Government Authority that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.
5.7. PAYMENT OF TAXES.
Except to the extent permitted by subsection 6.3, all material tax returns and reports of Company and its Subsidiaries required to be filed by any of them have been timely filed, and all taxes shown on such tax returns to be due and payable (other than taxes represented by the Tax Note) and all assessments, fees and other governmental charges upon Company and its Subsidiaries and upon their respective properties, assets, income, businesses and franchises that are due and payable have been paid when due and payable. No Borrower knows of any proposed tax assessment against Company or any of its Subsidiaries, that Company or its Subsidiaries dispute or disagree with, that is not being actively contested by Company or such Subsidiary in good faith and by appropriate proceedings; provided, that such reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made or provided therefor.
5.8. PERFORMANCE OF AGREEMENTS; MATERIAL CONTRACTS.
A. Except as set forth on Schedule 5.8A annexed hereto, after giving effect to the Approved Plan of Reorganization, neither Company nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any of its Contractual Obligations, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default except where the consequences, direct or indirect, of such default or defaults, if any, could not reasonably be expected to have a Material Adverse Effect.
B. Neither Company nor any of its Subsidiaries is a party to or is otherwise subject to (i) any agreements or instruments the performance of which, in the ordinary course, would reasonably be expected to result in a Material Adverse Effect, or (ii) any charter or other internal restrictions which, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.
C. Schedule 5.8C contains a true, correct and complete list of all the Material Contracts in effect on the Closing Date after giving effect to the Approved Plan of Reorganization.
5.9. GOVERNMENTAL REGULATION.
Neither Company nor any of its Subsidiaries is subject to regulation under (i) the Public Utility Holding Company Act of 1935, (ii) the Federal Power Act (other than as a "qualifying small power production facility", as such term is defined in PURPA), (iii) the Interstate Commerce Act, (iv) the Investment Company Act of 1940, or (v) any other federal or state statute or regulation which may limit its ability to incur Indebtedness or which may otherwise render all or any portion of the Obligations unenforceable.
5.10. SECURITIES ACTIVITIES.
A. Neither Company nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock.
B. Following application of the proceeds of each Revolving Loan, not more than 25% of the value of the assets (either of Company only or of Company and its Subsidiaries on a consolidated basis) subject to the provisions of subsection 7.2 or 7.7 or subject to any restriction contained in any agreement or instrument, between Company and any Lender or any Affiliate of any Lender, relating to Indebtedness and within the scope of subsection 8.2, will be Margin Stock.
5.11. EMPLOYEE BENEFIT PLANS.
A. Company, each of its Subsidiaries and, with respect to Pension Plans and Multiemployer Plans, each of their respective ERISA Affiliates are in material compliance with all applicable provisions and requirements of ERISA, the regulations and
published interpretations thereunder and other applicable law with respect to each Employee Benefit Plan, and have performed all of their material obligations under each Employee Benefit Plan. Company and each of its Subsidiaries are in material compliance with all applicable laws and orders of foreign Government Authorities with respect to each of its pension plans and employee benefit plans for foreign employees, and have performed all of their material obligations under each such pension plan and employee benefit plan. Each Employee Benefit Plan that is intended to qualify under Section 401(a) of the Internal Revenue Code has received, or has timely taken all action necessary to receive, a favorable determination letter from the Internal Revenue Service to such effect and no event has occurred (other than the enactment of legislation for which the remedial amendment period has not expired) that would reasonably be expected to affect adversely such Plan's qualification.
B. No ERISA Event has occurred or is reasonably expected to occur.
C. Except to the extent required under Section 4980B of the Internal Revenue Code or except as set forth in Schedule 5.11 annexed hereto or in the financial statements delivered to Lenders pursuant to subsection 4.1 or 6.1 hereof, as applicable, no Employee Benefit Plan provides health or welfare benefits (through the purchase of insurance or otherwise) for any retired or former employee of Company or any of its Subsidiaries (including CPIH Subsidiaries, to the extent such CPIH Subsidiaries are ERISA Affiliates of Company or any of its Subsidiaries).
D. As of January 1 of each year (based on, with respect to the Covanta Energy Pension Plan, the actuarial valuation as of such January 1 and, with respect to the SEIU Pension Plan, the actuarial valuation as of the immediately preceding June 1), the amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA, but determined on the basis of the actuarial assumptions used for funding purposes with respect to a Pension Plan (as set forth in Section 412 of the Internal Revenue Code, including, where applicable, the interest rate assumptions set forth in Section 412(l) of the Internal Revenue Code)), in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities), does not exceed (i) $20,000,000, in the event the applicable law (including statutorily prescribed actuarial assumptions) used in determining such unfunded benefit liabilities (the "ASSUMPTIONS") is generally as favorable as the Assumptions used in the 2003 plan year valuations with respect to such Pension Plans, or (ii) $26,000,000, in the event the Assumptions are generally less favorable than the Assumptions used in the 2003 plan year valuations with respect to such Pension Plans.
E. To each Borrower's knowledge, as of the most recent valuation date for each Multiemployer Plan for which the actuarial report (or an estimate provided pursuant to Section 4221(e) of ERISA) is reasonably available to Company, the potential withdrawal liability of Company, its Subsidiaries and their respective ERISA Affiliates for a complete withdrawal from such Multiemployer Plan (within the meaning of Section 4203 of ERISA), when aggregated with the potential liability for a complete withdrawal from all other Multiemployer Plans for which such actuarial report (or an estimate provided pursuant to
Section 4221(e) of ERISA) is reasonably available to Company, based on the information contained in such reports, would not reasonably be expected to exceed $7,500,000.
F. Neither Company nor any Subsidiary has incurred or is reasonably expected to incur any material liability pursuant to Title IV of ERISA with respect to any employee benefit plan of an entity that was formerly an ERISA Affiliate of Company or any of its Subsidiaries or with respect to any employee benefit plan that was previously maintained by Company or any of its Subsidiaries (including CPIH Subsidiaries, to the extent such CPIH Subsidiaries are ERISA Affiliates of Company or any of its Subsidiaries).
5.12. CERTAIN FEES.
No broker's or finder's fee or commission will be payable with respect to this Agreement or any of the transactions contemplated hereby, and each Borrower hereby indemnifies Lenders against, and agrees that it will hold Lenders harmless from, any claim, demand or liability for any such broker's or finder's fees alleged to have been incurred in connection herewith or therewith and any expenses (including reasonable fees, expenses and disbursements of counsel) arising in connection with any such claim, demand or liability.
5.13. ENVIRONMENTAL PROTECTION.
A. Except as set forth in Schedule 5.13 annexed hereto, neither Company nor any of its Subsidiaries (including, solely with respect to periods prior to the Closing Date, CPIH Subsidiaries) nor any of their respective Facilities or operations are subject to any outstanding written order, consent decree or settlement agreement with any Person relating to (a) any Environmental Law, (b) any Environmental Claim, or (c) any Hazardous Materials Activity that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or impose liability on any Lender or Agent;
B. Except as set forth in Schedule 5.13 annexed hereto, neither Company nor any of its Subsidiaries (including, solely with respect to periods prior to the Closing Date, CPIH Subsidiaries) has received any letter or request for information under Section 104 of CERCLA or any comparable state law regarding any condition, occurrence or activity that could reasonably be expected to form the basis of an Environmental Claim against Company or any of its Subsidiaries (including, solely with respect to periods prior to the Closing Date, CPIH Subsidiaries) that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or impose liability on any Lender or Agent;
C. Except as set forth in Schedule 5.13 annexed hereto, there are and, to Company's knowledge, have been no conditions, occurrences, or Hazardous Materials Activities that could reasonably be expected to form the basis of an Environmental Claim against Company or any of its Subsidiaries (including, solely with respect to periods prior to the Closing Date, CPIH Subsidiaries) that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or impose liability on any Lender or Agent;
D. Except as set forth in Schedule 5.13 annexed hereto, (i) neither Company nor any of its Subsidiaries (including, solely with respect to periods prior to the Closing Date, CPIH Subsidiaries) nor, to Company's knowledge, any predecessor of Company or any of its Subsidiaries (including, solely with respect to periods prior to the Closing Date, CPIH Subsidiaries) has filed any notice under any Environmental Law indicating past or present treatment of Hazardous Materials at any Facility, (ii) none of Company's or any of its Subsidiaries' Facilities constitute facilities for the treatment, storage or disposal of Hazardous Materials under RCRA or any state equivalent, and (iii) none of Company's or any of its Subsidiaries' operations involves the generation, transportation, treatment, storage or disposal of hazardous waste in violation of RCRA or any state equivalent that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or impose liability on any Lender or Agent; and
E. Compliance with all current requirements pursuant to or under Environmental Laws would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect or impose liability on any Lender or Agent.
5.14. EMPLOYEE MATTERS.
There is no strike or work stoppage in existence or threatened involving Company or any of its Subsidiaries that could reasonably be expected to have a Material Adverse Effect.
5.15. MATTERS RELATING TO COLLATERAL.
A. CREATION, PERFECTION AND PRIORITY OF LIENS. The execution and delivery of the Collateral Documents by Credit Parties, together with (x) the actions taken on or prior to the date hereof pursuant to subsections 4.1M, 4.1N, 6.8, 6.9 and 6.11 and (y) the delivery to Collateral Agent of any Pledged Collateral of the Credit Parties not delivered to Collateral Agent at the time of execution and delivery of the applicable Collateral Document (all of which Pledged Collateral has been so delivered) are effective to create in favor of Collateral Agent, for the benefit of Secured Parties, a Lien on all of the Collateral of the Credit Parties (which Lien has priority over any other Lien on such Collateral, subject to Permitted Encumbrances and Liens permitted under subsection 7.2A), and all filings and other actions necessary or desirable to perfect and maintain the perfection and such priority of such Liens have been duly made or taken and remain in full force and effect, other than the filing of any UCC financing statements delivered to Collateral Agent for filing (but not yet filed) and the periodic filing of UCC continuation statements in respect of UCC financing statements filed by or on behalf of Collateral Agent.
B. GOVERNMENTAL AUTHORIZATIONS. No authorization, approval or other action by, and no notice to or filing with, any Government Authority is required for either (i) the pledge or grant by any Credit Party of the Liens purported to be created in favor of Collateral Agent pursuant to any of the Collateral Documents or (ii) the exercise by Collateral Agent of any rights or remedies in respect of any Collateral (whether specifically granted or created pursuant to any of the Collateral Documents or created or provided for by
applicable law), except (a) for filings or recordings contemplated by subsection
5.15A, (b) as may be required, in connection with the disposition of any Pledged
Collateral, by laws generally affecting the offering and sale of securities, and
(c) authorizations and approvals in respect of the exercise of rights or
remedies as to any collateral of any Credit Party which is subject to regulation
under the Federal Power Act pursuant to Section 210(e)(2) of PURPA.
C. ABSENCE OF THIRD-PARTY FILINGS. Except such as may have been filed in favor of Collateral Agent as contemplated by subsection 5.15A and to evidence Liens permitted pursuant to subsection 7.2, (i) no effective UCC financing statement, fixture filing or other instrument similar in effect covering all or any part of the Collateral is on file in any filing or recording office, and (ii) no effective filing covering all or any part of the IP Collateral is on file in the PTO.
D. MARGIN REGULATIONS. The pledge of the Pledged Collateral pursuant to the Collateral Documents does not violate Regulation T, U or X of the Board of Governors of the Federal Reserve System.
E. INFORMATION REGARDING COLLATERAL. All information supplied to Collateral Agent by any Credit Party (including its officers, employees, agents, advisors, representatives or counsel) with respect to any of the Collateral (in each case taken as a whole with respect to any particular Collateral) is accurate and complete in all material respects.
5.16. DISCLOSURE.
No representation or warranty of Company or any of its Subsidiaries (including CPIH Subsidiaries) contained in any Credit Document or in any other certificate or written statement (excluding the projections, pro forma financial statements and forward looking statements contained therein and the estimates contained in such projections, pro forma financial statements and forward looking statements) furnished to Lenders by Company or any of its Subsidiaries (including CPIH Subsidiaries), including any such Person's officers, employees, agents, advisors, representatives or counsel, for use in connection with the transactions contemplated by this Agreement contained as of the date such representation or warranty was made any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements contained herein or therein not misleading in any material respect in light of the circumstances in which the same were made and in light of such representations and warranties and all such prior representations and warranties, taken as a whole. Any projections and pro forma financial information contained in such materials are based upon good faith estimates and assumptions believed by each Borrower to be reasonable at the time made, it being recognized by Lenders that such projections as to future events are subject to significant business, economic, regulatory and competitive uncertainties and contingencies, and, accordingly, no assurances are given and no representations or warranties are made by Company or any of its Subsidiaries that any of the estimates and assumptions are correct, that the projections will be achieved or that the forward looking statements expressed in such information will correspond to actual results.
5.17. CASH MANAGEMENT SYSTEM.
The summary of the Cash Management System attached hereto as Schedule 4.1P is accurate and complete in all material respects as of the Closing Date and does not omit to state any material fact necessary to make the statements set forth therein not misleading. No Borrower has any Deposit Account which is not described in Schedule 4.1P other than Deposit Accounts permitted to be owned after the Closing Date pursuant to subsection 6.10. There has been no change to the Cash Management System since the Closing Date except such changes as are permitted under subsection 6.10 and such other changes as have been disclosed to Lenders in writing and approved by Administrative Agent.
5.18. MATTERS RELATING TO CREDIT PARTIES.
A. CREDIT PARTIES. Neither Company nor any of its Subsidiaries owns any interest in any Subsidiary which is not a Borrower (other than Excluded Subsidiaries).
B. DOMESTIC SUBSIDIARY ASSETS. Each Subsidiary which is a Borrower has granted a Lien in favor of Collateral Agent on substantially all of its property (other than the Capital Stock of CPIH) pursuant to the Collateral Documents except in any case where the grant of such Lien would constitute a material violation of a valid and enforceable Contractual Obligation in favor of or for the benefit of a Person other than Company or any of its Subsidiaries and their respective Affiliates for which the required consents have not been obtained.
C. SUBSIDIARY CAPITAL STOCK. The Capital Stock of each Subsidiary which is directly owned by any Borrower has been pledged to Collateral Agent pursuant to the Collateral Documents, except for the Capital Stock of those Subsidiaries (other than Borrowers) (i) which is subject to a Lien permitted under subsection 7.2A securing Indebtedness permitted under subsection 7.1, or (ii) the pledge of which would constitute a material violation of (a) a valid and enforceable Contractual Obligation in favor of or for the benefit of a Person other than Company or any of its Subsidiaries and their respective Affiliates for which the required consents have not been obtained or (b) applicable law affecting such Borrower or such Subsidiary.
5.19. INVESTIGATION.
All obligations in existence immediately after the Closing Date (other than obligations that do not, in the aggregate, exceed $2,000,000) to extend credit or credit support or obtain the extension of credit or credit support or to make investments or expenditures with respect to existing or future Projects of any Borrower or any Subsidiary of any Borrower that are contained in Contractual Obligations or of which Borrowers are otherwise aware have been disclosed to Administrative Agent prior to the Closing Date. Borrowers have made such inquiry and investigation as is necessary to enable Borrowers to make the representation contained in the preceding sentence.
5.20. MATTERS RELATING TO BANKRUPTCY PROCEEDINGS.
A. PLAN OF REORGANIZATION. As of the Closing Date, there have been no material modifications, amendments revisions or restatements of the Approved Plan of Reorganization. Any representation and warranty made by Borrowers or any Subsidiary in the Approved Plan of Reorganization is accurate, true and correct in all material respects as of the Closing Date (or, to the extent such representations and warranties specifically relate to an earlier date, that such representations and warranties were accurate, true and correct in all material respects as of such earlier date).
B. CONFIRMATION ORDER. The Confirmation Order has been entered by the Bankruptcy Court at least 11 days prior to the Closing Date. The Confirmation Order has not been stayed pending any appeal or petition for review or for rehearing.
5.21. SUBORDINATED INDEBTEDNESS.
The Obligations constitute senior indebtedness that is entitled to the benefits of the subordination provisions, if any, of all Indebtedness of Company and its Subsidiaries under the Unsecured Creditor Notes.
5.22. REPORTING TO IRS.
Company does not intend to treat the Revolving Loans and Letters of Credit, and related transactions, as being a "reportable transaction" (within the meaning of Treasury Regulation Section 1.6011-4). In the event Company determines to take any action inconsistent with such intention, it will promptly notify Administrative Agent thereof. Company acknowledges that one or more Lenders may treat their Revolving Loans and Letters of Credit as part of a transaction that is subject to Treasury Regulation section 1.6011-4 or section 301.6112-1, and Administrative Agent and such Lender or Lenders, as applicable, may file such IRS forms or maintain such lists and other records as they may determine is required by such Treasury Regulations.
5.23. SOLVENCY.
Borrowers (taken as a whole) and Company are, and, upon the incurrence of any Obligations by such Borrowers on any date on which this representation is made, will be, Solvent.
SECTION 6. COMPANY'S AFFIRMATIVE COVENANTS
Borrowers covenant and agree that, so long as any of the Commitments hereunder shall remain in effect and until payment in full of all Obligations and the cancellation or expiration of all Letters of Credit, unless Requisite Lenders shall otherwise give prior written consent, Borrowers shall perform, and shall cause each of their Subsidiaries to perform, all covenants in this Section 6.
6.1. FINANCIAL STATEMENTS AND OTHER REPORTS.
Borrowers will maintain, and cause each of their respective Subsidiaries to maintain, a system of accounting established and administered in accordance with sound business practices to permit preparation of financial statements in conformity with GAAP. Borrowers will deliver to Administrative Agent (and, promptly after receipt thereof, Administrative Agent will deliver a copy to each Lender):
(i) Budget Report; Budget Update: as soon as available and in any event no later than the 15th Business Day of each month commencing with the 15th Business Day of April 2004, (a) for the month most recently ended, a report in form satisfactory to Administrative Agent reflecting the actual cash receipts and disbursements of Company and its Subsidiaries for the preceding month with respect to each line item described in the Budget for the current Fiscal Year and the percentage and dollar variance of such amounts from the projected amounts therefor set forth in (x) such Budget and (y) the Budget for the current Fiscal Year as delivered pursuant to subsection 6.1(xvi), accompanied by an Officer's Certificate from the chief financial officer of Company certifying that such report accurately presents, in all material respects, cash receipts and cash expenditures of Company and its Subsidiaries for the periods indicated, and (b) a supplement to the Budget for the current Fiscal Year, in the form of such Budget, reflecting projected cash receipts and disbursements of Company and its Subsidiaries for each month and each Fiscal Quarter remaining in the current Fiscal Year with respect to each line item described in such Budget, which supplement shall be accompanied by an Officer's Certificate from the chief financial officer of Company certifying that the projections contained in such supplement are based upon good faith estimates and assumptions believed by Company to be reasonable at the time made;
(ii) Events of Default, etc.: promptly upon any Officer of Company obtaining knowledge (a) of any condition or event that constitutes an Event of Default or Potential Event of Default, or becoming aware that any Lender has given any notice (other than to Administrative Agent) or taken any other action with respect to a claimed Event of Default or Potential Event of Default, (b) that any Person has given any notice to Company or any of its Subsidiaries or taken any other action with respect to a claimed default or event or condition of the type referred to in subsection 8.2, (c) of any condition or event that would be required to be disclosed in a current report filed by Company with the Securities and Exchange Commission on Form 8-K if Company were required to file such reports under the Exchange Act, or (d) of the occurrence of any event or change that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect, an Officer's Certificate specifying the nature and period of existence of such condition, event or change, or specifying the notice given or action taken by any such Person and the nature of such claimed Event of Default, Potential Event of Default, default, event or condition, and what action Company has taken, is taking and proposes to take with respect thereto;
(iii) Quarterly Financials: as soon as available and in any event within 45 days after the end of each of the first three Fiscal Quarters of each Fiscal Year, the consolidated balance sheet of Company and its Subsidiaries as at the end of such Fiscal Quarter and the related consolidated statement of income of Company and its Subsidiaries for such Fiscal Quarter and the related consolidated statements of stockholders' equity and cash flows of Company and its Subsidiaries for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter, setting forth in each case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year, all in reasonable detail and certified by the chief financial officer of Company that they fairly present, in all material respects, the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments; provided, however, that so long as Company files a quarterly report on Form 10Q with the Securities and Exchange Commission for any Fiscal Quarter, Borrowers shall be required to deliver a copy of such quarterly report in lieu of the financial statements described in this subsection 6.1(iii);
(iv) Year-End Financials: as soon as available and in any event within 90 days after the end of each Fiscal Year, (a) the consolidated balance sheet of Company and its Subsidiaries as at the end of such Fiscal Year and the related consolidated and consolidating statements of income, stockholders' equity and cash flows of Company and its Subsidiaries for such Fiscal Year, setting forth in each case in comparative form the corresponding figures for the previous Fiscal Year, all in reasonable detail and certified by the chief financial officer of Company that they fairly present, in all material respects, the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, and (b) an audit report thereon of independent certified public accountants of recognized national standing selected by Company and satisfactory to Administrative Agent, which report shall (with respect to the audits for all Fiscal Years after 2003) be unqualified, shall express no doubts, assumptions or qualifications concerning the ability of Company and its Subsidiaries to continue as a going concern, and shall (with respect to the audits for all Fiscal Years including 2003) state that in the opinion of such certified public accountants such consolidated financial statements fairly present, in all material respects, the consolidated financial position of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated in conformity with GAAP and that the audit by such accountants in connection with such consolidated financial statements has been made in accordance with auditing standards generally accepted in the United States; provided, however, that so long as Company files an annual report on Form 10K with the Securities Exchange Commission, Borrowers shall be required to deliver a copy of such annual report in lieu of the financial statements described in clause (a);
(v) Compliance Certificates: together with each delivery of
financial statements of Company and its Subsidiaries pursuant to
subdivisions (iii) and (iv) above, (a) an Officer's Certificate of
Company stating that the signers have reviewed the terms of this
Agreement and have made, or caused to be made under their supervision,
a review in reasonable detail of the transactions and condition of
Company and its Subsidiaries during the accounting period covered by
such financial statements and that such review has not disclosed the
existence during or at the end of such accounting period, and that the
signers do not have knowledge of the existence as at the date of such
Officer's Certificate, of any condition or event that constitutes an
Event of Default or Potential Event of Default, or, if any such
condition or event existed or exists, specifying the nature and period
of existence thereof and what action Company has taken, is taking and
proposes to take with respect thereto; and (b) a Compliance Certificate
demonstrating in reasonable detail compliance during and at the end of
the applicable accounting periods with the restrictions contained in
Section 7, in each case to the extent compliance with such restrictions
is required to be tested at the end of the applicable accounting
period;
(vi) Reconciliation Statements: other than the fresh start adjustments required under SOP 90-7, if, as a result of any change in accounting principles and policies from those used in the preparation of the audited financial statements referred to in subsection 5.3, the consolidated financial statements of Company and its Subsidiaries delivered pursuant to subdivisions (iii) or (iv) of this subsection 6.1 will differ in any material respect from the consolidated financial statements that would have been delivered pursuant to such subdivisions had no such change in accounting principles and policies been made, then (a) together with the first delivery of financial statements pursuant to subdivision (iii) or (iv) of this subsection 6.1 following such change, consolidated financial statements of Company and its Subsidiaries for (y) the current Fiscal Year to the effective date of such change and (z) the two full Fiscal Years immediately preceding the Fiscal Year in which such change is made, in each case prepared on a pro forma basis as if such change had been in effect during such periods, and (b) together with each delivery of financial statements pursuant to subdivision (iii) or (iv) of this subsection 6.1 following such change, if required pursuant to subsection 1.2, a written statement of the chief accounting officer or chief financial officer of Company setting forth the differences (including any differences that would affect any calculations relating to the financial covenants set forth in subsection 7.6) which would have resulted if such financial statements had been prepared without giving effect to such change;
(vii) Accountants' Certification: together with each delivery of consolidated financial statements of Company and its Subsidiaries pursuant to subdivision (iv) above, a written statement by the independent certified public accountants giving the report thereon stating that in connection with their audit, nothing came to their attention that caused them to believe that Company failed to comply with the terms, provisions or conditions of subsection 7.6, insofar as they relate to financial and accounting matters, or, if such a failure to comply has come to their attention,
specifying the nature and period of existence thereof (it being understood that their audit is not directed primarily toward obtaining knowledge of non-compliance and that such accountants shall not be liable by reason of any failure to obtain knowledge of any such non-compliance that would not be disclosed in the course of their audit);
(viii) Accountants' Reports: promptly upon request of Administrative Agent (unless restricted by applicable professional standards), copies of all reports submitted to Company by independent certified public accountants in connection with each annual, interim or special audit of the financial statements of Company and its Subsidiaries made by such accountants, including any comment letter submitted by such accountants to management in connection with their annual audit;
(ix) SEC Filings and Press Releases: promptly upon their
becoming available, copies of (a) all financial statements, reports,
notices and proxy statements sent or made available generally by
Company to its security holders or by any Subsidiary of Company to its
security holders other than Company or another Subsidiary of Company,
(b) all regular and periodic reports and all registration statements
(other than on Form S-8 or a similar form) and prospectuses, if any,
filed by Company or any of its Subsidiaries with any securities
exchange or with the Securities and Exchange Commission or any
governmental or private regulatory authority, and (c) all press
releases and other statements made available generally by Company or
any of its Subsidiaries to the public concerning material developments
in the business of Company or any of its Subsidiaries;
(x) Litigation or Other Proceedings: (a) promptly upon any officer of Company obtaining knowledge of (1) the institution of, or non-frivolous threat of, any Proceeding against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries not previously disclosed in writing by Company to Lenders or (2) any material development in any Proceeding that, in the case of both clauses (1) and (2):
(1) if adversely determined, has a reasonable possibility after giving effect to the coverage and policy limits of insurance policies issued to Company and its Subsidiaries of giving rise to a Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, or to contest or challenge the legality, validity or enforceability of, the transactions contemplated hereby;
written notice thereof together with such other information as may be reasonably available to Company to enable Lenders and their counsel to evaluate such matters; and (b) within 20 days after the end of each Fiscal Quarter, a schedule of all Proceedings involving an alleged liability of, or claims against or affecting, an Borrower equal to or greater than $1,000,000, and promptly after request by Administrative Agent such other information as may be reasonably requested by
Administrative Agent to enable Administrative Agent and its counsel to evaluate any of such Proceedings;
(xi) ERISA Events: with reasonable promptness upon becoming aware of the occurrence of or forthcoming occurrence of (a) any ERISA Event or (b) any event that would constitute an ERISA Event but for the requirements (in order for such event to constitute an ERISA Event) that a Lien or liability imposed as a result thereof be material, that the error giving rise thereto be in bad faith, and/or that such event would reasonably be expected to result in a Material Adverse Effect, a written notice specifying the nature thereof, what action Company, any of its Subsidiaries or any of their respective ERISA Affiliates has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened in writing by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto;
(xii) ERISA Notices: with reasonable promptness, copies of (a) all notices received by Company, any of its Subsidiaries or any of their respective ERISA Affiliates from a Multiemployer Plan sponsor concerning an ERISA Event; and (b) copies of such other documents or governmental reports or filings relating to any Employee Benefit Plan as Administrative Agent shall reasonably request (it being agreed that commencing on the Closing Date, on an annual basis Borrowers shall request information from each Multiemployer Plan in accordance with section 4221 of ERISA to determine the potential withdrawal liability of Company, its Subsidiaries and their respective ERISA Affiliates for a complete withdrawal from such Multiemployer Plan);
(xiii) Insurance: as soon as practicable after any material change in insurance coverage maintained by Company and its Subsidiaries notice thereof to Administrative Agent specifying the changes and reasons therefor;
(xiv) Governing Body: with reasonable promptness, written notice of any change in the Governing Body of Company;
(xv) Material Contracts: promptly, and in any event within 10 Business Days after any Material Contract of Company or any of its Subsidiaries is terminated or amended in a manner that is materially adverse to Company or such Subsidiary, as the case may be, or any new Material Contract is entered into, a written statement describing such event with copies of such material amendments or new contracts, and an explanation of any actions being taken with respect thereto;
(xvi) Budget: no later than the 15th day of December of each
year commencing with December 15, 2004, a budget for the next Fiscal
Year, in the form of the Budget for the current Fiscal Year, reflecting
(a) projected cash receipts and disbursements of Company and its
Subsidiaries for each month and each Fiscal Quarter in the next Fiscal
Year and (b) projected net cash flows of Company and its Subsidiaries
for each Fiscal Year following the next Fiscal Year and ending with
2009, in each case with respect to each line item described in the
Budget for the
current Fiscal Year, which budget shall be accompanied by an Officer's Certificate from the chief financial officer of Company certifying that the projections contained in such budget are based upon good faith estimates and assumptions believed by Company to be reasonable at the time made;
(xvii) New Restricted Accounts: promptly upon opening any Restricted Account after the Closing Date that is required to be opened by Company or any of its Subsidiaries pursuant to a Contractual Obligation binding on such Person, a written notice setting forth in reasonable detail (a) the Project or obligation to which such account relates, (b) a description of the Contractual Obligation requiring such account to be opened and (c) the provisions of this Agreement permitting such account to be opened and maintained (it being understood that such written notice shall be deemed to supplement Schedule 2.3A(i)(f) annexed hereto for all purposes of this Agreement);
(xviii) Other Information: with reasonable promptness, such other information and data with respect to Company or any of its Subsidiaries as from time to time may be reasonably requested by Administrative Agent or Requisite Lenders (or by any Lender so long as such request is made through Administrative Agent (and Administrative Agent shall be required to request from Borrowers any such information and data reasonably requested by a Lender)); and
(xix) Notices from Holders of Subordinated Indebtedness:
promptly, upon receipt, copies of all notices from holders of
Subordinated Indebtedness or a trustee, agent or other representative
of such a holder.
6.2. EXISTENCE, ETC.
Except as permitted under subsection 7.7, Company will, and will cause each of its Subsidiaries to, at all times preserve and keep in full force and effect its existence and all rights and franchises material to its business; provided, however, that neither Company nor any of its Subsidiaries shall be required to preserve the existence of any such Subsidiary or any such right or franchise if the management or Governing Body of Company or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of Company or such Subsidiary, as the case may be, and the loss thereof could not reasonably be expected to have a Material Adverse Effect.
6.3. PAYMENT OF TAXES AND CLAIMS; TAX.
Company will, and will cause each of its Subsidiaries to, pay all taxes, assessments and other governmental charges imposed upon it or any of its properties or assets or in respect of any of its income, businesses or franchises before any material penalty accrues thereon, and all claims (including claims for labor, services, materials and supplies) for material sums that have become due and payable and that by law have or may become a Lien upon any of its properties or assets, prior to the time when any penalty or fine shall be incurred with respect thereto; provided, that no such tax, assessment, charge or claim need be
paid if it is being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as (i) such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor and (ii) in the case of a tax, assessment, charge or claim which has or may become a Lien against any of the Collateral, such proceedings conclusively operate to stay the sale of any portion of the Collateral to satisfy such charge or claim.
6.4. MAINTENANCE OF PROPERTIES; INSURANCE; APPLICATION OF NET INSURANCE/ CONDEMNATION PROCEEDS.
A. MAINTENANCE OF PROPERTIES. Company will, and will cause each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition, ordinary wear and tear excepted, all material properties used or useful in the business of Company and its Subsidiaries (including all Intellectual Property) and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof, except that Company and its Subsidiaries shall not be required to perform the foregoing obligations (i) with respect to Subsidiaries or assets to which Persons other than Company and its Subsidiaries have recourse under Limited Recourse Debt owed to such Persons or (ii) to the extent that failure to perform such obligations would not reasonably be expected to have a Material Adverse Effect.
B. INSURANCE. Company will maintain or cause to be maintained, with financially sound and reputable insurers, such public liability insurance, third party property damage insurance, business interruption insurance and casualty insurance with respect to liabilities, losses or damage in respect of the assets, properties and businesses of Company and its Subsidiaries and, for not less than one year following the Closing Date, of CPIH Subsidiaries (provided, that Company shall not be required to maintain such insurance with respect to CPIH Subsidiaries to the extent such insurance is not commercially available to Company) as may customarily be carried or maintained under similar circumstances by corporations of established reputation engaged in similar businesses, in each case in such amounts (giving effect to self-insurance), with such deductibles, covering such risks and otherwise on such terms and conditions as shall be customary for corporations similarly situated in the industry. Without limiting the generality of the foregoing, Company will maintain or cause to be maintained (i) flood insurance with respect to each Flood Hazard Property that is located in a community that participates in the National Flood Insurance Program, in each case in compliance with any applicable regulations of the Board of Governors of the Federal Reserve System, and (ii) replacement value casualty insurance on the Collateral under such policies of insurance, with such insurance companies, in such amounts, with such deductibles, and covering such risks as are at all times satisfactory to Administrative Agent in its commercially reasonable judgment. Unless prohibited by contractual or other legal requirement, such policy of insurance shall (a) name Collateral Agent for the benefit of Secured Parties as an additional insured thereunder as its interests may appear and (b) in the case of each business interruption and casualty insurance policy, contain a loss payable clause or endorsement, satisfactory in form and substance to Administrative Agent, that names Collateral Agent for the benefit of Secured Parties as the loss payee thereunder for any covered loss in excess of $1,000,000 and provides for at least
30 days prior written notice to Collateral Agent of any modification or cancellation of such policy. As soon as practicable after the Closing Date, Company shall deliver to Administrative Agent a certificate from Borrowers' insurance broker(s) or other evidence satisfactory to it that all insurance required to be maintained pursuant to this subsection 6.4 is in full force and effect and that Collateral Agent on behalf of Secured Parties has been named as additional insured and/or loss payee thereunder to the extent required under this subsection 6.4.
C. APPLICATION OF NET INSURANCE/CONDEMNATION PROCEEDS.
(i) Business Interruption Insurance. Upon receipt by Company
or any of its Subsidiaries of any business interruption insurance
proceeds constituting Net Insurance/Condemnation Proceeds, (a) so long
as no Event of Default or Potential Event of Default shall have
occurred and be continuing, Company or such Subsidiary may retain and
apply such Net Insurance/Condemnation Proceeds for working capital
purposes or any other purposes not prohibited under this Agreement, and
(b) if an Event of Default or Potential Event of Default shall have
occurred and be continuing, Company shall apply an amount equal to such
Net Insurance/Condemnation Proceeds as provided in subsection 2.4A.
(ii) Net Insurance/Condemnation Proceeds Received by Company. Upon receipt by Company or any of its Subsidiaries of any Net Insurance/Condemnation Proceeds other than from business interruption insurance, (a) so long as no Event of Default or Potential Event of Default shall have occurred and be continuing, Company shall, or shall cause one or more of its Subsidiaries to, promptly and diligently apply such Net Insurance/Condemnation Proceeds to pay or reimburse the costs of repairing, restoring or replacing the assets in respect of which such Net Insurance/Condemnation Proceeds were received or, to the extent not so applied, as provided in subsection 2.4A, and (b) if an Event of Default or Potential Event of Default shall have occurred and be continuing (unless Company is otherwise required to use funds by law or contract), Company shall apply an amount equal to such Net Insurance/Condemnation Proceeds as provided in subsection 2.4A.
(iii) Net Insurance/Condemnation Proceeds Received by
Administrative Agent or Collateral Agent. Upon receipt by
Administrative Agent or Collateral Agent, as the case may be, of any
Net Insurance/Condemnation Proceeds, (a) if and to the extent Company
would have been required to apply such Net Insurance/Condemnation
Proceeds (if it had received them directly) Administrative Agent or
Collateral Agent, as the case may be, shall, and Company hereby
authorizes Administrative Agent or Collateral Agent, as the case may
be, to apply such Net Insurance/Condemnation Proceeds as provided in
subsection 2.4A, and (b) to the extent the foregoing clause (a) does
not apply Administrative Agent or Collateral Agent, as the case may be,
shall deliver such Net Insurance/Condemnation Proceeds to Company, and
(1) Company and its Subsidiaries may retain and apply any portion
thereof that is business interruption insurance proceeds for working
capital purposes or any other purposes not prohibited under this
Agreement and (2) Company shall, or
shall cause one or more of its Subsidiaries to, promptly apply such Net Insurance/Condemnation Proceeds that are not business interruption insurance proceeds to the costs of repairing, restoring, or replacing the assets in respect of which such Net Insurance/Condemnation Proceeds were received; provided, however, that if at any time Administrative Agent reasonably determines (A) that Company or such Subsidiary is not proceeding diligently with such repair, restoration or replacement or that such repair, restoration or replacement cannot be completed within 180 days after the receipt by Administrative Agent or Collateral Agent, as the case may be, of such Net Insurance/Condemnation Proceeds, Administrative Agent or Collateral Agent, as the case may be, shall, and Company hereby authorizes Administrative Agent or Collateral Agent, as the case may be, to apply such Net Insurance/Condemnation Proceeds as provided in subsection 2.4A.
Notwithstanding the foregoing, no Net Insurance/Condemnation Proceeds shall be required to be applied as provided in subsection 2.4A to the extent such application would constitute a material violation of (1) a valid Contractual Obligation (in effect on the Closing Date or arising under the documentation for Limited Recourse Debt permitted to be incurred under this Agreement) in favor of or for the benefit of a Person other than Company or any of its Subsidiaries or their respective Affiliates for which the required consents have not been obtained or (2) applicable law affecting Company and its Subsidiaries. Notwithstanding anything in this Agreement to the contrary, in the event of any conflict or inconsistency between subsection 6.4C and the terms of the Intercreditor Agreement, the terms of the Intercreditor Agreement shall prevail.
6.5. INSPECTION RIGHTS; LENDER MEETING.
A. INSPECTION RIGHTS. Borrowers shall, and shall cause each of their respective Subsidiaries to, permit any authorized representatives designated by any Lender, at such Lender's expense, to visit and inspect any of the properties of such Borrower or of any of its Subsidiaries, to inspect, copy and take extracts from its and their financial and accounting records, and to discuss its and their affairs, finances and accounts with its and their officers and independent public accountants (provided, that Company may, if it so chooses, be present at or participate in any such discussion), all upon reasonable notice and at such reasonable times during normal business hours and as often as may reasonably be requested; provided, that at any time after the occurrence and during the continuance of an Event of Default, Borrowers shall, and shall cause each of their respective Subsidiaries to, permit such additional visits, inspections and audits as Administrative Agent or Requisite Lenders may deem necessary or advisable, at any time or from time to time, all at Borrowers' expense.
B. LENDER MEETING. Company will, upon the request of Administrative Agent or Requisite Lenders, participate in a meeting of Administrative Agent and Lenders once during each Fiscal Year to be held at Company's corporate offices (or at such other location as may be agreed to by Company and Administrative Agent) at such time as may be agreed to by Company and Administrative Agent.
6.6. COMPLIANCE WITH LAWS, ETC.
Borrowers shall comply, and shall cause each of their Subsidiaries (including CPIH Subsidiaries) to comply, with the requirements of all applicable laws, rules, regulations and orders of any Government Authority (including all Environmental Laws), noncompliance with which could reasonably be expected to cause, individually or in the aggregate, a Material Adverse Effect.
6.7. ENVIRONMENTAL MATTERS.
A. ENVIRONMENTAL DISCLOSURE. Company will deliver to Administrative Agent:
(i) Environmental Audits and Reports. As soon as practicable following receipt thereof, copies of all environmental audits, investigations, analyses and reports of any kind or character (excluding writings which are protected by attorney-client privilege or the work-product doctrine or confidential self-evaluative writings), whether prepared by personnel of Company or any of its Subsidiaries or by independent consultants, governmental authorities or any other Persons, with respect to significant environmental matters at any Facility that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect or impose liability on any Lender or Administrative Agent or with respect to any Environmental Claims that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect or impose liability on any Lender or Administrative Agent;
(ii) Notice of Certain Releases, Remedial Actions, Etc. Promptly upon the occurrence thereof, written notice describing in reasonable detail (a) any Release required to be reported to any federal, state or local governmental or regulatory agency under any applicable Environmental Laws that could reasonably be expected to have a Material Adverse Effect or impose liability on any Lender or Administrative Agent, (b) any remedial action taken by Company or any other Person in response to (1) any Hazardous Materials Activities the existence of which could reasonably be expected to result in one or more Environmental Claims having, individually or in the aggregate, a Material Adverse Effect or imposing liability on any Lender or Administrative Agent, or (2) any Environmental Claims that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect or impose liability on any Lender or Administrative Agent;
(iii) Written Communications Regarding Environmental Claims, Releases, Etc. As soon as practicable following the sending or receipt thereof by Company or any of its Subsidiaries, a copy of any and all written communications (excluding writings which are protected by attorney-client privilege or the work-product doctrine or confidential self-evaluative writings), with respect to (a) the commencement or the threat to commence a proceeding regarding any Environmental Claims that, individually or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect or impose liability on any Lender or Agent, (b) any Release required to be reported to any federal, state or local governmental or regulatory agency that could reasonably be expected to have a Material Adverse Effect or impose liability on any Lender or Administrative Agent, and (c) any request for information from any governmental agency that suggests such agency is investigating whether Company or any of its Subsidiaries may be potentially responsible for any Hazardous Materials Activity that could reasonably be expected to have a Material Adverse Effect or impose liability on any Lender or Administrative Agent;
(iv) Notice of Certain Proposed Actions Having Environmental Impact. Prompt written notice describing in reasonable detail (a) any proposed acquisition of stock, assets, or property by Company or any of its Subsidiaries that could reasonably be expected to (1) expose Company or any of its Subsidiaries to, or result in, Environmental Claims that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or impose liability on any Lender or Administrative Agent or (2) affect the ability of Company or any of its Subsidiaries to maintain in full force and effect all Governmental Authorizations required under any Environmental Laws for their respective operations except to the extent the failure to maintain such Governmental Authorizations could not reasonably be expected to have a Material Adverse Effect or impose liability on any Lender or Administrative Agent and (b) any proposed action to be taken by Company or any of its Subsidiaries to commence manufacturing or other industrial operations or to modify current operations in a manner that could reasonably be expected to subject Company or any of its Subsidiaries to any additional obligations or requirements under any Environmental Laws that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or impose liability on any Lender or Administrative Agent; and
(v) Certain Communications. With respect to documents which
would have been required to be provided to Administrative Agent
pursuant to paragraph (i) or (iii) but for the parenthetical in those
paragraphs, Company shall promptly upon receiving such documents
provide a list identifying generally the documents not disclosed and
summarizing the information contained in such documents to the extent
consistent with not waiving any privilege with respect thereto. If the
privilege prevents Company from summarizing the information contained
in such documents Company (a) shall nevertheless advise Administrative
Agent that a matter, the nature of which cannot be disclosed without
waiving the applicable privilege, exists with respect to a specified
Facility or Environmental Claim that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect and
(b) shall provide such other information to Administrative Agent,
consistent with not waving the privilege, that Administrative Agent may
reasonably request.
B. COMPANY'S ACTIONS REGARDING ENVIRONMENTAL CLAIMS AND VIOLATIONS OF ENVIRONMENTAL LAWS. Company shall promptly take, and shall cause each of its Subsidiaries promptly to take, any and all actions necessary to (i) cure any violation of applicable Environmental Laws by Company or its Subsidiaries (including, solely with
respect to periods prior to the Closing Date, CPIH Subsidiaries) that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and (ii) make an appropriate response to any Environmental Claim against Company or any of its Subsidiaries (including, solely with respect to periods prior to the Closing Date, CPIH Subsidiaries) and discharge any obligations it may have to any Person thereunder where failure to do so could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect (except if Company and its Subsidiaries do not have standing to contest or respond to such Environmental Claim); provided, however, that Company may, without breaching the requirements of this subsection 6.7B, contest an alleged violation of Environmental Laws or an Environmental Claim in good faith by appropriate proceedings promptly instituted and diligently conducted so long as during such contest the failure to cure such violation or to respond to such Environmental Claim or discharge the obligations thereunder could not reasonably be expected to result in a Material Adverse Effect.
6.8. EXECUTION OF BORROWER JOINDER AGREEMENT AND PERSONAL PROPERTY COLLATERAL DOCUMENTS AFTER THE CLOSING DATE.
A. EXECUTION OF BORROWER JOINDER AGREEMENT AND PERSONAL PROPERTY COLLATERAL DOCUMENTS. In the event that any Subsidiary of Company existing on the Closing Date ceases to be an Excluded Subsidiary, Company will promptly notify Administrative Agent of that fact and cause such Subsidiary promptly (and in any event no later than 30 days after it ceases to be an Excluded Subsidiary) to execute and deliver to Administrative Agent a Borrower Joinder Agreement and counterparts of the Security Agreement and the Intercreditor Agreement and to take all such further actions and execute all such further documents and instruments (including actions, documents and instruments comparable to those described in subsection 4.1M) as may be necessary or, in the opinion of Administrative Agent, desirable to create in favor of Collateral Agent, for the benefit of Secured Parties, a valid and perfected First Priority security interest in all of the personal and mixed property assets of such Subsidiary described in the applicable forms of Collateral Documents, subject to any Liens in existence on the date such Subsidiary ceases to be an Excluded Subsidiary to the extent permitted under subsection 7.2A, provided, that at the request of Company in connection with sales of assets permitted under subsection 7.7, Administrative Agent shall, subject to the terms of the Intercreditor Agreement, direct Collateral Agent (without need for any further consent from any Lender or Lenders) to release any Liens on a Subsidiary's assets and/or release a Subsidiary from this Agreement solely to the extent required by the terms of any such sales permitted under this Agreement; provided, however, that no Capital Stock of any Subsidiary that meets the criteria set forth in subsections 5.18C(i) or 5.18C(ii) shall be required to be pledged as Collateral pursuant to this subsection.
B. SUBSIDIARY ORGANIZATIONAL DOCUMENTS, LEGAL OPINIONS, ETC. Company shall deliver to Administrative Agent, together with the relevant Credit Documents, (i) certified copies of Organizational Documents of each Subsidiary which is becoming a Borrower pursuant to subsection 6.8A (each, an "ADDITIONAL SUBSIDIARY BORROWER"), together with a good standing certificate from the Secretary of State of the jurisdiction of such Subsidiary's organization and each other state in which such Person is
qualified to do business and, to the extent generally available, a certificate or other evidence of good standing as to payment of any applicable franchise or similar taxes from the appropriate taxing authority of each of such jurisdictions, each to be dated a recent date prior to their delivery to Administrative Agent, (ii) a certificate executed by the secretary or similar officer of such Subsidiary as to (a) the fact that the attached resolutions of the Governing Body of such Subsidiary approving and authorizing the execution, delivery and performance of such Credit Documents are in full force and effect and have not been modified or amended and (b) the incumbency and signatures of the officers of such Subsidiary executing such Credit Documents, and (iii) a favorable opinion of counsel to such Subsidiary, in form and substance satisfactory to Administrative Agent and its counsel, as to (a) the due organization and good standing of such Subsidiary, (b) the due authorization, execution and delivery by such Subsidiary of such Credit Documents, (c) the enforceability of such Credit Documents against such Subsidiary and (d) such other matters (including matters relating to the creation and perfection of Liens in any Collateral pursuant to such Credit Documents) as Administrative Agent may reasonably request, all of the foregoing to be satisfactory in form and substance to Administrative Agent and its counsel.
C. RELEASE OF RESTRICTIONS. Borrowers shall use their good faith, commercially reasonable efforts to obtain all necessary consents from all Persons in whose favor or for whose benefit Contractual Obligations are in effect which would be violated by (i) a pledge of the Capital Stock of any Subsidiary of a Borrower, (ii) entry into a Borrower Joinder Agreement by a Subsidiary which is not already a Borrower, or (iii) granting a Lien on substantially all of the assets of a Subsidiary. The foregoing efforts shall be exercised so as to obtain such consents as soon as practicable but no later than 90 days after the Closing Date.
6.9. MATTERS RELATING TO ADDITIONAL REAL PROPERTY COLLATERAL.
From and after the Closing Date, in the event that any Borrower acquires any fee interest in real property or any Material Leasehold Property, such Borrower shall, as soon as practicable after such Person acquires such real property or Material Leasehold Property, execute, acknowledge, file, record, do and deliver all and any further acts, deeds, conveyances, mortgages, hypothecations, pledges, charges, assignments, financing statements and continuations thereof, notices of assignment, transfers, certificates, assurances and other instruments, opinions, appraisals, title insurance and environmental reports as Administrative Agent may reasonably request to perfect and maintain the Liens created by the Collateral Documents, including, without limitation, deliver to Collateral Agent in proper form for recording in all appropriate places in all applicable jurisdictions, encumbering the interest of such Borrower in such mortgaged property; and such opinions, appraisal, documents, title insurance, environmental reports that would have been delivered on the Closing Date if such mortgaged were a Closing Date Mortgaged Property, and to assure, convey, assign, transfer and confirm unto Collateral Agent, for the benefit of the Secured Parties, the property and rights thereby conveyed and assigned or intended to now or hereafter be conveyed or assigned or that any Borrower may be or may hereafter become bound to convey or to assign to Administrative Agent.
6.10. DEPOSIT ACCOUNTS.
Borrowers shall, and shall cause each of their Subsidiaries (other than Bankrupt Subsidiaries) to, maintain the Cash Management System as described in Schedule 4.1P, as said Schedule 4.1P may be supplemented from time to time pursuant to clause (i)(c) below, and Company and its Subsidiaries shall not open or close Deposit Accounts or make other changes to the Cash Management System without the written consent of Administrative Agent, except that (i) Company and its Subsidiaries may open and maintain funds in Deposit Accounts with Collateral Agent or other depository institutions after the Closing Date so long as (a) concurrently with the opening of any such account with a depository institution other than Collateral Agent, Borrowers shall deliver to Collateral Agent a Control Agreement with respect to such account (unless after giving effect to such opening Borrowers would not be in breach of the requirement set forth in clause (i)(b)), (b) the aggregate amount on deposit at any time in all Deposit Accounts maintained with depository institutions other than Collateral Agent for which Control Agreements have not been delivered to Collateral Agent shall not exceed $1,000,000, and (c) concurrently with the opening of any such account, Borrowers shall deliver to Administrative Agent a written notice setting forth the account number and the name of the relevant depository institution (it being understood that such written notice shall be deemed to supplement Schedule 4.1P annexed hereto for all purposes of this Agreement) and, if applicable, the Project to which such account relates and the primary purpose of such account, and (ii) after the Closing Date Company and its Subsidiaries may open and maintain funds in Restricted Accounts that are required to be opened by Company or any of its Subsidiaries pursuant to a Contractual Obligation binding on such Person so long as promptly upon opening any such account, a written notice setting forth in reasonable detail (a) the Project or obligation to which such account relates, (b) a description of the Contractual Obligation requiring such account to be opened, and (c) the provisions of this Agreement permitting such account to be opened and maintained (it being understood that such written notice shall be deemed to supplement Schedule 2.4A(iii)(f) annexed hereto for all purposes of this Agreement).
6.11. FURTHER ASSURANCES.
A. ASSURANCES. Without expense or cost to Administrative Agent or Lenders, each Borrower shall from time to time hereafter execute, acknowledge, file, record, do and deliver all and any further acts, deeds, conveyances, mortgages, deeds of trust, deeds to secure debt, security agreements, hypothecations, pledges, charges, assignments, financing statements and continuations thereof, notices of assignment, transfers, certificates, assurances and other instruments as Administrative Agent may from time to time reasonably request and that do not involve a material expansion of Borrowers' obligations or liabilities hereunder in order to carry out more effectively the purposes of this Agreement, the other Credit Documents and the Confirmation Order, including to subject any Collateral, intended to now or hereafter be covered, to the Liens created by the Collateral Documents and the Confirmation Order, to perfect and maintain such Liens, and to assure, convey, assign, transfer and confirm unto Collateral Agent the property and rights thereby conveyed and assigned or intended to now or hereafter be conveyed or assigned or that any Borrower may be or may hereafter become bound to convey or to assign to Collateral Agent or for carrying
out the intention of or facilitating the performance of the terms of this Agreement, any other Credit Documents or the Confirmation Order, registering or recording this Agreement or any other Credit Document. Without limiting the generality of the foregoing, Borrowers shall deliver to Collateral Agent, promptly upon receipt thereof, all instruments received by Borrowers after the Closing Date and take all actions and execute all documents necessary or reasonably requested by Collateral Agent to perfect Collateral Agent's Liens in any such instrument or any other Investment acquired by any Borrower.
B. FILING AND RECORDING OBLIGATIONS. Each Borrower shall jointly and severally pay all filing, registration and recording fees and all expenses incident to the execution and acknowledgement of any Mortgage or other Credit Document, including any instrument of further assurance described in subsection 6.11A, and shall pay all mortgage recording taxes, transfer taxes, general intangibles taxes and governmental stamp and other taxes, duties, imposts, assessments and charges arising out of or in connection with the execution, delivery, filing, recording or registration of any Mortgage or other Credit Document, including any instrument of further assurance described in subsection 6.11A, or by reason of its interest in, or measured by amounts payable under, the Notes, the Mortgages or any other Credit Document, including any instrument of further assurance described in subsection 6.11A, (excluding income, franchise and doing business Taxes), and shall pay all stamp Taxes and other Taxes required to be paid on any Credit Document; provided, however, that such Borrower may contest in good faith and through appropriate proceedings, any such Taxes, duties, imposts, assessments and charges; provided further, however, that such Borrower shall pay all such Taxes, duties, imposts and charges when due to the appropriate taxing authority during the pendency of any such proceedings if required to do so to stay enforcement thereof. If any Borrower fails to make any of the payments described in the preceding sentence within 10 days after notice thereof from Administrative Agent (or such shorter period as is necessary to protect the loss of or diminution in value of any Collateral by reason of tax foreclosure or otherwise, as determined by Administrative Agent) accompanied by documentation verifying the nature and amount of such payments, Administrative Agent may (but shall not be obligated to) pay the amount due and Borrowers shall jointly and severally reimburse all amounts in accordance with the terms hereof.
C. COSTS OF DEFENDING AND UPHOLDING THE LIEN. Administrative Agent may, upon at least 5 days' prior notice to Borrowers, (i) appear in and defend any action or proceeding, in the name and on behalf of Administrative Agent, Lenders or any Borrower, in which Administrative Agent or any Lender is named or which Administrative Agent in its sole discretion determines is reasonably likely to materially adversely affect any Mortgaged Property, any other Collateral, any Mortgage, the Lien thereof or any other Credit Document and (ii) institute any action or proceeding which Administrative Agent reasonably determines should be instituted to protect the interest or rights of Administrative Agent and Lenders in any Mortgaged Property or other Collateral or under this Agreement or any other Credit Document. Borrowers, jointly and severally, agree that all reasonable costs and expenses expended or otherwise incurred pursuant to this subsection (including reasonable attorneys' fees and disbursements) by Administrative Agent shall be paid pursuant to subsection 10.2 hereof.
6.12. HIGH YIELD NOTES.
Company shall obtain no later than three months after the Closing Date, ratings of the High Yield Notes from S&P and/or Moody's; provided, however, that if such ratings shall not have been obtained by such date solely due to inaction or a refusal to act by any such rating agency that is, in either case, beyond the control of Borrowers (as determined in the reasonable judgment of Administrative Agent), Borrowers shall not be in breach of this subsection 6.12 so long as Borrowers shall take all steps Administrative Agent reasonably requests from time to time to obtain such ratings.
6.13. MOST FAVORED NATIONS PAYMENTS.
Company shall, and shall cause each of its Subsidiaries to, extend any fees or pricing increases, to the extent such fees or pricing increases are the direct obligation of Company or its Subsidiaries, resulting from the amendment, waiver or modification, after the Closing Date, of the Detroit L/C Facility Documents, on an equivalent basis (based in the case of fees on the respective amounts of Letter of Credit Exposure outstanding (on one hand) and the credit exposure under the Detroit L/C Facility Documents (on the other hand)) to the Lenders regardless of whether a particular Lender has participated in or consented to a corresponding amendment, waiver or modification (if any) of the Credit Documents, and any such payment of equivalent fees shall be paid in cash concurrently with the fees giving rise to such equivalent fees.
6.14. MONTGOMERY CLOSING DATE LETTER OF CREDIT CANCELLATION.
No later than 20 Business Days after Company receives a rating with respect to its senior debt and subordinated debt of at least "BBB" from S&P and at least "Baa" from Moody's, Company shall cause the Montgomery Closing Date Letter of Credit to be returned undrawn to Company for cancellation; provided, however, that if Company is unable to obtain the return of the Montgomery Closing Date Letter of Credit by such date as a result of inaction or refusal by the beneficiary of the Montgomery Closing Date Letter of Credit, Borrowers shall not be in breach of this subsection 6.14 so long as Borrowers shall prior thereto or promptly thereafter initiate appropriate Proceedings with appropriate Government Authorities to obtain the return of the Montgomery Closing Date Letter of Credit.
Section 7. BORROWERS' NEGATIVE COVENANTS
Borrowers covenant and agree that, so long as any of the Commitments hereunder shall remain in effect and until payment in full of all Obligations and the cancellation or expiration of all Letters of Credit, unless Requisite Lenders shall otherwise give prior written consent, Borrowers shall perform, and shall cause each of their Subsidiaries to perform, all covenants in this Section 7.
7.1. INDEBTEDNESS.
Borrowers shall not, and shall not permit their respective Subsidiaries to, directly or indirectly, create, incur or assume, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except:
(i) Borrowers may become and remain liable with respect to the Obligations and Indebtedness under the Detroit L/C Facility Documents, the High Yield Notes, the Tax Note and the Unsecured Creditor Notes, and Subsidiaries of Borrowers may become and remain liable with respect to Indebtedness under the Tax Note;
(ii) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations and Performance Guaranties permitted by subsection 7.4 and, upon any matured obligations actually arising pursuant thereto, any Indebtedness created as a result thereof;
(iii) Borrowers may become and remain liable with respect to Indebtedness to any other Borrowers; provided, that all such intercompany Indebtedness shall be evidenced by the Intercompany Master Note;
(iv) Subsidiaries of Company other than Borrowers may, after the Closing Date, become and remain liable with respect to Indebtedness to Company or any Subsidiary of Company so long as the proceeds of such Indebtedness are applied to working capital, capital expenditure, maintenance, operation, payroll and other liquidity requirements in the ordinary course of business of the Subsidiaries incurring such Indebtedness; provided, that (a) no such Indebtedness may be incurred at any time that Borrowers shall not be in compliance with subsection 7.6E, (b) no such Indebtedness may be incurred to make capital expenditures if after giving effect to such expenditures Borrowers would not be in pro forma compliance with subsection 7.6F, and (c) all such intercompany Indebtedness shall be evidenced by the Intercompany Master Note;
(v) Subsidiaries of Company may, after the Closing Date, become and remain liable with respect to Indebtedness to Company or any Subsidiary of Company the proceeds of which are applied to Development Expenses; provided, that Development Expenses for all Projects of Company's Subsidiaries at any time after the Closing Date, net of any such Development Expenses that have theretofore been reimbursed after the Closing Date by the client of the relevant Project, shall not exceed on any date of determination an amount equal to (a) $3,000,000 plus (b) the product of $3,000,000 multiplied by the number of Fiscal Years that have commenced following January 31, 2004 but prior to such date of determination; and provided, further, that all such intercompany Indebtedness shall be evidenced by the Intercompany Master Note;
(vi) Company and its Subsidiaries, as applicable, may remain liable with respect to Indebtedness outstanding on the Closing Date and described in Schedule 7.1(vi) annexed hereto;
(vii) Subsidiaries of Company may become and remain liable with respect to Indebtedness to Company or any of its Subsidiaries the proceeds of which are applied to make Expansions permitted under subsection 7.3(vi) or 7.3(vii); provided, that all such intercompany Indebtedness shall be evidenced by the Intercompany Master Note;
(viii) Subsidiaries of Company may become and remain liable with respect to Indebtedness consisting of a converted equity Investment by Company or another Subsidiary of Company in such Subsidiaries, provided, that the underlying equity Investment was permitted under this Agreement at the time of such conversion;
(ix) Company and its Subsidiaries may become and remain liable with respect to Indebtedness under (a) Capital Leases in existence as of the Closing Date and described in Schedule 7.1(ix) and (b) Capital Leases entered into after the Closing Date, so long as the aggregate amount of Indebtedness outstanding at any time with respect to Capital Leases under clause (b) of this subsection 7.1(ix) shall not exceed $5,000,000;
(x) Company or any Subsidiary of Company may become and remain liable with respect to Indebtedness incurred to refinance, replace, renew or extend, in whole or in part, Indebtedness of such Person permitted to remain outstanding under subsection 7.1(vi); provided, that in each case (a) the terms (excluding the interest rate and fees payable with respect thereto, so long as such interest and fees on such Indebtedness are not borne directly or indirectly by Company or any of its Subsidiaries, whether through an offset to or deduction against service or operating agreement fees to Company or its Subsidiaries or otherwise) of such Indebtedness as refinanced, replaced, renewed or extended, taken as a whole (considering the economic benefits and disadvantages to Company and its Subsidiaries from such refinancing, replacement, renewal, or extension, as well as the economic benefits and disadvantages to Company and its Subsidiaries of the Project to which such Indebtedness relates), shall not be more disadvantageous in any material respect to Company and its Subsidiaries and the Lenders than the Indebtedness so refinanced, replaced, renewed or extended, (b) the principal amount of the Indebtedness as refinanced, replaced, renewed or extended shall not exceed 110% of the principal amount of the Indebtedness so refinanced, replaced, renewed or extended (provided, that such limitation shall not apply with respect to Indebtedness that an existing client (if such client is a Government Authority) of a Project undertakes to service through the principal lease, service or operating agreement of the applicable Project), (c) no obligee or beneficiary of such Indebtedness after such refinancing, replacement, renewal or extension shall have greater recourse to Persons for the payment or collection of such Indebtedness than the obligee or beneficiary of the Indebtedness so refinanced, replaced, renewed or extended had immediately prior to such transaction
and (d) Company shall provide to Administrative Agent reasonable prior advance written notice of such proposed refinancing, replacement, renewal or extension and copies of all material contracts or other agreements being entered into in connection therewith;
(xi) Subsidiaries of Company that are obligated with respect
to Limited Recourse Debt on the Closing Date relating to
waste-to-energy Projects may, after the Closing Date, become and remain
liable with respect to Limited Recourse Debt relating to such
waste-to-energy Projects, so long as (a) all or substantially all the
proceeds of such Limited Recourse Debt are applied to Expansions of
such waste-to-energy Projects permitted under subsection 7.3(vii) or to
ensure compliance with applicable laws and regulatory requirements and
(b) the incurrence by such Subsidiary of such Limited Recourse Debt is
required by the existing client (if such client is a Government
Authority) of the relevant Project and Company shall have delivered to
Administrative Agent an Officer's Certificate to the foregoing effect;
provided, that after the occurrence and during the continuation of an
Event of Default, neither Company nor any of its Subsidiaries shall
enter into a contractual commitment to incur any such Limited Recourse
Debt;
(xii) Company may become and remain liable with respect to Indebtedness consisting solely of its obligations under Insurance Premium Financing Arrangements, which obligations shall not exceed at any time $30,000,000 in the aggregate;
(xiii) Borrowers may become and remain liable with respect to Indebtedness incurred to refinance, replace, defease, renew or extend, in whole or in part, the High Yield Notes issued on the Closing Date; provided, that (a) the fees, interest rates and pricing terms of such Indebtedness as refinanced, replaced, defeased, renewed or extended, taken as a whole (considering any extension of the term of such Indebtedness), shall not be more disadvantageous to Company and its Subsidiaries and the Lenders (in a manner deemed material by Administrative Agent) than the High Yield Notes so refinanced, replaced, defeased, renewed or extended, (b) no scheduled installment of principal shall be required on earlier dates than the maturity date of the High Yield Notes so refinanced, replaced, defeased, renewed or extended, (c) the other terms (including the redemption and repayment terms, representations and warranties, covenants and events of default) of such Indebtedness as refinanced, replaced, defeased, renewed or extended, taken as a whole, shall not be more disadvantageous to Company and its Subsidiaries and the Lenders (in a manner deemed material by Administrative Agent) than the High Yield Notes so refinanced, replaced, defeased, renewed or extended, (d) the principal amount of the Indebtedness as refinanced, replaced, defeased, renewed or extended shall not exceed the sum of (1) 110% of the principal amount of the Indebtedness so refinanced, replaced, defeased, renewed or extended, (2) interest accrued and unpaid on such principal amount immediately prior to such refinancing, replacement, defeasance, renewal or extension, and (3) premiums required to be paid upon such refinancing, replacement, defeasance, renewal or extension pursuant to the documentation for the High Yield
Notes so refinanced, replaced, defeased, renewed or extended, (e) the obligations under (and the Liens securing) such Indebtedness as refinanced, replaced, defeased, renewed or extended shall be subject to the Intercreditor Agreement on terms substantively identical to the terms applicable to the High Yield Notes refinanced, replaced, defeased, renewed or extended thereby, and (f) Company shall provide to Administrative Agent reasonable prior advance written notice of such proposed refinancing, replacement, defeasance, renewal or extension and copies of all material contracts or other agreements being entered into in connection therewith;
(xiv) Company may become and remain liable with respect to Subordinated Indebtedness to Persons other than Company and its Subsidiaries in an aggregate amount at any time outstanding not to exceed $10,000,000; provided, that (a) such Indebtedness shall be unsecured and unguarantied, (b) no cash interest or cash principal payments shall be required on such Indebtedness until the Obligations are paid in full, (c) the interest rates maturities, amortization schedules covenants defaults, remedies, subordination provisions and other terms of such Indebtedness are satisfactory to Administrative Agent and Requisite Lenders, (d) the proceeds of such Indebtedness shall not be applied to any purpose prohibited under this Agreement, and (e) after giving effect to the incurrence of such Indebtedness, Borrowers shall be in pro forma compliance with subsection 7.6B;
(xv) Bankrupt Subsidiaries may become and remain liable under intercompany loans by Company and its Subsidiaries (other than Bankrupt Subsidiaries) to such Bankrupt Subsidiaries to the extent such loans are permitted under subsection 7.3(xi);
(xvi) CEA may become and remain liable with respect to Indebtedness under the CPIH Stock Pledge Agreement;
(xvii) Company and its Subsidiaries may become and remain liable with respect to their obligations to pay for services rendered by DHC to them under and in accordance with the Corporate Services Reimbursement Agreement; and
(xviii) Company and its Subsidiaries may become and remain liable with respect to other unsecured Indebtedness in an aggregate amount at any time outstanding not to exceed $7,500,000.
7.2. LIENS AND RELATED MATTERS.
A. PROHIBITION ON LIENS. Borrowers shall not, and shall not permit their respective Subsidiaries to, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset of any kind (including any document or instrument in respect of goods or accounts receivable) of Borrowers or any of their respective Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom, or file or authorize the filing of, or permit to remain in effect, any effective financing
statement or other similar notice of any Lien with respect to any such property, asset, income or profits under the UCC or under any similar recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens granted pursuant to the Collateral Documents to secure the Obligations, the obligations of Borrowers under the Detroit L/C Facility Documents, the obligations under the High Yield Notes and the obligations to the cash management bank with respect to the Cash Management System;
(iii) Liens existing on the Closing Date and described in Schedule 7.2 annexed hereto;
(iv) Liens on assets of any Subsidiary of Company and/or on the stock or other equity interests of such Subsidiary, in each case to the extent such Liens secure Limited Recourse Debt of such Subsidiary permitted by subsection 7.1(xi);
(v) Liens on assets of Company or any Subsidiary of Company securing refinancing Indebtedness permitted by subsection 7.1(x), provided, that in each case the Liens securing such refinancing Indebtedness shall attach only to the assets that were subject to Liens securing the Indebtedness so refinanced and, if applicable, assets the acquisition of which was financed with the proceeds of such refinancing Indebtedness permitted by subsection 7.1(x);
(vi) Liens securing debt service reserve funds, completion obligations and similar accounts and obligations (other than Indebtedness) of Subsidiaries of Company to Persons other than Company and its Subsidiaries and their respective Affiliates, so long as (a) each such obligation is associated with a Project, (b) such Lien is limited to (1) assets associated with such Project (which in any event shall not include assets held by any Borrower other than a Borrower whose sole business is the ownership and/or operation of such Project and substantially all of whose assets are associated with such Project) and/or (2) the equity interests in such Subsidiary, but in the case of clause (2) only if such Subsidiary's sole business is the ownership and/or operation of such Project and substantially all of such Subsidiary's assets are associated with such Project, and (c) such obligation is otherwise permitted under this Agreement;
(vii) Liens on cash collateral of Subsidiaries of Company securing Contingent Obligations permitted under subsection 7.4(ix), so long as such cash is provided from funds that would not otherwise be available (due to prohibitions in the underlying agreements relating to Projects) for making dividends and distributions to Company and its other Subsidiaries;
(viii) Liens on cash collateral of Subsidiaries of Company securing Contingent Obligations permitted under subsection 7.4(x), so long as such cash is provided from funds that would not otherwise be available (due to prohibitions in the
underlying agreements relating to Projects) for making dividends and distributions to Company and its other Subsidiaries;
(ix) Liens on cash collateral of Company and its Subsidiaries securing Contingent Obligations permitted under subsection 7.4(xi);
(x) Liens created pursuant to Insurance Premium Financing Arrangements otherwise permitted under this Agreement, so long as such Liens attach only to gross unearned premiums for the insurance policies;
(xi) Liens on cash collateral of Company securing insurance deductibles or self-insurance retentions required by third party insurers in connection with insurance arrangements entered into by Company and its Subsidiaries with such insurers in compliance with subsection 6.4B;
(xii) Liens on all or substantially all of the assets of the Bankrupt Subsidiaries to the extent such Liens secure the obligations of such Bankrupt Subsidiaries under loans made to them and permitted under subsection 7.3(xi);
(xiii) Liens securing Indebtedness permitted under subsection 7.1(ix)(b), so long as such Liens extend only to the assets subject to the relevant Capital Lease;
(xiv) Liens on the Capital Stock of CPIH pledged by CEA under the CPIH Stock Pledge Agreement; and
(xv) Other Liens on assets of any Subsidiary of Company securing Indebtedness in an aggregate amount not exceeding $2,500,000.
B. EQUITABLE LIEN IN FAVOR OF LENDERS. If any Borrowers or any of its Subsidiaries shall create or assume any Lien upon any of its properties or assets, whether now owned or hereafter acquired, other than Liens excepted by the provisions of subsection 7.2A and Liens created or assumed on properties or assets on which First Priority Liens created under the Collateral Documents are attached and perfected at the time of such creation or assumption, the Borrowers hereby agree that (i) they will be deemed to have automatically and without further action secured the Obligations with such Lien equally and ratably with any and all other Indebtedness, Contingent Obligations or any other obligations or debt (as defined in the Bankruptcy Code) secured thereby, and (ii) they shall take or cause to be taken such actions as Administrative Agent or Requisite Lenders deem necessary or advisable to evidence such equal and ratable Lien; provided, that notwithstanding the foregoing, this covenant shall not be construed as a consent by Requisite Lenders to the creation or assumption of any such Lien not permitted by the provisions of subsection 7.2A, and the creation or assumption of any such Lien not permitted by the provisions of subsection 7.2A shall constitute an Event of Default.
C. NO FURTHER NEGATIVE PLEDGES. Neither Company nor any of its Subsidiaries shall enter into any agreement (other than this Agreement, the Credit Documents, the Detroit L/C Facility Documents and the High Yield Indenture) on or after
the Closing Date prohibiting the creation or assumption of any Lien upon any of its properties or assets, whether now owned or hereafter acquired, except with respect to (i) specific property encumbered by a Lien permitted hereunder to secure payment of particular Indebtedness permitted to be incurred under subsection 7.1(vii), 7.1(x) (but only to the extent that the Indebtedness being refinanced was subject to a negative pledge on the same assets), 7.1(xi) or 7.1(xii) or a Lien permitted under subsection 7.2A(vi), 7.2A(vii), 7.2A(viii), 7.2A(ix), 7.2A(xi), 7.2A(xii) or 7.2A(xiv), or by a Lien permitted under subsection 7.2A(xv) to the extent such Lien secures obligations permitted hereunder that are incurred to finance the acquisition of such specific property, (ii) specific property to be sold pursuant to an executed agreement with respect to an Asset Sale which is permitted hereunder, (iii) specific property that is leased pursuant to a lease permitted hereunder, (iv) provisions in the principal lease, service and operating agreements pertaining to Projects or the partnership and financing agreements relating to Projects, so long as in each case such lease, service, operating, partnership or financing agreement is an extension, renewal or replacement of such agreement in effect as of the Closing Date, is otherwise permitted to be entered into hereunder and contains no more restrictive provisions relating to prohibiting the creation or assumption of any Lien upon the properties or assets of the relevant Subsidiary than the lease, service, operating, partnership or financing agreement so extended, renewed or replaced, and (v) provisions contained in any Detroit L/C Facility Agreement described in and permitted under clause (ii) of the definition of Detroit L/C Facility Agreement.
D. NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO COMPANY OR
OTHER SUBSIDIARIES. Company will not, and will not permit any of its
Subsidiaries to, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any such Subsidiary to (i) pay dividends or make any other distributions on
any of such Subsidiary's capital stock owned by Company or any other Subsidiary
of Company, (ii) repay or prepay any Indebtedness owed by such Subsidiary to
Company or any other Subsidiary of Company, (iii) make loans or advances to
Company or any other Subsidiary of Company, or (iv) transfer any of its property
or assets to Company or any other Subsidiary of Company, except (a) as provided
in this Agreement or the other Credit Documents, (b) those encumbrances or
restrictions applicable to Subsidiaries of Company to the extent created under
documentation in existence on the Closing Date, under the Detroit L/C Facility
Documents or under the High Yield Indenture, (c) as may be provided in an
executed agreement with respect to an Asset Sale which is permitted hereunder,
and (d) provisions in the principal lease, service or operating agreements,
partnership agreements and financing agreements pertaining to Projects, so long
as such lease, service or operating agreements, partnership agreements and
financing agreements are extensions, renewals or replacements of such agreements
in effect as of the Closing Date, are otherwise permitted to be entered into
hereunder and in each case contain no more restrictive provisions relating to
the ability of the relevant Subsidiary to take the actions described in clauses
(i) through (iv) than the agreement so extended, renewed or replaced.
7.3. INVESTMENTS; ACQUISITIONS.
Borrowers shall not, and shall not permit their respective Subsidiaries to, directly or indirectly, make or own any Investment in any Person, including any Joint
Venture, or acquire, by purchase or otherwise, all or substantially all the business, property or fixed assets of, or capital stock or other ownership interest of any Person, or any division or line of business of any Person except:
(i) Company and its Subsidiaries may make and own Investments in Domestic Cash Equivalents and in such investments as are permitted or imposed under the terms of any cash collateral or debt service reserve agreement (including pursuant to the terms of any Project bond indenture) permitted hereunder;
(ii) Borrowers may make and own additional equity Investments in other Borrowers, so long as no such Investment shall be made by one Borrower in another Borrower if (a) the latter is subject to restrictions of the type described in subsection 7.2D more adverse than restrictions of such type that are applicable to the Borrower making such Investment, or (b) such Investment shall result in the obligee or beneficiary of any Indebtedness or Contingent Obligation (other than the Obligations) having greater recourse to assets for the payment or collection of such Indebtedness or Contingent Obligation than such obligee or beneficiary had immediately prior to such Investment; and Subsidiaries that are not Borrowers may make and own additional equity Investments in Borrowers other than Company, so long as no such Investment shall be made if (a) the applicable Subsidiary is subject to restrictions of the type described in subsection 7.2D more adverse than restrictions of such type that are applicable to the applicable Borrower, (b) such Investment shall result in the obligee or beneficiary of any Indebtedness or Contingent Obligation (other than the Obligations) of such Subsidiary having greater recourse to assets for the payment or collection of such Indebtedness or Contingent Obligation than such obligee or beneficiary had immediately prior to such Investment, or (c) such Investment shall have any adverse effect on the Collateral for the Obligations;
(iii) Company and its Subsidiaries may make intercompany loans to the extent permitted under subsections 7.1(iii) and 7.1(vii);
(iv) Company and its Subsidiaries may make Consolidated Facilities Capital Expenditures permitted by subsection 7.6;
(v) Company and its Subsidiaries may continue to own the Investments owned by them on the Closing Date and described in Schedule 7.3(v) annexed hereto;
(vi) Company and its Subsidiaries may make Expansions which Company and its Subsidiaries are committed as of the Closing Date to make in those waste-to-energy Projects set forth in Schedule 7.3(vi) annexed hereto; provided, that each such Investment (or commitment to make the same) made in connection with such Projects shall be of a type described on such Schedule and shall be in an amount not exceeding the amount set forth on such Schedule;
(vii) Company and its Subsidiaries may make Expansions (and may enter into contractual commitments to make such Investments) with respect to existing
waste-to-energy Projects to the extent such Expansions are publicly
financed, so long as (a) Company shall provide to Administrative Agent
reasonable prior advance written notice of each such Investment and
Expansion and copies of all material contracts or other agreements
being entered into in connection with such Investment and Expansion,
(b) such Expansion is not otherwise prohibited under this Agreement,
(c) such Expansions are required by the existing client (if such client
is a Government Authority) of the relevant Project and the amounts
required therefor are advanced to Company and its Subsidiaries or paid
directly by such client, and (d) such Investment (or such contractual
commitment, as the case may be) shall not breach any other provision of
this Agreement; provided, that after the occurrence and during the
continuation of an Event of Default, neither Company nor any of its
Subsidiaries shall enter into a contractual commitment for any such
Investment;
(viii) Company and its Subsidiaries may, after the Closing Date, make and own Investments in any other Subsidiary of Company (to the extent in existence on the Closing Date) the proceeds of which are applied to working capital, maintenance, operation, payroll and other liquidity requirements in the ordinary course of business of Subsidiaries other than Borrowers; provided, that no such Investment may be made at any time that Borrowers shall not be in compliance with subsection 7.6E;
(ix) Company and its Subsidiaries may, after the Closing Date, make and own Investments in any other Subsidiary of Company (to the extent in existence on the Closing Date) the proceeds of which are applied to Development Expenses; provided, that Development Expenses for all Projects of Company's Subsidiaries at any time after the Closing Date, net of any such Development Expenses that have theretofore been reimbursed after the Closing Date by the client of the relevant Project, shall not exceed on any date of determination an amount equal to (a) $3,000,000 plus (b) the product of $3,000,000 multiplied by the number of Fiscal Years that have commenced following January 31, 2004 but prior to such date of determination;
(x) Borrowers and their Subsidiaries may own Investments in the form of non-cash consideration received in connection with (a) Asset Sales permitted under subsection 7.7(iii) or 7.7(iv) or (b) settlements of disputes, to the extent such settlements occur in the ordinary course of business;
(xi) Company and its Subsidiaries may make Investments after the Closing Date consisting of intercompany loans to the Bankrupt Subsidiaries, so long as (a) the proceeds of such loans are applied to working capital, maintenance, operation, payroll and other liquidity requirements in the ordinary course of business of such Bankrupt Subsidiaries, (b) the aggregate amount of such intercompany loans outstanding to the Bankrupt Subsidiaries at any time shall not exceed $2,000,000, (c) such loans shall have, pursuant to an order of the Bankruptcy Court in form and substance satisfactory to Administrative Agent, no less favorable payment priority and lien priority than the payment priority and lien priority of such Bankrupt Subsidiaries' obligations under the DIP Credit Agreement immediately prior to the Closing Date, and shall be secured by
substantially the same assets of such Bankrupt Subsidiary as such obligations under the DIP Credit Agreement immediately prior to the Closing Date, and (d) such loans shall be evidenced by promissory notes that shall be pledged to secure the Obligations;
(xii) Borrowers may make payments to the extent contractually obligated pursuant to the terms of the Existing IPP International Project Guaranties;
(xiii) Subject to the Intercreditor Agreement, Borrowers may reimburse drawings made under Letters of Credit issued hereunder that support obligations with respect to the IPP International Business; and
(xiv) CEA may make payments on account of Indebtedness of CPIH to the extent such payments are made solely from the proceeds of sales of Capital Stock of CPIH.
7.4. CONTINGENT OBLIGATIONS; PERFORMANCE GUARANTIES.
Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create or become or remain liable with respect to any Contingent Obligation or Performance Guaranty, and shall not create or become or remain liable with respect to any obligation to incur a subsequent Contingent Obligation or to post cash collateral to secure any obligation, except:
(i) Borrowers may become and remain liable (a) with respect to Contingent Obligations in respect of the Obligations and under the Credit Documents, (b) with respect to Contingent Obligations under guarantees of the High Yield Notes, and (c) with respect to Contingent Obligations under the Detroit L/C Facility Documents and the CPIH Stock Pledge Agreement;
(ii) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations in respect of Letters of Credit;
(iii) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations in respect of customary and appropriate indemnification and purchase price adjustment obligations incurred in connection with Asset Sales or other sales of assets to the extent such Asset Sales and sales are permitted under this Agreement;
(iv) Company and its Subsidiaries may become and remain liable with respect to (a) Performance Guaranties in existence on the Closing Date and described on Schedule 7.4(iv) annexed hereto, (b) Performance Guaranties replacing, renewing or extending Performance Guaranties described in clause (a), and (c) Performance Guaranties entered into in connection with a Bankrupt Subsidiary ceasing to be a Bankrupt Subsidiary, for the purpose of replacing a Performance Guaranty relating to such Bankrupt Subsidiary that was in effect immediately prior to the Closing Date but was terminated on the Closing Date, so long as no Persons enter into any such
replacement Performance Guaranty as obligors other than the obligors under the Performance Guaranty being so replaced; provided, that no such replacement, renewed or extended Performance Guaranty referred to in clause (b) or (c) (x) taken as a whole (considering the economic benefits and disadvantages to Company and its Subsidiaries from such replacement, renewal or extension, as well as the economic benefits and disadvantages to Company and its Subsidiaries of the Project to which such Performance Guaranty relates), shall be more disadvantageous in any material respect to Company and its Subsidiaries than the Performance Guaranty so replaced, renewed or extended or (y) shall be secured or guarantied;
(v) Company and its Subsidiaries may become and remain liable with respect to Performance Guaranties or Contingent Obligations supporting Expansions of waste-to-energy Projects permitted pursuant to subsection 7.3(vii), provided, that (a) the terms of any such Performance Guaranty or Contingent Obligation shall be generally consistent with past practice of Company and its Subsidiaries, (b) in no event shall any such Performance Guaranty or Contingent Obligation be secured by collateral, (c) no Borrower or Subsidiary other than a Person already liable under a substantially similar Contingent Obligation with respect to such Project shall become liable under any such Contingent Obligation, (d) no Borrower or Subsidiary other than a Person already liable under a substantially similar Performance Guaranty with respect to such Project shall become liable under any such Performance Guaranty, and (e) after the occurrence and during the continuation of an Event of Default, neither Company nor any if its Subsidiaries shall enter into any such Performance Guaranty or Contingent Obligation or enter into a contractual commitment to provide any such Performance Guaranty or Contingent Obligation;
(vi) Company and its Subsidiaries, as applicable, may become
and remain liable with respect to (a) Contingent Obligations (other
than the Existing IPP International Project Guaranties) in existence on
the Closing Date and described in Schedule 7.4(vi) annexed hereto, and
(b) Contingent Obligations replacing, renewing or extending Contingent
Obligations described in clause (a); provided, that no such
replacement, renewed or extended Contingent Obligation, taken as a
whole, shall be more disadvantageous in any material respect to Company
and its Subsidiaries than the Contingent Obligations so replaced,
renewed or extended;
(vii) Company and its Subsidiaries may become and remain liable with respect to usual and customary Contingent Obligations incurred in connection with arrangements made with third parties to obtain surety bonds, bid bonds and other similar security required to be delivered or posted in connection with (i) additions or improvements to existing facilities to increase the capacity, efficiency, performance or profitability of the applicable Project, so long as such additions or improvements are not Expansions, are required pursuant to binding Contractual Obligations of Company or its Subsidiaries and are in compliance with subsection 7.6F, and (ii) Expansions of existing Projects, to the extent such Expansions are otherwise permitted under subsection 7.3(vii) and the other provisions of this Agreement;
(viii) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations which Company and its Subsidiaries are contractually committed as of the Closing Date to incur with respect to those Projects set forth on Schedule 7.3(vi) annexed hereto; provided, that each such Contingent Obligation (or commitment to incur the same) incurred in connection with such Projects shall be of a type described on such Schedule and shall be in an amount not exceeding the amount set forth on such Schedule;
(ix) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations consisting of long-term or forward purchase contracts and option contracts to buy, sell or exchange commodities and similar agreements or arrangements, so long as such contracts, agreements or arrangements do not constitute Commodities Agreements;
(x) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations constituting Hedge Agreements;
(xi) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations incurred in exchange (or in consideration) for (a) the release of cash collateral pledged by Company or its Subsidiaries or (b) the return and cancellation of undrawn letters of credit for which Company or its Subsidiaries are liable for reimbursement; provided, that in each case the maximum amount of the Contingent Obligations so incurred shall not exceed 110% of the amount of cash collateral released or the face amount of the letters of credit returned and cancelled, as the case may be;
(xii) Company and its Subsidiaries may become and remain liable with respect to usual and customary Contingent Obligations incurred in connection with insurance deductibles or self-insurance retentions required by third party insurers in connection with insurance arrangements entered into by Company and its Subsidiaries with such insurers in compliance with subsection 6.4B; and
(xiii) Company and its Subsidiaries, as applicable, may remain liable with respect to the Existing IPP International Project Guaranties, as such guaranties are in effect on the Closing Date.
7.5. RESTRICTED PAYMENTS.
Borrowers shall not, and shall not permit their respective Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum for any Restricted Payment; provided, however, that (i) so long as no Event of Default shall have occurred and be continuing, Borrowers may make regularly scheduled payments of principal and interest in respect of any Subordinated Indebtedness (other than the Tax Note) in accordance with the terms of, and only to the extent required by, and subject to the subordination provisions contained in, the indenture or other agreement pursuant to which such Subordinated Indebtedness was issued, as such indenture or other agreement may be amended from time to
time to the extent permitted under subsection 7.12, provided, that so long as Borrowers may elect to pay all or any portion of such interest in kind rather than in cash, Borrowers shall elect to pay in kind the maximum portion of such interest with respect to which Borrowers can make such election; (ii) Company and its Subsidiaries may make payments of principal, interest and other amounts in respect of the Tax Note and Indebtedness permitted under subsections 7.1(vi), 7.1(ix), 7.1(x), 7.1(xi), 7.1(xii), 7.1(xiv) and 7.1(xviii), in accordance with the terms of, and only to the extent required by, the Tax Note or the indentures or other agreements pursuant to which such Indebtedness was issued, as the case may be, as such Tax Note, indentures or other agreements may be amended from time to time to the extent permitted hereunder, provided, however, that during the continuance of an Event of Default, notwithstanding anything to the contrary in this Agreement, neither Company nor any Subsidiary shall fund, contribute or otherwise advance amounts for payment of Indebtedness permitted under subsections 7.1(vi), 7.1(x) and 7.1(xi) related to Projects unless it has an irrevocable Contractual Obligation to make such payments; (iii) so long as no Event of Default shall have occurred and be continuing, Subsidiaries of Company may, at the time Indebtedness is refinanced or replaced as permitted under subsection 7.1 by other Indebtedness permitted under such subsection, pay principal, accrued interest and other amounts owing on such refinanced Indebtedness at such time, provided, that such payments may be made with respect to Limited Recourse Debt during the continuance of an Event of Default so long as such payments are from the proceeds of Limited Recourse Debt permitted to be incurred hereunder and such proceeds are required to be applied to make such payments under a binding Contractual Obligation to a third party; (iv) Company and its Subsidiaries may pay any fees required to be paid to Administrative Agent and Lenders hereunder; (v) so long as no failure to pay any amount when due shall have occurred and be continuing under this Agreement, Company may make payments to DHC to the extent required under the Corporate Services Reimbursement Agreement; (vi) Company and its Subsidiaries may make payments required under the DHC Tax Sharing Agreement; (vii) Company and its Subsidiaries may make payments to Persons in accordance with the Approved Plan of Reorganization to the extent such payments are made from funds held in reserves established pursuant to the Approved Plan of Reorganization, provided, that Borrowers shall not, and shall not permit their respective Subsidiaries to, deposit any amounts in such reserves in excess of the amounts established prior to the Closing Date pursuant to the Approved Plan of Reorganization and (viii) Company and its Subsidiaries may apply cash in an amount not exceeding, in the aggregate, 105% of the stated amount of the Greenway L/C to cash collateralize or otherwise support the Greenway L/C as contemplated under subsection 4.1F(i)(d) and/or to reimburse drawings thereunder.
In addition, in any case where a Borrower or Subsidiary is a Joint Venture, Borrowers shall not, and shall not permit their respective Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum for (a) any dividend or other distribution, direct or indirect, on account of any shares of Capital Stock of such Joint Venture held by Persons other than Borrowers or any Subsidiaries of Borrowers, except a dividend payable solely in shares of that class of stock to the holders of that class, (b) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of Capital Stock of such Joint Venture held by Persons
other than Borrowers or any Subsidiaries of Borrowers, or (c) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of Capital Stock of such Joint Venture held by Persons other than Borrowers or any Subsidiaries of Borrowers, except in each case to the extent the relevant action described in clause (a), (b) or (c) is required pursuant to a binding Contractual Obligation in effect as of the Closing Date or pursuant to an extension, renewal or replacement of such a Contractual Obligation so long as such extension, renewal or replacement is otherwise permitted to be entered into hereunder and contains provisions no less favorable to Company and its Subsidiaries than the relevant Contractual Obligations so extended, renewed or replaced.
7.6. FINANCIAL COVENANTS.
A. MINIMUM INTEREST COVERAGE RATIO. Company shall not permit the ratio of (i) Adjusted EBITDA to (ii) Consolidated Cash Interest Expense, in each case for any four-Fiscal Quarter period ending at the end of any Fiscal Quarter set forth below, to be less than the correlative ratio indicated:
MINIMUM INTEREST
FISCAL QUARTER COVERAGE RATIO
---------------- ----------------
FQ2 2004 1.15:1.00
FQ3 2004 1.15:1.00
FQ4 2004 1.15:1.00
FQ1 2005 1.15:1.00
FQ2 2005 1.20:1.00
FQ3 2005 1.20:1.00
FQ4 2005 1.25:1.00
FQ1 2006 1.25:1.00
FQ2 2006 1.30:1.00
FQ3 2006 1.30:1.00
FQ4 2006 1.30:1.00
FQ1 2007 1.30:1.00
FQ2 2007 1.35:1.00
FQ3 2007 1.35:1.00
FQ4 2007 1.35:1.00
FQ1 2008 1.35:1.00
FQ2 2008 1.40:1.00
FQ3 2008 1.40:1.00
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MINIMUM INTEREST
FISCAL QUARTER COVERAGE RATIO
---------------- ----------------
FQ4 2008 and thereafter 1.40:1.00
|
B. MAXIMUM CONSOLIDATED LEVERAGE RATIO. Company shall not permit the Consolidated Leverage Ratio as at any date on or after the end of the most recently ended Fiscal Quarter set forth in the table below to exceed the correlative ratio indicated:
MAXIMUM CONSOLIDATED
FISCAL QUARTER LEVERAGE RATIO
---------------- --------------------
FQ2 2004 7.00:1.00
FQ3 2004 7.00:1.00
FQ4 2004 7.00:1.00
FQ1 2005 7.00:1.00
FQ2 2005 6.75:1.00
FQ3 2005 6.75:1.00
FQ4 2005 6.50:1.00
FQ1 2006 6.50:1.00
FQ2 2006 6.25:1.00
FQ3 2006 6.25:1.00
FQ4 2006 6.25:1.00
FQ1 2007 6.25:1.00
FQ2 2007 6.00:1.00
FQ3 2007 6.00:1.00
FQ4 2007 6.00:1.00
FQ1 2008 6.00:1.00
FQ2 2008 5.75:1.00
FQ3 2008 5.75:1.00
FQ4 2008 and thereafter 5.75:1.00
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C. MINIMUM CONSOLIDATED NET WORTH. Company shall not permit Consolidated Net Worth on any date of determination after the Closing Date to be less than (i) Consolidated Net Worth as of the Closing Date, if such date of determination occurs during 2004, or (ii) the sum of (a) Consolidated Net Worth as of the Closing Date plus (b) the product of $7,000,000 multiplied by the number of Fiscal Quarters that have ended
after December 31, 2004 but prior to such date of determination, if such date of determination occurs after 2004.
D. MINIMUM ADJUSTED EBITDA. Company shall not permit Adjusted EBITDA for any four-Fiscal Quarter period ending at the end of any Fiscal Quarter set forth below to be less than the correlative amount indicated:
MINIMUM ADJUSTED
FISCAL QUARTER EBITDA
-------------- ----------------
FQ2 2004 $40,000,000
FQ3 2004 $40,000,000
FQ4 2004 $40,000,000
FQ1 2005 $40,000,000
FQ2 2005 $40,000,000
FQ3 2005 $40,000,000
FQ4 2005 $45,000,000
FQ1 2006 $45,000,000
FQ2 2006 $45,000,000
FQ3 2006 $45,000,000
FQ4 2006 $45,000,000
FQ1 2007 $45,000,000
FQ2 2007 $45,000,000
FQ3 2007 $45,000,000
FQ4 2007 $45,000,000
FQ1 2008 $45,000,000
FQ2 2008 $45,000,000
FQ3 2008 $45,000,000
FQ4 2008 and thereafter $45,000,000
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E. MINIMUM NON-BORROWER CASH FLOW. Company shall not permit Non-Borrower Cash Flow for any four-Fiscal Quarter period ending at the end of any Fiscal Quarter, to be less than zero.
F. MAXIMUM CONSOLIDATED FACILITIES CAPITAL EXPENDITURES. Borrowers shall not, and shall not permit their respective Subsidiaries to, make or incur Consolidated Facilities Capital Expenditures during any Fiscal Year in excess of the Maximum Consolidated Facilities Capital Expenditures Amount for such Fiscal Year. For purposes of
this subsection 7.6F, the "MAXIMUM CONSOLIDATED FACILITIES CAPITAL EXPENDITURES AMOUNT" for Fiscal Year 2004 shall equal $25,000,000 and for each Fiscal Year thereafter shall equal $20,000,000; provided, however, that the Maximum Consolidated Facilities Capital Expenditures Amount for any Fiscal Year after 2004 shall be increased by an amount equal to 25% of the excess, if any, of the Maximum Consolidated Facilities Capital Expenditures Amount for the previous Fiscal Year (prior to giving effect to this proviso) over the actual amount of Consolidated Facilities Capital Expenditures made or incurred during such previous Fiscal Year; and provided further, however, that Company may elect by written notice to Administrative Agent to increase the Maximum Consolidated Facilities Capital Expenditures Amount for any Fiscal Year by an amount not more than $5,000,000 by decreasing the Maximum Consolidated Facilities Capital Expenditures Amount for the subsequent Fiscal Year by an amount equal to the amount of such increase.
G. CERTAIN CALCULATIONS. Notwithstanding any provision of this
Agreement to the contrary, (i) for purposes of calculating Adjusted EBITDA for
any four-Fiscal Quarter period ending prior to the first Fiscal Quarter of 2005,
Adjusted EBITDA for the third and fourth Fiscal Quarters of 2003 and the first
Fiscal Quarter of 2004 shall be deemed to be equal to the correlative amounts
set forth opposite such Fiscal Quarters on Schedule 7.6G annexed hereto; and
(ii) for purposes of determining compliance with subsection 7.6A for any
four-Fiscal Quarter period ending prior to the last Fiscal Quarter of 2004,
Consolidated Cash Interest Expense shall equal the product of (a) actual
Consolidated Cash Interest Expense during the period from the Closing Date to
the end of such four-Fiscal Quarter period multiplied by (b) the ratio of (1)
365 divided by (2) the number of days in such period; and (iii) for purposes of
determining compliance with each of the covenants in this subsection 7.6, each
of Adjusted EBITDA, Consolidated Cash Interest Expense, Consolidated Net Worth,
Non-Borrower Cash Flow and Consolidated Facilities Capital Expenditures shall
not include any portion thereof attributable to the results of operations or
financial position, as the case may be, of CPIH Subsidiaries for the relevant
period or as of the relevant date of determination.
7.7. RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES.
Borrowers shall not, and shall not permit their respective Subsidiaries to, alter the legal form of organization of Company or any of its Subsidiaries, or enter into any transaction of merger or consolidation, or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor or sublessor), transfer or otherwise dispose of (including by discount or compromise), in one transaction or a series of transactions, all or any part of its business, property or assets (including its notes or receivables and Capital Stock of a Subsidiary, whether newly issued or outstanding) or its interests in or claims against any Project, in each case whether now owned or hereafter acquired, except:
(i) any Borrower may be merged with or into a Borrower, or be liquidated, wound up or dissolved, or all or any part of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of, in one transaction or a series of transactions, to a Borrower; provided, that no such transaction shall result in
the obligee or beneficiary of any Indebtedness or Contingent Obligation (other than the Obligations) having greater recourse to assets or Persons for the payment or collection of such Indebtedness or Contingent Obligation than such obligee or beneficiary had immediately prior to such transaction;
(ii) (a) any Subsidiary of Company that is not a Borrower may
be merged with or into any other Subsidiary of Company that is not a
Borrower, or be liquidated, wound up or dissolved, or all or any part
of its business, property or assets may be conveyed, sold, leased,
transferred or otherwise disposed of, in one transaction or a series of
transactions, to another Subsidiary that is not a Borrower, provided,
that no such transaction shall result in the obligee or beneficiary of
any Indebtedness or Contingent Obligation (other than the Obligations)
having greater recourse to assets or Persons for the payment or
collection of such Indebtedness or Contingent Obligation than such
obligee or beneficiary had immediately prior to such transaction; and
(b) any Immaterial Foreign Subsidiary may be merged with or into any
Borrower, or be liquidated, wound up or dissolved, or all or any part
of its business, property or assets may be conveyed, sold, leased,
transferred or otherwise disposed of, in one transaction or a series of
transactions, to a Borrower, provided, that (1) no such transaction
shall result in the obligee or beneficiary of any Indebtedness or
Contingent Obligation (other than the Obligations) of such Immaterial
Foreign Subsidiary having greater recourse to assets or Persons for the
payment or collection of such Indebtedness or Contingent Obligation
than such obligee or beneficiary had immediately prior to such
transaction and (2) the relevant Borrower shall be a surviving entity
in any such transaction;
(iii) Company and its Subsidiaries may sell or otherwise dispose of assets in transactions that do not constitute Asset Sales; provided, that the consideration received for such assets shall be in an amount at least equal to the fair market value thereof; and
(iv) Company and its Subsidiaries may make Asset Sales,
provided, that (a) the consideration received for such assets shall be
in an amount at least equal to the fair market value thereof; (b) not
less than 90% of the consideration received (other than any
consideration consisting of the assumption of liabilities related to
such assets) in any such Asset Sale shall be cash (it being agreed that
cash the receipt of which may by the relevant terms of such Asset Sale
be deferred more than six months after the date of consummation of such
Asset Sale shall not be considered cash for purposes of this clause
(b)); (c) not more than 10% of the cash consideration received by
Company and its Subsidiaries in any such Asset Sale shall be received
after the date of consummation of such Asset Sale; (d) any Indebtedness
in relation to the assets sold in any such Asset Sale shall be repaid
and the related letters of credit shall be cancelled and returned to
the issuers thereof; (e) the Net Asset Sale Proceeds of such Asset
Sales shall be applied as Mandatory Payments to the extent required
under subsection 2.4A; and (f) in the event that the Net Asset Sale
Proceeds from any Asset Sale, when added to the aggregate Net Asset
Sale Proceeds from all other Asset Sales after the Closing Date, would
exceed $10,000,000, Company and its Subsidiaries
shall not be permitted to consummate such Asset Sale without the prior written consent of Requisite Lenders.
7.8. TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES.
Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any holder of 5% or more of any class of equity Securities of Company or with any Affiliate of Company or of any such holder, on terms that are less favorable to Company or that Subsidiary, as the case may be, than those that might be obtained at the time from Persons who are not such a holder or Affiliate; provided, that the foregoing restriction shall not apply to (i) any Indebtedness permitted under subsection 7.1 among Company and its Subsidiaries or among Subsidiaries of Company, (ii) reasonable and customary salaries and fees paid to current officers and members of the Governing Bodies of Company and its Subsidiaries, provided, that such salary and fee arrangements are entered into at arms' length and on terms that are no less favorable to Company or that Subsidiary, as the case may be, than those that would have been obtained at the relevant time from Persons who are not such a holder or Affiliate, (iii) reasonable and customary indemnifications and insurance arrangements for the benefit of Persons that are officers or members of the Governing Bodies of Company and its Subsidiaries on or after the Closing Date, whether such Persons are current or former officers or members at the time such indemnifications or arrangements are entered into, provided, that such indemnifications and arrangements are entered into at arms' length and on terms that are no less favorable to Company or that Subsidiary, as the case may be, than those that would have been obtained at the relevant time from Persons who are not such a holder or Affiliate, (iv) any employment agreements or benefits arrangements entered into on or after the Closing Date by Company and its Subsidiaries with employees at arms' length and on terms that are no less favorable to Company or that Subsidiary, as the case may be, than those that would have been obtained at the relevant time from Persons who are not such a holder or Affiliate, (v) payments (and other transactions) made in accordance with the terms of the Management Services and Reimbursement Agreement, the DHC Tax Sharing Agreement, the Corporate Services Reimbursement Agreement and the other Related Agreements, (vi) transactions occurring on the Closing Date and described on Schedule 7.8 annexed hereto, and (vii) the payment of reasonable legal fees and expenses incurred by law firms in which Directors of Company are affiliated for services rendered to Company and its Subsidiaries.
7.9. RESTRICTION ON LEASES.
Borrowers shall not, and shall not permit any of their Subsidiaries to, become liable in any way, whether directly by assignment or as a guarantor or other surety, for the obligations of the lessee under any lease for equipment (other than intercompany leases between Borrowers), unless, immediately after giving effect to the incurrence of liability with respect to such lease, the aggregate amount of all rents paid or payable by Company and its Subsidiaries on a consolidated basis under all such leases entered into after the Closing Date at the time in effect during the then current Fiscal Year or any future period of 12
consecutive calendar months shall not exceed $3,000,000; provided, however, that this subsection 7.9 shall not prohibit Company or its Subsidiaries from incurring obligations pursuant to the renewal, extension or replacement of leases in effect at the Closing Date so long as such leases as renewed, extended or replaced are not more disadvantageous in any material respect to Company and its Subsidiaries and the Lenders than the leases so renewed, extended or replaced.
7.10. [Intentionally Omitted]
7.11. CONDUCT OF BUSINESS.
From and after the Closing Date, Company shall not, and shall not permit any of its Subsidiaries, to engage in any business other than the energy, water and waste management businesses of the type in which they are engaged on the Closing Date and other activities to the extent incidental or reasonably related to such businesses.
7.12. AMENDMENTS TO RELATED AGREEMENTS, DEBT DOCUMENTATION AND ORGANIZATIONAL DOCUMENTS.
Company shall not, and shall not permit any of its
Subsidiaries to, amend, restate, modify or waive (or make any payment consistent
with an amendment, restatement, modification or waiver of) any material
provision of (i) the Management Services and Reimbursement Agreement or the
other Related Agreements (other than the Detroit L/C Facility Documents), in
each case if the effect of such amendment, restatement, modification or waiver,
together with all other amendments, restatements, modifications or waivers made,
(a) except as otherwise permitted under subsection 7.1(xiii), is to impose
additional material obligations on, or confer material additional rights to the
holders thereof (or to other obligees with respect thereto) against, Company or
any of its Subsidiaries, or (b) is otherwise adverse to the interests of the
Lenders in a manner deemed material in the judgment of Administrative Agent;
(ii) the Organizational Documents of Company and its Subsidiaries, if the effect
of such amendment, restatement, modification or waiver, together with all other
amendments, restatements, modifications or waivers made, is adverse to the
interests of the Lenders in a manner deemed material in the judgment of
Administrative Agent; (iii) the Subordinated Indebtedness, if the effect thereof
would be to (a) change to earlier dates the dates on which any payments of
principal or interest are due thereon, (b) increase the interest rate, or the
portion thereof payable on a current basis in cash, applicable thereto, (c)
change any event of default with respect thereto in any manner adverse to the
interests of the Lenders, (d) change the redemption, prepayment or defeasance
provisions thereof, (e) change the subordination provisions thereof (or of any
guaranty thereof or intercreditor arrangement with respect thereto), (f) change
any collateral therefor (other than to release such collateral), or (g) change
any other term or provision thereof, if the effect of such change, together with
all other changes made, is to increase materially the obligations of the obligor
thereunder or to confer any additional rights on the holders of such
Indebtedness that would be materially adverse (in the judgment of Administrative
Agent or Requisite Lenders so notifying Administrative Agent or Company) to
Company, Administrative Agent or the Lenders, without the prior written consent
of Requisite Lenders; (iv) the principal documents relating
to Limited Recourse Debt with respect to a Project if such amendment,
restatement, modification or waiver, together with all other amendments,
restatements, modifications and waivers made, would reasonably be expected to
have a Material Adverse Effect; or (v) the Detroit L/C Facility Documents,
unless (a) the terms of the Detroit L/C Facility Documents as so amended,
restated, modified or waived are not more disadvantageous to Company and its
Subsidiaries and the Lenders (in a manner deemed material by Administrative
Agent) than the Detroit L/C Facility Documents in effect on the Closing Date (it
being understood and agreed that any amendment, restatement, modification or
waiver having the effect of reducing, delaying or waiving any otherwise required
reduction in the amount of any commitment to extend letters of credit under the
Detroit L/C Facility Documents shall be deemed to be more disadvantageous for
purposes of this clause (a) without further notice or other action by
Administrative Agent), (b) the aggregate amount of Indebtedness and letters of
credit outstanding and additional Commitments to extend credit, if any, under
the Detroit L/C Facility Documents as so amended, restated, modified or waived,
do not exceed the aggregate amount of the commitments to extend credit in effect
under the Detroit L/C Facility Documents on the Closing Date (or, if less, the
amount of such commitments in effect immediately prior to such amendment,
restatement, modification or waiver), plus $5,000,000, (c) the credit available
under the Detroit L/C Facility Documents as so amended, restated, modified or
waived is limited to letters of credit issuable in connection with the Project
to which the Existing Detroit L/Cs relate (provided, that the requirements of
this clause (c) shall not apply with respect to credit extended pursuant to the
$5,000,000 additional amount described at the end of the foregoing clause (b)),
(d) the obligations under (and the Liens securing) the Detroit L/C Facility
Documents as so amended, restated, modified or waived are subject to the
Intercreditor Agreement on terms substantively identical to the terms applicable
to the obligations in effect under the Detroit L/C Facility Documents in effect
on the Closing Date, and (e) Company provides to Administrative Agent reasonable
prior advance written notice of such proposed amendment, restatement,
modification or waiver and copies of all material contracts or other agreements
being entered into in connection therewith).
7.13. END OF FISCAL YEARS; FISCAL QUARTERS.
Company shall not, and shall not permit any of its Subsidiaries to change the end of the Fiscal Year of Company or any of its Subsidiaries from December 31st.
7.14. AMENDMENT TO PENSION PLANS.
Borrowers shall not amend or modify any Pension Plan after the Closing Date in any manner that results in or would reasonably be expected to result in an increase in the amount of unfunded benefit liabilities (as such unfunded benefit liabilities are determined in accordance with subsection 5.11D hereof), unless such amendment or modification is required under applicable law.
SECTION 8. EVENTS OF DEFAULT
If any of the following conditions or events ("EVENT OF
DEFAULT") shall occur:
8.1. FAILURE TO MAKE PAYMENTS WHEN DUE.
Failure by Borrowers to pay the principal amount of any Revolving Loan when due, whether at stated maturity, by acceleration, by notice of voluntary prepayment, by mandatory prepayment or otherwise; failure by Borrowers to pay when due any amount payable to Issuing Lender in reimbursement of any drawing under a Letter of Credit; failure by Borrowers to pay any Mandatory Payment when due; or failure by Borrowers to pay any interest or any fee or any other amount due under this Agreement within 5 days after the date due; or
8.2. DEFAULT IN OTHER AGREEMENTS.
(i) Failure of Company or any of its Subsidiaries (other than the Bankrupt Subsidiaries) to pay when due any principal of or interest on or any other amount payable in respect of (a) the Detroit L/C Facility Documents or the High Yield Notes, (b) any one or more items of Indebtedness (other than Indebtedness referred to in subsection 8.1 or in clause (a) above or clause (c) below) or Contingent Obligations or Performance Guaranties, in each case in the principal amount of $5,000,000 or more, individually or in the aggregate, or (c) Limited Recourse Debt of Subsidiaries of Company (other than the Bankrupt Subsidiaries) in the principal amount of $10,000,000 or more, individually or in the aggregate (provided, that Limited Recourse Debt incurred in connection with one or more Projects to which less than $2,000,000 in the aggregate of the operating income of Company and its Subsidiaries (on a consolidated basis) is attributable for the 12-month period immediately preceding the failure to pay such interest, principal or other amounts shall not be considered Indebtedness or Limited Recourse Debt solely for purposes of this clause (c)), in each case beyond the end of any grace period provided therefor; or
(ii) breach or default by Company or any of its Subsidiaries (other than the Bankrupt Subsidiaries) with respect to any other material term of (a) the Detroit L/C Facility Documents, the High Yield Indenture or the High Yield Notes, (b) one or more items of Indebtedness (other than Limited Recourse Debt) or Contingent Obligations in the individual or aggregate principal amounts referred to in clause (i) above or (c) any loan agreement, mortgage, indenture or other agreement relating to such item(s) of Indebtedness or Contingent Obligation(s), if the effect of such breach or default is to cause, or to permit the holder or holders of that Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such holder or holders) to cause, that Indebtedness or Contingent Obligation(s) to become or be declared due and payable prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be (upon the giving or receiving of notice, lapse of time, both, or otherwise); or
8.3. BREACH OF CERTAIN COVENANTS.
Failure of any Borrower to perform or comply with any term or condition contained in subsection 6.2 or Section 7 of this Agreement; or
8.4. BREACH OF WARRANTY.
Any representation, warranty, certification or other statement made by Company or any of its Subsidiaries in any Credit Document or in any statement or certificate at any time given by Company or any of its Subsidiaries in writing pursuant hereto or thereto or in connection herewith or therewith shall be false in any material respect on the date as of which made; or
8.5. OTHER DEFAULTS UNDER CREDIT DOCUMENTS.
Any Credit Party shall default in the performance of or
compliance with any term contained in this Agreement or any of the other Credit
Documents, other than any such term referred to in any other subsection of this
Section 8, and such default shall not have been remedied or waived within 30
days after the earlier of (i) an Officer of Company or such Credit Party
becoming aware of such default or (ii) receipt by Company or such Credit Party
of notice from Administrative Agent or any Lender of such default; or
8.6. INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) A court having jurisdiction in the premises shall enter a decree or order for relief in respect of DHC, Company or any of Company's Subsidiaries (other than the Bankrupt Subsidiaries) in an involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, which decree or order is not stayed; or any other similar relief shall be granted under any applicable federal or state law; or
(ii) an involuntary case shall be commenced against DHC, Company or any of Company's Subsidiaries (other than the Bankrupt Subsidiaries) under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over DHC, Company or any of Company's Subsidiaries (other than the Bankrupt Subsidiaries), or over all or a substantial part of its property, shall have been entered; or there shall have occurred the involuntary appointment of an interim receiver, trustee or other custodian of DHC, Company or any of Company's Subsidiaries (other than the Bankrupt Subsidiaries) for all or a substantial part of its property; or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of DHC, Company or any of Company's Subsidiaries (other than the Bankrupt Subsidiaries), and any such event described in this clause (ii) shall continue for 60 days unless dismissed, bonded or discharged; or
8.7. VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) DHC, Company or any of Company's Subsidiaries (other than the Bankrupt Subsidiaries) shall have an order for relief entered with respect to it or
commence a voluntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or DHC, Company or any of Company's Subsidiaries (other than the Bankrupt Subsidiaries) shall make any assignment for the benefit of creditors; or
(ii) DHC, Company or any of Company's Subsidiaries shall be unable, or shall fail generally, or shall admit in writing its inability, to pay its debts as such debts become due; or the Governing Body of DHC, Company or any of Company's Subsidiaries (other than the Bankrupt Subsidiaries), or any committee thereof, shall adopt any resolution or otherwise authorize any action to approve any of the actions referred to in clause (i) above or this clause (ii); or
8.8. JUDGMENTS AND ATTACHMENTS.
Any money judgment, writ or warrant of attachment or similar process involving (a) in any individual case an amount in excess of $5,000,000 or (b) in the aggregate at any time an amount in excess of $5,000,000 (in either case not adequately covered by insurance as to which a solvent and unaffiliated insurance company has acknowledged coverage) shall be entered or filed against Company or any of its Subsidiaries (other than the Bankrupt Subsidiaries) or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of 60 days (or in any event later than 5 days prior to the date of any proposed sale thereunder); or
8.9. DISSOLUTION.
Any order, judgment or decree shall be entered against Company or any of its Material Subsidiaries decreeing the dissolution or split up of Company or that Subsidiary and such order shall remain undischarged or unstayed for a period in excess of 30 days; or
8.10. EMPLOYEE BENEFIT PLANS.
There shall occur one or more ERISA Events that individually
or in the aggregate result in or are reasonably be expected to result in
liability of Company, any of its Subsidiaries or any of their respective ERISA
Affiliates in excess of $5,000,000 during the term of this Agreement; or there
shall exist as of January 1 of any year (based on, with respect to the Covanta
Energy Pension Plan, the actuarial valuation as of such January 1 and, with
respect to the SEIU Pension Plan, the actuarial valuation as of the immediately
preceding June 1), unfunded benefit liabilities (as defined in Section
4001(a)(18) of ERISA, but determined on the basis of the actuarial assumptions
used for funding purposes with respect to a Pension Plan (as set forth in
Section 412 of the Internal Revenue Code, including, where applicable, the
interest rate assumptions set forth in Section 412(l) of the Internal Revenue
Code)), in the aggregate for all Pension Plans (excluding for purposes of
such computation any Pension Plans with respect to which assets exceed benefit liabilities), in excess of (i) $20,000,000, in the event Assumptions are generally as favorable as the Assumptions used in the 2003 plan year valuations with respect to such Pension Plans, or (ii) $26,000,000, in the event the Assumptions are generally less favorable than the Assumptions used in the 2003 plan year valuations with respect to such Pension Plans; or
8.11. MATERIAL ADVERSE EFFECT.
Any event or change shall occur after the Closing Date that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect; or
8.12. CHANGE IN CONTROL.
A Change in Control shall have occurred; or
8.13. INVALIDITY OF INTERCREDITOR AGREEMENT; FAILURE OF SECURITY; REPUDIATION OF OBLIGATIONS.
At any time after the execution and delivery thereof, (i) the Intercreditor Agreement for any reason, other than the satisfaction in full of all Obligations, shall cease to be in full force and effect (other than in accordance with its terms) or shall be declared to be null and void, (ii) any Collateral Document (with respect to the obligations thereunder of Company or any Material Subsidiary (other than any Bankrupt Subsidiary)) shall cease to be in full force and effect (other than by reason of a release of Collateral thereunder in accordance with the terms hereof or thereof, the satisfaction in full of the Secured Obligations or any other termination of such Collateral Document in accordance with the terms hereof or thereof) or shall be declared null and void, or Collateral Agent shall not have or shall cease to have a valid and perfected Lien (with the priority set forth in subsection 5.15A) in any Collateral purported to be covered thereby, in each case for any reason other than the failure of Collateral Agent or any Lender to take any action within its control, or (iii) any Credit Party shall contest the validity or enforceability of any Credit Document in writing or deny in writing that it has any further liability, including with respect to future advances by Lenders, under any Credit Document to which it is a party; or
8.14. TERMINATION OF MATERIAL CONTRACTS.
Any Material Contract of the type described in clause (i) of the definition of Material Contract, or any power purchase agreement to which Company or any of its Subsidiaries is a party relating to a Project, shall be terminated by Company or any of its Subsidiaries or by the counterparty or counterparties thereto, if such termination is enforceable by Company, such Subsidiary, or such counterparty or counterparties, unless (a) such Material Contract is replaced within 10 days after such termination with a contract that is reasonably acceptable to the Requisite Lenders and on substantially the same economic terms as the relevant Material Contract being terminated, (b) the Subsidiary of Company party to such Material Contract or power purchase agreement, as the case may be, is a Bankrupt Subsidiary and such termination would not reasonably be expected to have a
Material Adverse Effect, or (c) the termination of such Material Contract occurs pursuant to the exercise by the counterparty or counterparties thereto of a contractual right to terminate such Material Contract for convenience and such termination would not reasonably be expected to have a Material Adverse Effect; or
8.15. NOL TREATMENT.
Any Capital Stock of Company of any of its Subsidiaries shall be issued, or any equity contribution shall be made to Company or any of its Subsidiaries, if (i) such issuance or equity contribution would reasonably be expected to have a material adverse effect on the availability or accessibility to Company and its Subsidiaries of the net operating losses disclosed to Administrative Agent and Lenders prior to the Closing Date as being held by DHC, or (ii) the proceeds of such issuance or equity contribution are applied to any purpose prohibited under this Agreement:
THEN (i) upon the occurrence of any Event of Default described in subsection 8.6
or 8.7, each of (a) the unpaid principal amount of and accrued interest on the
Revolving Loans, (b) an amount equal to 105% of the maximum amount that may at
any time be drawn under all Letters of Credit then outstanding (whether or not
any beneficiary under any such Letter of Credit shall have presented, or shall
be entitled at such time to present, the drafts or other documents or
certificates required to draw under such Letter of Credit), and (c) all other
Obligations shall automatically become immediately due and payable, without
presentment, demand, protest or other requirements of any kind, all of which are
hereby expressly waived by each Borrower, and obligation of Administrative Agent
and any Lender to make any Revolving Loan and the obligation of Issuing Lender
to issue, renew or extend any Letter of Credit shall thereupon terminate, and
(ii) upon the occurrence and during the continuation of any other Event of
Default, Administrative Agent shall, upon the written request or with the
written consent of Requisite Lenders, by written notice to Borrowers, declare
all or any portion of the amounts described in clauses (a) through (c) above to
be, and the same shall forthwith become, immediately due and payable, and the
obligation of any Lender to make any Revolving Loan and the obligation of
Issuing Lender to issue, renew or extend any Letter of Credit hereunder shall
thereupon terminate.
Any amounts described in clause (b) above, when received by Collateral Agent, shall be held by Collateral Agent pursuant to the terms of the Security Agreement and shall be applied as therein provided (subject to the terms of the Intercreditor Agreement).
Further upon the occurrence and during the continuance of any Event of Default, subject to the Intercreditor Agreement, Administrative Agent and Collateral Agent may, and upon the written request of Requisite Lenders shall, (i) exercise all rights and remedies of Administrative Agent or Collateral Agent set forth in any of the Collateral Documents, in addition to all rights and remedies allowed by, the United States and of any state thereof, including but not limited to the UCC, and (ii) revoke Borrowers' rights to use cash collateral in which Administrative Agent or Collateral Agent has an interest. The enumeration of the foregoing rights and remedies is not intended to be exhaustive and the
exercise of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative and not alternative.
SECTION 9. ADMINISTRATIVE AGENT
9.1. APPOINTMENT.
A. APPOINTMENT OF ADMINISTRATIVE AGENT. Bank One is hereby
appointed Administrative Agent hereunder and under the other Credit Documents.
Each Lender hereby authorizes Administrative Agent to act as its agent in
accordance with the terms of this Agreement and the other Credit Documents.
Administrative Agent agrees to act upon the express conditions contained in this
Agreement and the other Credit Documents, as applicable. The provisions of this
Section 9 are solely for the benefit of Administrative Agent and Lenders and no
Credit Party shall have rights as a third party beneficiary of any of the
provisions thereof. In performing its functions and duties under this Agreement,
Administrative Agent (other than as provided in subsection 2.1E) shall act
solely as an agent of Lenders and does not assume and shall not be deemed to
have assumed any obligation towards or relationship of agency or trust with or
for any Borrower or any other Credit Party.
B. CONTROL. Each Lender and Administrative Agent hereby appoint each other Lender as agent for the purpose of perfecting Collateral Agent's security interest in assets that, in accordance with the UCC, can be perfected by possession or control.
9.2. POWERS AND DUTIES; GENERAL IMMUNITY.
A. POWERS; DUTIES SPECIFIED. Each Lender irrevocably authorizes Administrative Agent to take such action on such Lender's behalf and to exercise such powers, rights and remedies hereunder and under the other Credit Documents as are specifically delegated or granted to Administrative Agent by the terms hereof and thereof, together with such powers, rights and remedies as are reasonably incidental thereto. Administrative Agent shall have only those duties and responsibilities that are expressly specified in this Agreement and the other Credit Documents. Administrative Agent may exercise such powers, rights and remedies and perform such duties by or through its Affiliates, agents or employees. Administrative Agent shall not have, by reason of this Agreement or any of the other Credit Documents, a fiduciary relationship in respect of any Lender or any Borrower; and nothing in this Agreement or any of the other Credit Documents, expressed or implied, is intended to or shall be so construed as to impose upon Administrative Agent any obligations in respect of this Agreement or any of the other Credit Documents except as expressly set forth herein or therein.
B. NO RESPONSIBILITY FOR CERTAIN MATTERS. Administrative Agent shall not be responsible to any Lender for the execution, effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement or any other Credit Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by Administrative Agent to Lenders or by or on behalf of any Borrower to Administrative Agent or any Lender
in connection with the Credit Documents and the transactions contemplated thereby or for the financial condition or business affairs of Borrowers or any other Person liable for the payment of any Obligations, nor shall Administrative Agent be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Credit Documents or as to the use of the proceeds of the Revolving Loans or the use of the Letters of Credit or as to the existence or possible existence of any Event of Default or Potential Event of Default. Anything contained in this Agreement to the contrary notwithstanding, Administrative Agent shall not have any liability arising from confirmations of the amount of the Letter of Credit Usage or the component amounts thereof.
C. EXCULPATORY PROVISIONS. Neither Administrative Agent nor any of its officers, directors, employees or agents shall be liable to Lenders for any action taken or omitted by Administrative Agent under or in connection with any of the Credit Documents except to the extent caused by Administrative Agent's gross negligence or willful misconduct. Administrative Agent shall be entitled to refrain from any act or the taking of any action (including the failure to take an action) in connection with this Agreement or any of the other Credit Documents or from the exercise of any power, discretion or authority vested in it hereunder or thereunder unless and until Administrative Agent shall have received instructions in respect thereof from Requisite Lenders (or such other Lenders as may be required to give such instructions under subsection 10.6) and, upon receipt of such instructions from Requisite Lenders (or such other Lenders, as the case may be), Administrative Agent shall be entitled to act or (where so instructed) refrain from acting, or to exercise such power, discretion or authority, in accordance with such instructions. Without prejudice to the generality of the foregoing, (i) Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for Company and its Subsidiaries), accountants, experts and other professional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever against Administrative Agent as a result of Administrative Agent acting or (where so instructed) refraining from acting under this Agreement or any of the other Credit Documents in accordance with the instructions of Requisite Lenders (or such other Lenders as may be required to give such instructions under subsection 10.6).
D. ADMINISTRATIVE AGENT ENTITLED TO ACT AS LENDER. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, Administrative Agent in its individual capacity as a Lender hereunder. With respect to its participation in the Revolving Loans and the Letters of Credit, Administrative Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not performing the duties and functions delegated to it hereunder, and the term "Lender" or "Lenders" or any similar term shall, unless the context clearly otherwise indicates, include Administrative Agent in its individual
capacity. Administrative Agent and its Affiliates may accept deposits from, lend money to, acquire equity interests in and generally engage in any kind of commercial banking, investment banking, trust, financial advisory or other business with Company or any of its Affiliates as if it were not performing the duties specified herein, and may accept fees and other consideration from any Borrower for services in connection with this Agreement and otherwise without having to account for the same to Lenders.
9.3. INDEPENDENT INVESTIGATION BY LENDERS; NO RESPONSIBILITY FOR APPRAISAL OF CREDITWORTHINESS.
Each Lender agrees that it has made its own independent investigation of the financial condition and affairs of Company and its Subsidiaries in connection with the making of the Revolving Loans and the issuance of Letters of Credit hereunder and that it has made and shall continue to make its own appraisal of the creditworthiness of Company and its Subsidiaries. Administrative Agent shall not have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of Lenders or to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of any Revolving Loan or the issuance of any Letter of Credit or at any time or times thereafter, and Administrative Agent shall not have any responsibility with respect to the accuracy of or the completeness of any information provided to Lenders.
9.4. RIGHT TO INDEMNITY.
Each Lender, in proportion to its Pro Rata Share, severally agrees to indemnify Administrative Agent and its officers, directors, employees, agents, attorneys, professional advisors and affiliates to the extent that any such Person shall not have been reimbursed by Borrowers, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements and fees and disbursements of any financial advisor engaged by Administrative Agent) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against Administrative Agent or other such Persons in exercising the powers, rights and remedies of Administrative Agent or performing duties of Administrative Agent hereunder or under the other Credit Documents or otherwise in its capacity as Administrative Agent in any way relating to or arising out of this Agreement or the other Credit Documents; provided, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of Administrative Agent resulting from Administrative Agent's gross negligence or willful misconduct. If any indemnity furnished to Administrative Agent or any other such Person for any purpose shall, in the opinion of Administrative Agent, be insufficient or become impaired, Administrative Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished.
9.5. SUCCESSOR ADMINISTRATIVE AGENTS.
Administrative Agent may resign at any time by giving 30 days' prior written notice thereof to Lenders and Borrowers, and Administrative Agent may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to Borrowers and Administrative Agent and signed by Requisite Lenders. If Bank One is an Issuing Lender, any such resignation or removal of Bank One as Administrative Agent shall also constitute its resignation or removal as Issuing Lender. Upon any such notice of resignation or any such removal, Requisite Lenders shall have the right, upon 5 Business Days' notice to Borrowers, to appoint a successor Administrative Agent. If, within 30 days after the date of Administrative Agent's notice of its intention to resign, no successor Administrative Agent shall have been so appointed by Requisite Lenders, then the Administrative Agent's resignation shall become effective on such date without the need for any further action and the Lenders shall be deemed to have been appointed as successor to Administrative Agent hereunder and shall thereafter perform all of the duties of Administrative Agent hereunder and/or under any other Credit Document until the appointment by Requisite Lenders of such other successor Administrative Agent. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, including the Lenders as successor to Administrative Agent (who shall be deemed to have accepted such appointment pursuant to this subsection 9.5), such successor Administrative Agent shall thereupon succeed to and become vested with all of the rights, powers, privileges and duties of the retiring or removed Administrative Agent (and, if the removed Agent is an Issuing Lender, all the rights, powers, privileges and duties of an Issuing Lender), the retiring or removed Administrative Agent shall be discharged from its duties and obligations under this Agreement, and, if the retiring or removed Agent is an Issuing Lender, such retiring or removed Issuing Lender shall be discharged from its duties and obligations under this Agreement, without any other or further act or deed on the part of such retiring or removed Issuing Lender or any other Lender; provided, however, that the successor Issuing Lender shall be obligated to issue Letters of Credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or to make other arrangements satisfactory to the retiring or removed Issuing Lender to effectively assume the obligations of such retiring or removed Issuing Lender with respect to such outstanding Letters of Credit, and such retiring or removed Issuing Lender shall continue to have all rights of an Issuing Lender with respect to such outstanding Letters of Credit until the cancellation or expiration of such Letters of Credit and the reimbursement of any amounts drawn thereunder. After any retiring or removed Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Credit Documents.
9.6. INTERCREDITOR AGREEMENT.
Each Lender hereby further authorizes Administrative Agent, on behalf of and for the benefit of Lenders, to enter into and to be the agent for and representative of Lenders under the Intercreditor Agreement, and each Lender agrees to be bound by the terms of the Intercreditor Agreement; provided, that Administrative Agent shall not (i) enter into or
consent to any material amendment, modification, termination or waiver of any provision contained in the Intercreditor Agreement or (ii) release any Collateral (except as otherwise expressly permitted or required pursuant to the terms of this Agreement or the applicable Collateral Document), in each case without the prior consent of Requisite Lenders (or, if required pursuant to subsection 10.6, all Lenders). Anything contained in any of the Credit Documents to the contrary notwithstanding, each Borrower, Administrative Agent and each Lender hereby agree that (1) no Lender shall have any right individually to realize upon any of the Collateral under any Collateral Document, it being understood and agreed that all powers, rights and remedies under the Collateral Documents may be exercised solely by Collateral Agent for the benefit of Secured Parties in accordance with the terms thereof and of the Intercreditor Agreement, and (2) in the event of a foreclosure by Collateral Agent on any of the Collateral pursuant to a public or private sale, Administrative Agent or any Lender may be the purchaser of any or all of such Collateral at any such sale and Administrative Agent, as agent for and representative of Lenders (but not any Lender or Lenders in its or their respective individual capacities unless Requisite Lenders shall otherwise agree in writing) shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Obligations as a credit on account of the purchase price for any Collateral payable by Administrative Agent at such sale.
9.7. ADMINISTRATIVE AGENT MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to Company or any of the Subsidiaries of Company, Administrative Agent (irrespective of whether any Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether Administrative Agent shall have made any demand on Borrowers) shall be entitled and empowered, by intervention in such proceeding or otherwise
(i) to file and prove a claim for the whole amount of principal and interest owing and unpaid in respect of any Obligations that are owing and unpaid and to file such other papers or documents as may be necessary or advisable in order to have the claims of Lenders and Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of Lenders and Administrative Agent and their agents and counsel and all other amounts due Lenders and Administrative Agent under subsections 2.2, 3.2 and 10.2) allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to Administrative Agent and, in the event that Administrative Agent shall consent to the making of such payments directly to Lenders, to pay to Administrative Agent any amount
due for the reasonable compensation, expenses, disbursements and advances of Administrative Agent and their agents and counsel, and any other amounts due Administrative Agent under subsections 2.3, 3.2 and 10.2.
Nothing herein contained shall be deemed to authorize Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lenders or to authorize Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.
SECTION 10. MISCELLANEOUS
10.1. SUCCESSORS AND ASSIGNS; ASSIGNMENTS AND PARTICIPATIONS IN LETTERS OF CREDIT.
A. GENERAL. This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of Lenders (it being understood that Lenders' rights of assignment are subject to the further provisions of this subsection 10.1). Neither any Borrower's rights or obligations hereunder nor any interest therein may be assigned or delegated by any Borrower without the prior written consent of all Lenders (and any attempted assignment or transfer by any Borrower without such consent shall be null and void). No sale, assignment or transfer or participation of any Letter of Credit or any participation therein may be made separately from a sale, assignment, transfer or participation of a corresponding interest in the relevant Letter of Credit Commitment of the Lender effecting such sale, assignment, transfer or participation. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Affiliates of each of Administrative Agent and Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. No Lender shall be permitted to assign any portion of its rights or obligations hereunder to any other Person if, upon giving effect to such assignment, Borrowers would be obligated to pay such assignee amounts greater than the amounts, if any, which Borrowers would have been required to pay such assigning Lender under subsection 2.4 if such assignment did not occur.
B. ASSIGNMENTS.
(i) Amounts and Terms of Assignments. Any Lender may assign to one or more Eligible Assignees all or any portion of its rights and obligations under this Agreement; provided, that (a) except (1) in the case of an assignment of the entire remaining amount of the assigning Lender's rights and obligations under this Agreement or (2) in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund of a Lender, the aggregate amount of the Credit Exposure of the assigning Lender and the assignee subject to each such assignment shall not be less than $5,000,000, determined as of the date the Assignment Agreement with respect to such assignment is delivered to Administrative Agent or, if a trade date is specified in
the Assignment Agreement, as of such trade date, unless Administrative
Agent otherwise consents, such consent not to be unreasonably withheld
or delayed, (b) such assignment shall consist of corresponding amounts
of the Letter of Credit Commitment of such Lender and the portion of
such Letter of Credit Commitment that is available for the making of
Revolving Loans (for example, if such assignment includes 20% of the
Letter of Credit Commitment of such Lender it shall also include 20% of
the portion of such Letter of Credit Commitment that is available for
the making of Revolving Loans), (c) the parties to each assignment
shall execute and deliver to Administrative Agent an Assignment
Agreement, together with a processing and recordation fee of $5,000,
and the Eligible Assignee, if it shall not be a Lender prior to such
assignment, shall deliver to Administrative Agent a counterpart to the
Intercreditor Agreement and such documents and information reasonably
requested by Administrative Agent, including such forms, certificates
or other evidence, if any, with respect to United States federal income
tax withholding matters as the assignee under such Assignment Agreement
may be required to deliver to Administrative Agent pursuant to
subsection 2.7B(iii), and no such assignment shall be effective unless
and until such Assignment Agreement is accepted by Administrative Agent
and recorded in the Register as provided in subsection 10.1B(ii), (d)
except in the case of an assignment to another Lender, Administrative
Agent and Issuing Lender shall have consented thereto (which consents
shall not be unreasonably withheld or delayed (it being understood that
nothing in this clause (c) shall affect the requirement that the
relevant assignee meet the requirements in the definition of Eligible
Assignee and any other applicable requirements of this Agreement)), (e)
no assignment by a Defaulting Lender shall be permitted unless such
Defaulting Lender or assignee has funded such Defaulting Lender's
defaulted funding obligations with respect to Revolving Loans and
participations in Letters of Credit and (f) unless an Event of Default
or Potential Event of Default then exists, Borrowers shall have
consented to any such assignment (such consent not to be unreasonably
withheld or delayed). Upon such execution, delivery and consent, from
and after the effective date specified in such Assignment Agreement,
(x) the assignee thereunder shall be a party hereto and, to the extent
that rights and obligations hereunder have been assigned to it pursuant
to such Assignment Agreement, shall have the rights and obligations of
a Lender hereunder, (y) the assignee shall be a party to the
Intercreditor Agreement and, to the extent that rights and obligations
have been assigned to it pursuant to such Assignment Agreement, shall
have the rights and obligations of a "Creditor Party" thereunder (as
such term is defined in the Intercreditor Agreement) and (z) the
assigning Lender thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such
Assignment Agreement, relinquish its rights (other than any rights
which survive the termination of this Agreement under subsection 10.9B)
and be released from its obligations under this Agreement and the
Intercreditor Agreement (and, in the case of an Assignment Agreement
covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of
subsection 10.9; provided, that anything contained in any of the Credit
Documents to
the contrary notwithstanding (but subject to subsection 9.5), if such Lender is the Issuing Lender such Lender shall continue to have all rights and obligations of Issuing Lender with respect to any Letters of Credit issued by it until the cancellation or expiration of such Letters of Credit and the reimbursement of any amounts drawn thereunder). The assigning Lender of any Revolving Loan Commitments and/or Revolving Loans shall, upon the effectiveness of such assignment or as promptly thereafter as practicable, surrender its Revolving Notes, if any, to Administrative Agent for cancellation, and thereupon new Revolving Notes shall, if so requested by the assignee and/or the assigning Lender in accordance with subsection 2.1F, be issued to the assignee and/or to the assigning Lender, substantially in the form of Exhibit II annexed hereto, with appropriate insertions, to reflect the new Revolving Loan Commitments and/or outstanding Revolving Loans, as the case may be, of the assignee and/or the assigning Lender. Other than as provided in subsection 10.5, any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection 10.1B shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection 10.1C. Except as otherwise provided in this subsection 10.1, no Lender shall, as between Borrowers and such Lender, as between Agents and such Lender, or as between Issuing Lender and such Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment or transfer of, or any granting of participations in, all or any part of its Letter of Credit Commitment, Letters of Credit or participations therein or the other Obligations owed to such Lender.
(ii) Acceptance by Administrative Agent; Recordation in Register. Upon its receipt of an Assignment Agreement executed by an assigning Lender and an assignee representing that it is an Eligible Assignee and the processing and recordation fee referred to in subsection 10.1B(i) and any forms, certificates or other evidence with respect to United States federal income tax withholding matters that such assignee may be required to deliver to Administrative Agent pursuant to subsection 2.7B(iii), Administrative Agent shall, if Administrative Agent and Issuing Lenders have consented to the assignment evidenced thereby (to the extent each such consent is required pursuant to subsection 10.1B(i)), (a) accept such Assignment Agreement by executing a counterpart thereof as provided therein (which acceptance shall evidence any required consent of Administrative Agent to such assignment), (b) record the information contained therein in the Register, and (c) give prompt notice thereof to Company. Administrative Agent shall maintain a copy of each Assignment Agreement delivered to and accepted by it as provided in this subsection 10.1B(ii).
C. PARTICIPATIONS. Any Lender may, without the consent of, or notice to, any Borrower or Administrative Agent, sell participations to one or more Persons (other than a natural Person or any Borrower or any of its Affiliates) in all or a portion of such Lender's rights and/or obligations under this Agreement; provided, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations and (iii) Borrowers, Administrative Agent and Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided, that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver directly affecting (i) the extension of the Maturity Date or (ii) a reduction of the principal amount of or the rate of interest payable on any Obligation allocated to such participation. Subject to the further provisions of this subsection 10.1C, each Borrower agrees that each Participant shall be entitled to the benefits of subsections 2.6D and 2.7 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection 10.1B. To the extent permitted by law, each Participant also shall be entitled to the benefits of subsection 10.4 as though it were a Lender, provided, such Participant agrees to be subject to subsection 10.5 as though it were a Lender. A Participant shall not be entitled to receive any greater payment under subsections 2.6D and 2.7 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant unless the sale of the participation to such Participant is made with Borrowers' prior written consent. A Participant that would be a Non-US Lender if it were a Lender shall not be entitled to the benefits of subsection 2.7.
D. PLEDGES AND ASSIGNMENTS. Any Lender may at any time pledge or assign a security interest in all or any portion of the Obligations owed to such Lender, to secure obligations of such Lender, including any pledge or assignment to secure obligations to any Federal Reserve Bank; provided, that (i) no Lender shall be relieved of any of its obligations hereunder as a result of any such assignment or pledge and (ii) in no event shall any assignee or pledgee be considered to be a "Lender" or be entitled to require the assigning Lender to take or omit to take any action hereunder.
E. INFORMATION. Each Lender may furnish any information concerning Company and its Subsidiaries (including CPIH Subsidiaries) in the possession of that Lender from time to time to assignees and participants (including prospective assignees and participants), subject to subsection 10.20.
F. AGREEMENTS OF LENDERS. Each Lender listed on the signature pages hereof hereby agrees, and each Lender that becomes a party hereto pursuant to an Assignment Agreement shall be deemed to agree, (i) that it is an Eligible Assignee described in clause (i) of the definition thereof; (ii) that it has experience and expertise in the making or purchasing of loans such as the Revolving Loans and in the funding of or purchasing participations of the type purchased in the Letters of Credit; and (iii) that it will make or purchase Revolving Loans and fund or purchase such participations for its own account in the ordinary course of its business and without a view to distribution thereof within the meaning of the Securities Act or the Exchange Act or other federal securities laws (it being understood that, subject to the provisions of this subsection 10.1, the disposition of such
Revolving Loans or participations or any interests therein shall at all times remain within its exclusive control).
G. ASSIGNMENTS TO FEDERAL RESERVE BANKS. In addition to the assignments and participations permitted under the foregoing provisions of this subsection 10.1, any Lender may assign and pledge all or any portion of the Obligations owed to such Lender hereunder to any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any operating circular issued by such Federal Reserve Bank; provided, that (i) no Lender shall, as between Company and such Lender, be relieved of any of its obligations hereunder as a result of any such assignment and pledge and (ii) in no event shall such Federal Reserve Bank be considered to be a "Lender" or be entitled to require the assigning Lender to take or omit to take any action hereunder.
10.2. EXPENSES.
Whether or not the transactions contemplated hereby shall be
consummated, Borrowers agree, jointly and severally, to pay promptly (i) all the
actual and reasonable costs and expenses of negotiation, preparation and
execution of the Credit Documents and any consents, amendments, waivers or other
modifications thereto; (ii) all the costs of furnishing all opinions by counsel
for Credit Parties (including any opinions requested by Administrative Agent or
Lenders as to any legal matters arising hereunder) and of Borrowers' performance
of and compliance with all agreements and conditions on their part to be
performed or complied with under this Agreement and the other Credit Documents
including with respect to confirming compliance with environmental and insurance
requirements; (iii) the reasonable fees, expenses and disbursements of advisors
and counsel to Administrative Agent (including Goldberg, Kohn, Bell, Black,
Rosenbloom & Moritz, Ltd.) in connection with the negotiation, preparation,
execution, interpretation or administration of the Credit Documents and any
proposed consents, amendments, waivers or other modifications thereto and any
other documents or matters requested by any Borrower; (iv) all the actual costs
and reasonable expenses of creating and perfecting Liens in favor of Collateral
Agent on behalf of Secured Parties pursuant to any Collateral Document,
including filing and recording fees, expenses and taxes, stamp or documentary
taxes, search fees, title insurance premiums, and reasonable fees, expenses and
disbursements of counsel to Administrative Agent and Collateral Agent and of
counsel providing any opinions that Administrative Agent or Requisite Lenders
may request in respect of the Collateral Documents or the Liens created pursuant
thereto; (v) all the actual costs and reasonable fees, expenses and
disbursements of any auditors, accountants or appraisers and any environmental
or other consultants, advisors and agents employed or retained by Administrative
Agent or their counsel; (vi) all the actual costs and reasonable expenses
incurred in connection with the custody or preservation of any of the
Collateral; (vii) all other actual and reasonable costs and expenses incurred by
Administrative Agent in connection with the syndication of the Commitments; and
(viii) all the actual costs and reasonable expenses, including reasonable
attorneys' fees and costs of settlement, incurred by Administrative Agent,
Issuing Lender and Lenders in enforcing any Obligations of or in collecting any
payments due from any Credit Party hereunder or under the other Credit
Documents (including in connection with the sale of, collection from, or other realization upon any of the Collateral) or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a "work-out" or pursuant to the Chapter 11 Cases or any other insolvency or bankruptcy proceedings.
10.3. INDEMNITY.
In addition to the payment of expenses pursuant to subsection 10.2, whether or not the transactions contemplated hereby shall be consummated, Borrowers jointly and severally agree to defend (subject to Indemnitees' selection of counsel), indemnify, pay and hold harmless Administrative Agent, Issuing Lender and Lenders, and the officers, directors, employees, agents and affiliates of Administrative Agent, Issuing Lender and Lenders (collectively called the "INDEMNITEES"), including Issuing Lenders, from and against any and all Indemnified Liabilities (as hereinafter defined); provided, that Borrowers shall not have any obligation to any Indemnitee hereunder with respect to any Indemnified Liabilities to the extent such Indemnified Liabilities arise solely from the gross negligence or willful misconduct of that Indemnitee as determined by a final judgment of a court of competent jurisdiction.
As used herein, "INDEMNIFIED LIABILITIES" means, collectively, any and all liabilities, obligations, losses, damages (including natural resource damages), penalties, actions, judgments, suits, claims (including Environmental Claims), costs (including the costs of any investigation, study, sampling, testing, abatement, cleanup, removal, remediation or other response action necessary to remove, remediate, clean up or abate any Hazardous Materials Activity), expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened by any Person, whether or not any such Indemnitee shall be designated as a party or a potential party thereto, and any fees or expenses incurred by Indemnitees in enforcing this indemnity), whether direct, indirect or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or regulations and Environmental Laws), on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of (i) this Agreement or the other Credit Documents and the Chapter 11 Cases (it being understood that such Indemnified Liabilities arising out of the Chapter 11 Cases shall apply solely to Indemnitees in their capacities as Administrative Agent, Lenders and Issuing Lender or officers, directors, employees, agents and affiliates of Administrative Agent, Lenders or Issuing Lender, and not in any other capacities) or the transactions contemplated hereby or thereby (including Lenders' agreement to make the Revolving Loans hereunder or the use or intended use of the proceeds thereof or the issuance of Letters of Credit hereunder or the use or intended use of any thereof, the failure of Issuing Lender to honor a drawing under a Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto Government Authority, or any enforcement of any of the Credit Documents (including any sale of, collection from, or other realization upon any of the Collateral)), (ii) the statements contained in the commitment letter delivered by any Lender with respect thereto, or (iii) any
Environmental Claim or any Hazardous Materials Activity relating to or arising from, directly or indirectly, any past or present activity, operation, land ownership, or practice of Company or any of its Subsidiaries (including, solely with respect to periods prior to the Closing Date, CPIH Subsidiaries).
To the extent that the undertakings to defend, indemnify, pay and hold harmless set forth in this subsection 10.3 may be unenforceable in whole or in part because they are violative of any law or public policy, Borrowers shall contribute the maximum portion that they are permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of them.
10.4. SET-OFF.
In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence and during the continuance of any Event of Default each Lender is hereby authorized by each Borrower at any time or from time to time, without notice to each Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, including Indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts) and any other Indebtedness at any time held or owing by that Lender or any Affiliate of such Lender to or for the credit or the account of any Borrower or any other Credit Party against and on account of the obligations and liabilities of any Borrower or any other Credit Party to that Lender (or any Affiliate of such Lender) or to any other Lender (or any Affiliate of any other Lender) under this Agreement, the Letters of Credit and participations therein and the other Credit Documents, including all claims of any nature or description arising out of or connected with this Agreement, the Letters of Credit and participations therein or any other Credit Document, irrespective of whether or not (i) any Agent or any Lender shall have made any demand hereunder or (ii) the principal of or the interest on the Revolving Loans or any amounts in respect of the Letters of Credit or any other amounts due hereunder shall have become due and payable pursuant to Section 8 and although said obligations and liabilities, or any of them, may be contingent or unmatured. Each Borrower hereby further grants to Administrative Agent and each Lender a security interest in all deposits and accounts maintained with Administrative Agent or such Lender as security for the Obligations.
10.5. RATABLE SHARING.
A. Subject at all times to their obligations under the Intercreditor Agreement, Lenders hereby agree among themselves that if any of them shall, whether by voluntary payment or mandatory payment (other than a payment or prepayment of the Revolving Loans made and applied in accordance with the terms of this Agreement), by realization upon security, through the exercise of any right of set-off or banker's lien, by counterclaim or cross action or by the enforcement of any right under the Credit Documents or otherwise, or as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code, receive payment or reduction of a proportion of the aggregate amount of principal, interest and other amounts payable in respect of Revolving Loans, Letters of
Credit, fees and other amounts then due and owing to that Lender hereunder or under the other Credit Documents with respect to the Obligations (collectively, the "AGGREGATE AMOUNTS DUE" to such Lender) that is greater than the proportion received by any other Lender in respect of the Aggregate Amounts Due to such other Lender, then the Lender receiving such proportionately greater payment shall (i) notify Administrative Agent and each other Lender of the receipt of such payment and (ii) apply a portion of such payment to purchase assignments (which it shall be deemed to have purchased from each seller of an assignment simultaneously upon the receipt by such seller of its portion of such payment) of the Aggregate Amounts Due to the other Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by all Lenders in proportion to the Aggregate Amounts Due to them; provided, that if all or part of such proportionately greater payment received by such purchasing Lender is thereafter recovered from such Lender, those purchases shall be rescinded and the purchase prices paid for such assignments shall be returned to such purchasing Lender ratably to the extent of such recovery, but without interest. Each Borrower expressly consents to the foregoing arrangement and agrees that any purchaser of an assignment so purchased may exercise any and all rights of a Lender as to such assignment as fully as if that Lender had complied with the provisions of subsection 10.1B with respect to such assignment. In order to further evidence such assignment (and without prejudice to the effectiveness of the assignment provisions set forth above), each purchasing Lender and each selling Lender agree to enter into an assignment agreement at the request of a selling Lender or a purchasing Lender, as the case may be, in form and substance reasonably satisfactory to each such Lender and to Administrative Agent.
B. Notwithstanding anything in this subsection 10.5 to the contrary, in the event any one or more Lenders (for purposes of this subsection 10.5, "ENFORCING LENDERS") receives any amounts that are subject to the sharing provisions of subsection 10.5A as a result of such Enforcing Lender or Enforcing Lenders, but not Administrative Agent or all Lenders, commencing Proceedings to recover such amounts, no Lender that is not an Enforcing Lender shall be entitled to the benefits of subsection 10.5A with respect to the amounts received by such Enforcing Lenders (i) unless and until such Lender has paid its Pro Rata Share of the out-of-pocket costs and expenses (including legal fees and expenses of counsel to such Enforcing Lenders) incurred by such Enforcing Lenders in connection with such Proceedings or (ii) in any greater amount at any time than such Lender would be entitled to receive under such subsection if all Lenders paid their Pro Rata Shares of such costs and expenses.
10.6. AMENDMENTS AND WAIVERS.
No amendment, modification, termination or waiver of any provision of this Agreement or of the Notes or the Credit Documents, and no consent to any departure by any Borrower therefrom, shall in any event be effective without the written concurrence of Requisite Lenders; provided, that no such amendment, modification, termination, waiver or consent shall, without the consent of: (a) each Lender with Obligations directly affected (whose consent shall be required for any such amendment, modification, termination or waiver in addition to that of Requisite Lenders) (1) reduce the principal amount of any Revolving Loan or any funded amount with respect to a participation in a Letter of Credit,
(2) increase the maximum aggregate amount of such Lender's Revolving Loan Commitment, Letter of Credit Commitment or Letters of Credit, (3) postpone the Maturity Date or any other scheduled payment date with respect to the principal balance of the Revolving Loans, (4) postpone the date on which any interest or any fees are payable, (5) decrease the interest rate borne by any funded amount with respect to a participation in a Letter of Credit or any Revolving Loan (other than any waiver of any increase in the interest rate applicable pursuant to subsection 2.2E, the penultimate sentence of subsection 3.2 or subsection 6.13) or the amount of any fees payable hereunder, (6) reduce the amount or postpone the due date of any reimbursement of a drawing (other than from a Mandatory Payment) in respect of any Letter of Credit, (7) extend the expiration date of any Letter of Credit beyond the Maturity Date, (8) change in any manner the obligations of Lenders relating to the purchase of participations in Letters of Credit, or (9) change in any manner or waive the provisions contained in subsection 8.1; (b) each Lender, (1) change in any manner the definition of "Pro Rata Share" or the definition of "Requisite Lenders" (except for any changes resulting solely from an increase in Letter of Credit Commitments approved by Requisite Lenders), (2) change in any manner any provision of this Agreement that, by its terms, expressly requires the approval or concurrence of all Lenders, (3) release any Lien granted in favor of Administrative Agent or Collateral Agent with respect to all or substantially all of the Collateral or release any substantial portion of Borrowers from their obligations under this Agreement, in each case other than in accordance with the terms of the Credit Documents, or (4) change in any manner or waive the provisions contained in subsection 10.6; (c) Administrative Agent and Issuing Lender, change in any manner the definition of "Eligible Assignee"; (d) Administrative Agent, affect the rights or duties of Administrative Agent (in its capacity as Administrative Agent) under this Agreement or any other Credit Document; and (e) Issuing Lender, affect the rights or duties of Issuing Lender (in its capacity as Issuing Lender) under this Agreement or any other Credit Document.
In addition, (i) no amendment, modification, termination or waiver of any provision of any Note shall be effective without the written concurrence of the Lender which is the holder of that Note, (ii) no amendment, modification, termination or waiver of any provision of Section 3 shall be effective without the written concurrence of Administrative Agent and, with respect to the purchase of participations in Letters of Credit, without the written concurrence of Issuing Lender, (iii) no amendment, modification, termination or waiver of any provision of Section 9 or of any other provision of this Agreement which, by its terms, expressly requires the approval or concurrence of Administrative Agent shall be effective without the written concurrence of Administrative Agent, as the case may be and (iii) no amendment, modification, termination or waiver of any provision of this Agreement which, by its terms, expressly requires the approval or concurrence of Issuing Lender shall be effective without the written concurrence of Issuing Lender. Administrative Agent may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of that Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on any Borrower or Borrowers in any case shall entitle any Borrower or Borrowers to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this
subsection 10.6 shall be binding upon each Lender at the time outstanding, each future Lender and, if signed by Borrowers, on Borrowers. Administrative Agent agrees that promptly after the effectiveness of any amendment, termination, supplement, waiver or other modification of this Agreement it shall provide, or cause to be provided, to each Lender a copy thereof to the extent such a copy is available to Administrative Agent.
10.7. INDEPENDENCE OF COVENANTS.
All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of an Event of Default or Potential Event of Default if such action is taken or condition exists.
10.8. NOTICES; EFFECTIVENESS OF SIGNATURES.
Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served, or sent by telefacsimile or United States mail or courier service or (subject to the following paragraph of this subsection 10.8) electronic mail and shall be deemed to have been given (a) when delivered in person or by courier service, (b) upon receipt of telefacsimile in complete and legible form, (c) 3 Business Days after depositing it in the United States mail with postage prepaid and properly addressed, or (d) in the case of communications delivered by electronic mail to the extent provided in the following paragraph of this subsection 10.8, as provided pursuant to such paragraph; provided, that notices to Administrative Agent and Issuing Lender shall not be effective until received. For the purposes hereof, the address of each party hereto shall be as set forth under such party's name on the signature pages hereof or (i) as to Company and Administrative Agent, such other address as shall be designated by such Person in a written notice delivered to the other parties hereto and (ii) as to each other party, such other address as shall be designated by such party in a written notice delivered to Administrative Agent.
Notices and other communications to the Lenders hereunder may
be delivered or furnished by electronic communication (including e-mail and
Internet or intranet websites) pursuant to procedures approved by Administrative
Agent; provided, that the foregoing shall not apply to notices to any Lender
pursuant to Section 2 or Section 3 hereof if such Lender has notified
Administrative Agent that it is incapable of receiving notices under such
Section by electronic communication. Administrative Agent or any Borrower may,
in its discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by it;
provided, that approval of such procedures may be limited to particular notices
or communications.
Credit Documents and notices under the Credit Documents may be transmitted and/or signed by telefacsimile. The effectiveness of any such documents and signatures shall, subject to applicable law, have the same force and effect as an original copy with manual signatures and shall be binding on all Credit Parties, Administrative Agent and
Lenders. Administrative Agent may also require that any such documents and signature be confirmed by a manually-signed copy thereof; provided, however, that the failure to request or deliver any such manually-signed copy shall not affect the effectiveness of any facsimile document or signature.
10.9. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
A. All representations, warranties and agreements made herein or in any other Credit Document shall survive the execution and delivery of this Agreement and the issuance of the Letters of Credit hereunder.
B. Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of Borrowers set forth in subsections 2.6D, 2.7, 3.5A, 10.2, 10.3, 10.4, 10.19 and 10.20 and the agreements of Lenders set forth in subsections 9.2C, 9.4, 10.5, 10.19 and 10.20 shall survive the payment of the Revolving Loans, the cancellation or expiration of the Letters of Credit and the reimbursement of any amounts drawn thereunder, and the termination of this Agreement (and the benefits to a Lender of such agreements of Borrowers shall survive such Lender's ceasing to be a party hereto pursuant to subsection 10.1B).
10.10. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of Administrative Agent or any Lender in the exercise of any power, right or privilege hereunder or under any other Credit Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement and the other Credit Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available.
10.11. MARSHALLING; PAYMENTS SET ASIDE.
Neither Administrative Agent nor any Lender shall be under any obligation to marshal any assets in favor of Company or any other party or against or in payment of any or all of the Obligations. To the extent that Company makes a payment or payments to Administrative Agent or Lenders (or to Administrative Agent for the benefit of Lenders), or Administrative Agent or Lenders enforce any security interests or exercise their rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, any other state or federal law, common law or any equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor or related thereto, shall be revived and continued in full force and effect as if such payment or payments had not been made or such enforcement or setoff had not occurred.
10.12. SEVERABILITY.
In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
10.13. OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS; DAMAGE WAIVER.
The obligations of Lenders hereunder are several and no Lender shall be responsible for the obligations or Letter of Credit Commitments of any other Lender hereunder. Nothing contained herein or in any other Credit Document, and no action taken by Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders, or Lenders and Company, as a partnership, an association, a Joint Venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out of this Agreement and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose.
To the extent permitted by law, each Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with or as a result of this Agreement, any other Credit Document, any transaction contemplated by the Credit Documents, any Letter of Credit or Revolving Loan or the use of proceeds of drawings thereunder.
10.14. RELEASE OF SECURITY INTEREST.
Upon the proposed sale or other disposition of any Collateral that is permitted by this Agreement or to which Requisite Lenders have otherwise consented, for which a Credit Party desires to obtain a security interest release from Collateral Agent, such Credit Party shall deliver to Administrative Agent and Collateral Agent an Officer's Certificate (i) stating that the Collateral or the Capital Stock subject to such disposition is being sold or otherwise disposed of in compliance with the terms hereof and of the Credit Documents and (ii) specifying the Collateral or Capital Stock being sold or otherwise disposed of in the proposed transaction. Upon the receipt of such Officer's Certificate, Collateral Agent shall, at such Credit Party's expense, so long as Collateral Agent (a) believes in good faith that the facts stated in such Officer's Certificate are true and correct and (b) if the sale or other disposition of such item of Collateral or Capital Stock constitutes an Asset Sale, shall have received evidence satisfactory to it that arrangements satisfactory to it have been made for delivery of the Net Asset Sale Proceeds if and as required by subsection 2.4, execute and deliver such releases of its security interest in such Collateral as may be reasonably requested by such Credit Party. In the event of any conflict or inconsistency between this subsection 10.14 and the terms of the Intercreditor Agreement, the terms of the Intercreditor Agreement shall prevail.
10.15. HEADINGS.
Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect.
10.16. APPLICABLE LAW.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER OR ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THAT WOULD REQUIRE APPLICATION OF ANOTHER LAW.
10.17. CONSTRUCTION OF AGREEMENT.
Each of the parties hereto acknowledges that it has been represented by counsel in the negotiation and documentation of the terms of this Agreement, that it has had full and fair opportunity to review and revise the terms of this Agreement, and that this Agreement has been drafted jointly by all of the parties hereto. Accordingly, each of the parties hereto acknowledges and agrees that the terms of this Agreement shall not be construed against or in favor of another party.
10.18. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT, OR ANY OBLIGATIONS THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK (AS ANY OF ADMINISTRATIVE AGENT, ANY LENDER OR LENDERS BRINGING SUCH ACTION MAY ELECT IN ITS OR THEIR SOLE DISCRETION). BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH BORROWER, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(i) ACCEPTS (AND SUBMITS TO) GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS;
(ii) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(iii) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO SUCH
BORROWER AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SUBSECTION 10.8;
(iv) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH BORROWER IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT;
(v) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST SUCH BORROWER IN THE COURTS OF ANY OTHER JURISDICTION; AND
(vi) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 10.18
RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO
THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW
SECTION 5-1402 OR OTHERWISE.
10.19. WAIVER OF JURY TRIAL.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS CREDIT TRANSACTION
OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this
waiver is intended to be all-encompassing of any and all disputes that may be
filed in any court and that relate to the subject matter of this transaction,
including contract claims, tort claims, breach of duty claims and all other
common law and statutory claims. Each party hereto acknowledges that this waiver
is a material inducement to enter into a business relationship, that each has
already relied on this waiver in entering into this Agreement, and that each
will continue to rely on this waiver in their related future dealings. Each
party hereto further warrants and represents that it has reviewed this waiver
with its legal counsel and that it knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING
(OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION
10.19 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THE CREDIT EXTENDED HEREUNDER. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
10.20. CONFIDENTIALITY.
Each Lender shall hold all non-public information obtained pursuant to the requirements of this Agreement that has been identified as confidential by Company in accordance with such Lender's customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices, it being understood and agreed by Borrowers that in any event a Lender may make (a) disclosures to Affiliates and professional advisors of such Lender, (b) disclosures reasonably required by (i) any bona fide assignee, transferee or participant in connection with the contemplated assignment or transfer by such Lender of any Obligations or any participations therein, or (ii) any direct or indirect contractual counterparties in swap agreements or such contractual counterparties' professional advisors provided, that such assignee, transferee, participant, contractual counterparty or professional advisor agrees to keep such information confidential to the same extent required of Lenders hereunder, (c) disclosures to any court or tribunal (whether or not pursuant to subpoena) in connection with any action arising out of or related to this Agreement, or (d) disclosures required or requested by any Government Authority or representative thereof or pursuant to legal process; provided, that unless specifically prohibited by applicable law or court order, each Lender shall notify Company of any request by any Government Authority or representative thereof (other than any such request in connection with any examination of such Lender by such Government Authority) for disclosure of any such non-public information prior to disclosure of such information; and provided, further, that in no event shall any Lender be obligated or required to return any materials furnished by Company or any of its Subsidiaries (including CPIH Subsidiaries).
Notwithstanding anything herein to the contrary, information required to be treated as confidential by reason of the foregoing shall not include, and Administrative Agent, each Lender and the respective Affiliates of each of the foregoing (and the respective partners, directors, officers, employees, agents, advisors and other representatives of each of the foregoing and their respective Affiliates) (collectively, the "LENDER PARTIES") may disclose to any and all Persons, without limitation of any kind, (x) any information with respect to United States federal and state income tax treatment and United States federal income tax structure of the transactions contemplated hereby and any facts that may be relevant to understanding such tax treatment, which facts shall not include for this purpose the names of the parties or any other Person named herein, or information that would permit identification of the parties or such other Persons, or any pricing terms or other non-public business or financial information that is unrelated to such tax treatment or facts, and (y) all materials of any kind (including opinions or other tax analyses) relating to such tax treatment or facts that are provided to any of the Lender Parties.
10.21. NO FIDUCIARY DUTY.
Neither Administrative Agent nor any Lender has or shall have, by reason of this Agreement or any of the Credit Documents, a fiduciary relationship in respect of, or a fiduciary duty to, any Borrower, Borrowers, any other Credit Party or Credit Parties, and the relationship between Administrative Agent and Lenders, on one hand, and each Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor.
10.22. COUNTERPARTS; EFFECTIVENESS.
This Agreement and any amendments, waivers, consents or supplements hereto or in connection herewith may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto.
10.23. NO THIRD PARTY BENEFICIARIES.
Nothing in this Agreement, express or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Indemnitees and Released Parties related to Administrative Agent, and Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.
BORROWERS:
COVANTA ENERGY CORPORATION, as Borrower
EACH OF THE ENTITIES NAMED ON SCHEDULE
A ANNEXED
Notice Address for each Borrower:
c/o Covanta Energy Group, Inc.
40 Lane Road
Fairfield, NJ 07007
Attn: Jeffrey Horowitz, Esq.
ADMINISTRATIVE AGENT AND LENDERS:
BANK ONE, NA,
as Administrative Agent and as Issuing
Lender
Notice Address:
120 South LaSalle Street
8th Floor
Chicago, IL 60603
Attn: Douglas Boersma
Facsimile: (312) 661-7352
SZ INVESTMENTS, L.L.C.,
as a Lender
Notice Address:
Two North Riverside Plaza
Suite 600
Chicago, Illinois 60606
Attention: Donald J. Liebentritt and
Philip G. Tinkler
Facsimile: (312) 454-0335
D. E. SHAW LAMINAR PORTFOLIOS, L.L.C.,
as a Lender
Notice Address:
120 West Forty-Fifth Street
Floor 39, Tower 45
New York, NY 10036
Attention: Max Holmes
Facsimile: (212) 478-0100
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019
Attention: Steven Wilamowsky, Esq.
Facsimile: (212) 728-8111
THIRD AVENUE TRUST, ON BEHALF OF THE
THIRD AVENUE VALUE FUND SERIES,
as a Lender
Notice Address:
622 Third Avenue
New York, NY 10017
Attention: General Counsel
Facsimile: (212) 735-0003
with a copy to:
Pillsbury Winthrop LLP
One Battery Park Plaza
New York, NY 10004
Attention: Richard Epling, Esq.
Facsimile: (212) 858-1500
SCHEDULE A
1. COMPANY
2. AMOR 14 Corporation
3. Burney Mountain Power
4. Covanta Acquisition, Inc.
5. Covanta Alexandria/Arlington, Inc.
6. Covanta Bessemer, Inc.
7. Covanta Bristol, Inc.
8. Covanta Cunningham Environmental Support, Inc.
9. Covanta Energy Americas, Inc.
10. Covanta Energy Construction, Inc.
11. Covanta Energy Corporation
12. Covanta Energy Group, Inc.
13. Covanta Energy International, Inc.
14. Covanta Energy Resource Corp.
15. Covanta Energy Services, Inc.
16. Covanta Energy West, Inc.
17. Covanta Engineering Services, Inc.
18. Covanta Fairfax, Inc.
19. Covanta Geothermal Operations Holdings, Inc.
20. Covanta Geothermal Operations, Inc.
21. Covanta Haverhill Properties, Inc.
22. Covanta Haverhill, Inc.
23. Covanta Heber Field Energy, Inc.
24. Covanta Hennepin Energy Resource Co., Limited Partnership
25. Covanta Hillsborough, Inc.
26. Covanta Honolulu Resource Recovery Venture
27. Covanta Huntsville, Inc.
28. Covanta Hydro Energy, Inc.
29. Covanta Hydro Operations West, Inc.
30. Covanta Hydro Operations, Inc.
31. Covanta Imperial Power Services, Inc.
32. Covanta Indianapolis, Inc.
33. Covanta Kent, Inc.
34. Covanta Lancaster, Inc.
35. Covanta Lee, Inc.
36. Covanta Long Island, Inc.
37. Covanta Marion Land Corp.
38. Covanta Marion, Inc.
39. Covanta Mid-Conn, Inc.
40. Covanta Montgomery, Inc.
41. Covanta New Martinsville Hydroelectric Corporation
42. Covanta New Martinsville Hydro-Operations Corporation
43. Covanta Oahu Waste Energy Recovery, Inc.
44. Covanta Omega Lease, Inc.
45. Covanta Onondaga Operations, Inc.
46. Covanta Operations of Union, LLC
47. Covanta OPW Associates, Inc.
48. Covanta OPWH, Inc.
49. Covanta Pasco, Inc.
50. Covanta Plant Services of New Jersey, Inc.
51. Covanta Power Equity Corporation
52. Covanta Power Pacific, Inc.
53. Covanta Power Plant Operations
54. Covanta Projects of Hawaii, Inc.
55. Covanta Projects, Inc.
56. Covanta RRS Holdings, Inc.
57. Covanta Secure Services, Inc.
58. Covanta SIGC Energy, Inc.
59. Covanta SIGC Energy II, Inc.
60. Covanta SIGC Geothermal Operations, Inc.
61. Covanta Stanislaus, Inc.
62. Covanta Systems, LLC
63. Covanta Wallingford Associates, Inc.
64. Covanta Waste to Energy , LLC
65. Covanta Water Holdings, Inc.
66. Covanta Water Systems, Inc.
67. Covanta Water Treatment Services, Inc.
68. DSS Environmental, Inc.
69. ERC Energy II, Inc.
70. ERC Energy, Inc.
71. Haverhill Power, LLC
72. Heber Field Energy II, Inc.
73. Heber Loan Partners
74. LMI, Inc.
75. Mammoth Geothermal Company
76. Mammoth Power Company
77. Michigan Waste Energy, Inc.
78. Mt. Lassen Power
79. Pacific Geothermal Company
80. Pacific Oroville Power, Inc.
81. Pacific Wood Fuels Company
82. Pacific Wood Services Company
83. Three Mountain Operations, Inc.
84. Three Mountain Power, LLC
EXHIBIT 4.20
EXECUTION VERSION
THE 8.25% SENIOR SECURED NOTES DUE 2011 WILL BE INITIALLY ISSUED IN GLOBAL FORM AND HELD BY DTC. PLAN PARTICIPANTS ENTITLED TO RECEIVE NOTES WILL BE REQUIRED TO HOLD THEIR INTERESTS DIRECTLY OR INDIRECTLY THROUGH DTC PARTICIPANTS EXCEPT IN THE LIMITED CIRCUMSTANCES SET FORTH IN THIS INDENTURE.
COVANTA ENERGY CORPORATION
AND EACH OF THE GUARANTORS NAMED HEREIN
$230,000,000 AT STATED MATURITY
8.25% SENIOR SECURED NOTES DUE 2011
INDENTURE
DATED AS OF MARCH 10, 2004
U.S. BANK NATIONAL ASSOCIATION
AS TRUSTEE
CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section --------------- ----------------- 310(a)(1).......................................................... 7.10 (a)(2).......................................................... 7.10 (a)(3).......................................................... N.A. (a)(4).......................................................... N.A. (a)(5).......................................................... 7.08, 7.10 (b)............................................................. 7.08, 7.10, 13.02 (c)............................................................. N.A. 311(a)............................................................. 7.11 (b)............................................................. 7.11 (c)............................................................. N.A. 312(a)............................................................. 2.05 (b)............................................................. 13.03 (c)............................................................. 13.03 313(a)............................................................. 7.06 (b)(1).......................................................... N.A. (b)(2).......................................................... 7.06 (c)............................................................. 7.06 (d)............................................................. 7.06 314(a)............................................................. 4.03, 4.04 (b)............................................................. 10.02 (c)(1).......................................................... 7.02, 13.04 (c)(2).......................................................... 7.02, 13.05 (c)(3).......................................................... N.A. (d)............................................................. 10.03, 10.04, 10.05 (e)............................................................. 13.05 (f)............................................................. N.A. 315(a)............................................................. 7.01(b) (b)............................................................. 7.05 (c)............................................................. 7.01 (d)............................................................. 6.05, 7.01(c) (e)............................................................. 6.11 316(a) (last sentence)............................................. 2.9 (a)(1)(A)....................................................... 6.05 (a)(1)(B)....................................................... 6.04 (a)(2).......................................................... N.A. (b)............................................................. 6.07 (c)............................................................. 9.04 317(a)(1).......................................................... 6.08 (a)(2).......................................................... 6.09 (b)............................................................. 2.04 318(a)............................................................. 13.01 (b)............................................................. N.A. (c)............................................................. 13.01 |
TABLE OF CONTENTS
PAGE
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE.................................................. 1
Section 1.01 Definitions..................................................................... 1
Section 1.02 Other Definitions............................................................... 30
Section 1.03 Incorporation by Reference of Trust Indenture Act............................... 30
Section 1.04 Rules of Construction........................................................... 31
ARTICLE 2. THE NOTES................................................................................... 32
Section 2.01 Form and Dating................................................................. 32
Section 2.02 Execution and Authentication.................................................... 32
Section 2.03 Registrar and Paying Agent...................................................... 33
Section 2.04 Paying Agent to Hold Money in Trust............................................. 33
Section 2.05 Holder Lists.................................................................... 34
Section 2.06 Transfer and Exchange........................................................... 34
Section 2.07 Replacement Notes............................................................... 38
Section 2.08 Outstanding Notes............................................................... 38
Section 2.09 Treasury Notes.................................................................. 39
Section 2.10 Temporary Notes................................................................. 39
Section 2.11 Cancellation.................................................................... 39
Section 2.12 Defaulted Interest.............................................................. 39
ARTICLE 3. REDEMPTION AND PREPAYMENT................................................................... 40
Section 3.01 Notices to Trustee.............................................................. 40
Section 3.02 Selection of Notes to Be Redeemed or Purchased.................................. 40
Section 3.03 Notice of Redemption............................................................ 40
Section 3.04 Effect of Notice of Redemption.................................................. 41
Section 3.05 Deposit of Redemption or Purchase Price......................................... 41
Section 3.06 Notes Redeemed or Purchased in Part............................................. 42
Section 3.07 Optional Redemption............................................................. 42
Section 3.08 Mandatory Redemption............................................................ 43
Section 3.09 Offer to Purchase by Application of Excess Proceeds............................. 43
Section 3.10 Mandatory Prepayment............................................................ 45
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TABLE OF CONTENTS
(continued)
PAGE
ARTICLE 4. COVENANTS................................................................................... 45
Section 4.01 Payment of Notes................................................................ 45
Section 4.02 Maintenance of Office or Agency................................................. 45
Section 4.03 Reports......................................................................... 46
Section 4.04 Compliance Certificate.......................................................... 46
Section 4.05 Taxes........................................................................... 47
Section 4.06 Stay, Extension and Usury Laws.................................................. 47
Section 4.07 Restricted Payments............................................................. 47
Section 4.08 Dividend and Other Payment Restrictions Affecting Subsidiaries.................. 52
Section 4.09 Restrictions on Indebtedness.................................................... 54
Section 4.10 Asset Sales..................................................................... 57
Section 4.11 Transactions with Affiliates.................................................... 60
Section 4.12 Liens........................................................................... 62
Section 4.13 Business Activities............................................................. 62
Section 4.14 Corporate Existence............................................................. 62
Section 4.15 Offer to Repurchase Upon Change of Control...................................... 63
Section 4.16 Payments for Consent............................................................ 64
Section 4.17 Additional Subsidiary Guarantees and Liens...................................... 65
Section 4.18 Designation of Restricted and Unrestricted Subsidiaries......................... 65
Section 4.19 Limitation on Sale and Leaseback Transactions................................... 65
Section 4.20 Limitation on Performance Guarantees............................................ 66
Section 4.21 Payment of Additional Interest.................................................. 66
ARTICLE 5. SUCCESSORS.................................................................................. 67
Section 5.01 Merger, Consolidation, or Sale of Assets........................................ 67
Section 5.02 Successor Corporation Substituted............................................... 68
ARTICLE 6. DEFAULTS AND REMEDIES....................................................................... 68
Section 6.01 Events of Default............................................................... 68
Section 6.02 Acceleration.................................................................... 71
Section 6.03 Other Remedies.................................................................. 71
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TABLE OF CONTENTS
(continued)
PAGE
Section 6.04 Waiver of Past Defaults......................................................... 72
Section 6.05 Control by Majority............................................................. 72
Section 6.06 Limitation on Suits............................................................. 72
Section 6.07 Rights of Holders of Notes to Receive Payment................................... 73
Section 6.08 Collection Suit by Trustee...................................................... 73
Section 6.09 Trustee May File Proofs of Claim................................................ 73
Section 6.10 Priorities...................................................................... 74
Section 6.11 Undertaking for Costs........................................................... 74
ARTICLE 7. TRUSTEE..................................................................................... 74
Section 7.01 Duties of Trustee............................................................... 74
Section 7.02 Rights of Trustee............................................................... 75
Section 7.03 Individual Rights of Trustee.................................................... 76
Section 7.04 Trustee's Disclaimer............................................................ 76
Section 7.05 Notice of Defaults.............................................................. 77
Section 7.06 Reports by Trustee to Holders................................................... 77
Section 7.07 Compensation and Indemnity...................................................... 77
Section 7.08 Replacement of Trustee.......................................................... 78
Section 7.09 Successor Trustee by Merger, etc................................................ 79
Section 7.10 Eligibility; Disqualification................................................... 79
Section 7.11 Preferential Collection of Claims Against Company............................... 79
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.................................................... 80
Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance........................ 80
Section 8.02 Legal Defeasance and Discharge.................................................. 80
Section 8.03 Covenant Defeasance............................................................. 80
Section 8.04 Conditions to Legal or Covenant Defeasance...................................... 81
Section 8.05 Deposited Money and Government Securities to be Held in Trust; Other
Miscellaneous Provisions..................................................... 82
Section 8.06 Repayment to Company............................................................ 83
Section 8.07 Reinstatement................................................................... 83
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TABLE OF CONTENTS
(continued)
PAGE
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER............................................................ 84
Section 9.01 Without Consent of Holders of Notes............................................. 84
Section 9.02 With Consent of Holders of Notes................................................ 84
Section 9.03 Compliance with Trust Indenture Act............................................. 86
Section 9.04 Revocation and Effect of Consents............................................... 86
Section 9.05 Notation on or Exchange of Notes................................................ 86
Section 9.06 Trustee to Sign Amendments, etc................................................. 87
ARTICLE 10. COLLATERAL AND SECURITY..................................................................... 87
Section 10.01 Security Documents.............................................................. 87
Section 10.02 Recording and Opinions.......................................................... 88
Section 10.03 Release of Collateral/Additional Liens.......................................... 88
Section 10.04 Certificates and Opinions of Counsel............................................ 91
Section 10.05 Certificates of the Trustee..................................................... 91
Section 10.06 Authorization of Actions to be Taken by the Trustee Under the Security
Documents...................................................................... 91
Section 10.07 Authorization of Receipt of Funds by the Trustee Under the Security Documents... 92
Section 10.08 Termination of Security Interest................................................ 92
ARTICLE 11. NOTE GUARANTEES............................................................................. 92
Section 11.01 Guarantee....................................................................... 92
Section 11.02 Limitation on Guarantor Liability............................................... 94
Section 11.03 Execution and Delivery of Subsidiary Guarantees................................. 94
Section 11.04 Guarantors May Consolidate, etc., on Certain Terms.............................. 94
Section 11.05 Releases Following Sale of Assets............................................... 95
Section 11.06 Release Following Designation as an Unrestricted Subsidiary..................... 96
ARTICLE 12. SATISFACTION AND DISCHARGE.................................................................. 96
Section 12.01 Satisfaction and Discharge...................................................... 96
Section 12.02 Application of Trust Money...................................................... 97
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(continued)
PAGE
ARTICLE 13. MISCELLANEOUS............................................................................... 98
Section 13.01 Trust Indenture Act Controls.................................................... 98
Section 13.02 Notices......................................................................... 98
Section 13.03 Communication by Holders of Notes with Other Holders of Notes................... 99
Section 13.04 Certificate and Opinion as to Conditions Precedent.............................. 99
Section 13.05 Statements Required in Certificate or Opinion................................... 99
Section 13.06 Rules by Trustee and Agents..................................................... 100
Section 13.07 No Personal Liability of Directors, Officers, Employees and Stockholders........ 100
Section 13.08 Governing Law................................................................... 100
Section 13.09 No Adverse Interpretation of Other Agreements................................... 100
Section 13.10 Successors...................................................................... 100
Section 13.11 Severability.................................................................... 100
Section 13.12 Counterpart Originals........................................................... 100
Section 13.13 Table of Contents, Headings, etc................................................ 101
Schedule I Schedule of Guarantors.......................................................... I-1
Exhibit A Form of Notes................................................................... A-1
Exhibit B Form of Notation of Guarantee................................................... B-1
Exhibit C Form of Supplemental Indenture to be Delivered by Subsequent Guarantors......... C-1
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INDENTURE dated as of March 10, 2004 among Covanta Energy Corporation, a Delaware corporation (the "Company"), the Guarantors (as defined) and U.S. Bank National Association, as trustee (the "Trustee").
The Company, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders (as defined) of the 8.25% Senior Secured Notes due 2011 (the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions.
"Accreted Value" means, subject to reduction pursuant to Section 3.10, with respect to each $1,000 principal amount at Stated Maturity of Notes, (i) as of the Issue Date, the Initial Principal Amount; (ii) as of the Stated Maturity of the principal of the Notes, $1,000.00 and (iii) as of any other date of determination, the Initial Principal Amount plus an accretion on such Initial Principal Amount equal to an amount that causes the yield to maturity on such Note (taking into account the amount and timing of all payments of stated interest at the Stated Maturity of such payments, other than additional interest payable pursuant to Section 4.21, if any) to equal 10.47759% per annum, calculated on a semi-annual bond equivalent basis using a 360-day year comprised of twelve 30-day months and rounded to the nearest $0.01.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired or owned by such specified Person.
"Adjusted EBITDA" means, for any period, for the Company and its
Consolidated Subsidiaries (i) without duplication, the aggregate amount derived
by combining the amounts for such period of (a) "Operating income (loss)", plus
(b) Net Depreciation and Amortization Expense, plus (c) "Amortization of premium
and discount, net", plus (d) "Unbilled receivables", to the extent associated
with accretion accounting for Limited Recourse Debt relating to Projects of the
Company and its Subsidiaries, minus (e) "Equity in income from unconsolidated
investments", minus (ii) without duplication, the aggregate amount derived by
combining the amounts (each expressed as a positive number) for such period of
(a) "Payment of debt", to the extent consisting of principal payments on Limited
Recourse Debt relating to Projects of the Company and its Subsidiaries, plus (b)
"Minority interests", plus (c) the change in Accreted Value of the Notes, as
each such line item referred to in clauses (i)(a), (i)(e) and (ii)(b) is
reflected in the Company's consolidated statement of income prepared in
conformity with GAAP and as each such line item referred to in clauses (i)(c),
(i)(d) and (ii) (a) is reflected in the Company's consolidated statement of cash
flows prepared in conformity with GAAP, in each
case reported in a manner consistent with the Company's reporting of such amount in its last quarterly or annual report (as the case may be) on Form 10-Q or Form 10-K, respectively, filed with the Commission prior to the Issue Date, whether such line items are so titled or otherwise titled; provided, however, that, with respect to any such period ending during 2008, each of the line items referred to above shall be calculated as if the terms of the service agreement of the Company and its Subsidiaries relating to the Alexandria Project in effect for fiscal year 2007 continued in effect during 2008, without giving effect to any negative impact on Adjusted EBITDA from the terms of any extension in 2008 of such service agreement.
"Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Agent" means any Registrar, co-registrar, Paying Agent or additional paying agent.
"Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange.
"Approved DHC Investor" means any Person that acquires shares of common stock of DHC pursuant to a transaction determined by at least a majority of the members of the board of directors of DHC (who are not representatives, nominees or Affiliates of such Person) to be in the best interests of DHC and its stockholders.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets, property or rights (other than the sale of Equity Interests of the Company by the Company); provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole shall be governed by Section 4.15 or Section 5.01 and not by Section 4.10; and
(2) the issuance of Equity Interests by any Restricted Subsidiary of the Company or the sale of Equity Interests in any Restricted Subsidiary of the Company.
Notwithstanding the preceding, none of the following items shall be deemed to be an Asset Sale:
(1) any single transaction or series of related transactions that involves assets, property or rights or the issuance of Equity Interests having a fair market value, or yielding Net Proceeds, of less than $10.0 million;
(2) any transfer of assets, property or rights by the Company to a Restricted Subsidiary of the Company or by a Restricted Subsidiary of the Company to the Company or another Restricted Subsidiary of the Company;
(3) an issuance of Equity Interests by a Restricted Subsidiary of the Company to the Company or a Restricted Subsidiary of the Company;
(4) the sale, lease, sublease or assignment of equipment, inventory, accounts receivable or other assets, property or rights in the ordinary course of business;
(5) the disposition of equipment no longer used or useful in the business of the Company or any of its Restricted Subsidiaries;
(6) a Sale/Leaseback Transaction with respect to any assets within 90 days of the acquisition of such assets which complies with the terms of this Indenture;
(7) the sale or other disposition of Cash Equivalents;
(8) the grant of any license of patents or trademarks or registrations therefor and other similar intellectual property in the ordinary course of business;
(9) the granting of any Permitted Lien (or the foreclosure thereon);
(10) the surrender or waiver of contract rights or the settlement, release or surrender of a contract, tort or other litigation claim in the ordinary course of business;
(11) any sale of Indebtedness or other securities of an Unrestricted Subsidiary of the Company;
(12) a Restricted Payment permitted to be made under
Section 4.07 or a Permitted Investment; or
(13) any issuance of employee stock options or stock awards pursuant to benefit plans in existence on the Issue Date.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate implicit in such transaction, determined in accordance with GAAP) of the total obligations of the lessee for net rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended or may be, at the option of the lessor, extended).
"Bank Indebtedness" means any and all amounts payable under or in respect of the Credit Agreements and any Permitted Refinancing Indebtedness with respect thereto, as amended from time to time, including principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company or any Guarantor whether or not a claim for post-filing interest is allowed in such proceedings), fees,
charges, expenses, reimbursement obligations, guarantees and all other amounts payable thereunder or in respect thereof.
"Bankruptcy Court" means the United States Bankruptcy Court for the Southern District of New York and any other court properly exercising jurisdiction over any relevant case under Chapter 11 of the Bankruptcy Law.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors.
"Bankrupt Subsidiary" means any of Covanta Warren Energy Resource Co. LP, a Delaware limited partnership, Covanta Lake II, Inc., a Florida corporation, Covanta Tampa Construction, Inc., a Delaware corporation, Covanta Tampa Bay, Inc., a Florida corporation, Covanta Warren Holdings I, Inc., a Virginia corporation, or Covanta Warren Holdings II, Inc., a California corporation, in each case so long as such Person remains subject to the Chapter 11 Cases before the Bankruptcy Court.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms "Beneficially Own" and "Beneficially Owned" have corresponding meanings.
"Board of Directors" means the Board of Directors of the Company.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;
(3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.
"Cash Equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States government having maturities of not more than one year from the date of acquisition;
(3) time deposits, demand deposits, certificates of deposit and Eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances with maturities not exceeding one year and overnight bank deposits, in each case, with any bank lender party to the First Lien Letter of Credit Facility or an Affiliate thereof or with any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thomson Bank Watch Rating of "B" or better;
(4) securities issued by any state of the United States or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Moody's or S & P;
(5) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above;
(6) commercial paper having one of the two highest ratings obtainable from Moody's or S&P and in each case maturing within one year after the date of acquisition; and
(7) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (6) of this definition.
"Cash Management System" means the cash management system of the Company and its Subsidiaries as in effect on the Issue Date and any amendments, modifications or extensions thereof on terms not materially less favorable to the Company and its Restricted Subsidiaries, taken as a whole, than the terms of such system as in effect on the Issue Date.
"Change of Control" means the occurrence of any of the following:
(1) any "person" (as such term is used in Section 13(d)(3) of the Exchange Act), other than one or more Permitted Holders, becomes the Beneficial Owner, directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the Company, whether as a result of the issuance of securities of the Company, any merger, consolidation, liquidation or dissolution of the Company, any direct or indirect transfer of securities or otherwise; provided that the creation of a holding company to own all of the Capital Stock of the Company shall not be deemed to constitute a Change of Control under this clause (1) if, immediately after consummation of such transaction, the holders of the Capital Stock of such holding company are the same holders of the Capital Stock
of the Company immediately before such transaction and the percentage holding of such holders is unaffected by the creation of such holding company;
(2) the first day on which a majority of the members of the Board of Directors are not Continuing Directors;
(3) the adoption of a plan relating to the liquidation or dissolution of the Company, other than to effect a Change of Domicile; or
(4) the sale, lease or transfer, other than by way of merger or consolidation, in one or a series of related transactions, of all or substantially all the assets of the Company and its Restricted Subsidiaries taken as a whole to any "person" or "group" as that term is used in Section 13(d)(3) of the Exchange Act (other than to the Company, any Guarantor or one or more Permitted Holders or other than to effect a Change of Domicile).
"Change of Domicile" means a transaction or series of related transactions, including without limitation (1) a merger, amalgamation, combination or consolidation of the Company with or into another Person, (2) the acquisition of all the Capital Stock of the Company or (3) the sale, transfer, conveyance or other disposition of all or substantially all the assets of the Company and its Subsidiaries taken as a whole to another Person, the sole purpose of which is to reincorporate the Company in another jurisdiction or organize a successor entity to the Company in another jurisdiction.
"Chapter 11 Cases" means those bankruptcy cases jointly administered under the caption "In re Ogden New York Services, Inc., et al.," Case Nos. 02-40826 (CB), et al.
"Clearstream" means Clearstream Banking, S.A.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means all property and assets of the Company or any Guarantor with respect to which from time to time a Lien is granted as security for the Notes pursuant to the applicable Security Documents.
"Collateral Agent" means Bank of America, N.A. in its capacity as the "Collateral Agent" as appointed pursuant to the Security Documents and any successor thereto in such capacity.
"Commission" means the Securities and Exchange Commission.
"Company" means Covanta Energy Corporation, a Delaware corporation, and any and all successors thereto.
"Consolidated Cash Interest Expense" means, for any period, (i) Consolidated Interest Expense for such period minus (ii) to the extent included in Consolidated Interest Expense for such period, the change in Accreted Value of the Notes, interest paid in kind and not in cash during such period and any other amounts not paid or payable in cash.
"Consolidated Coverage Ratio" means, with respect to the Company and its Consolidated Subsidiaries, as of any date of determination, the ratio of:
(1) the aggregate amount of Adjusted EBITDA for the period of the most recent four consecutive fiscal quarters (commencing on or after the Issue Date) for which internal financial statements are available prior to the date of such determination to
(2) Consolidated Cash Interest Expense for such four fiscal quarters; provided, however, that:
(A) if the Company or any of its Restricted Subsidiaries has incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an incurrence of Indebtedness, Adjusted EBITDA and Consolidated Cash Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been incurred on the first day of such period (in each case other than Indebtedness incurred under any revolving credit facility, in which case interest expense shall be computed based upon the average daily balance of such Indebtedness during the applicable period) and the discharge of any other Indebtedness repaid, repurchased, defeased (whether legally or as to covenants only) or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period;
(B) if the Company or any of its Restricted Subsidiaries has repaid, repurchased, defeased or otherwise discharged, including permanent reductions in letter of credit commitments, any Indebtedness since the beginning of such period or if any Indebtedness is to be repaid, repurchased, defeased (whether legally or as to covenants only) or otherwise discharged, including permanent reductions in letter of credit commitments (in each case, if such Indebtedness has been permanently repaid and has not been replaced, other than Indebtedness incurred under any revolving credit facility unless such Indebtedness is permanently reduced, in which case interest expense shall be computed based upon the average daily balance of such Indebtedness during the applicable period) on the date of the transaction giving rise to the need to calculate the Consolidated Coverage Ratio, Adjusted EBITDA and Consolidated Cash Interest Expense for such period shall be calculated on a pro forma basis as if such discharge had occurred on the first day of such period and as if the Company or such Restricted Subsidiary has not earned any interest income actually earned during such period in respect of cash or Cash Equivalents used to repay, repurchase, defease or otherwise discharge such Indebtedness;
(C) if since the beginning of such period, the Company or any of its Restricted Subsidiaries has made any Asset Sale, Adjusted EBITDA for such period shall be reduced by an amount equal to Adjusted EBITDA (if positive) directly attributable to the assets that are the subject of such Asset Sale for such period or increased by an amount equal to Adjusted EBITDA (if negative)
directly attributable thereto for such period, and Consolidated Cash Interest Expense for such period shall be reduced by an amount equal to the Consolidated Cash Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary of the Company repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Sale for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Cash Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale);
(D) if since the beginning of such period, the Company or any of its Restricted Subsidiaries (by merger or otherwise) has made an Investment in any Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary) or an acquisition of assets, including any such Investment or acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business, Adjusted EBITDA and Consolidated Cash Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such period; and
(E) if since the beginning of such period, any Person (that subsequently became a Restricted Subsidiary of the Company or was merged with or into the Company or any of its Restricted Subsidiaries since the beginning of such period) shall have made any Asset Sale or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (C) or (D) above if made by the Company or any of its Restricted Subsidiaries during such period, Adjusted EBITDA and Consolidated Cash Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Sale, Investment or acquisition of assets occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the amount of income or earnings relating thereto and the amount of Consolidated Cash Interest Expense associated with any Indebtedness incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting officer of the Company. Any such pro forma calculations shall reflect any pro forma expense and cost reductions attributable to such acquisitions, to the extent such expense and cost reduction would be consistent with Regulation S-X, promulgated under the Securities Act, as such regulation is in effect from time to time, and permitted by the Commission to be reflected in pro forma financial statements included in a registration statement filed with the Commission.
If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Hedging
Obligation applicable to such Indebtedness if such Hedging Obligation has a remaining term as at the date of determination in excess of twelve months).
"Consolidated Interest Expense" means, for any period, (i) the total
interest expense, net of interest income, of the Company and its Consolidated
Subsidiaries, determined on a consolidated basis in accordance with GAAP, minus
(ii) interest expense incurred by the Company or its Consolidated Subsidiaries
in such period in connection with Indebtedness constituting Non-Recourse Debt or
Limited Recourse Debt, determined on a consolidated basis in accordance with
GAAP, plus (iii) to the extent incurred by the Company or its Consolidated
Subsidiaries in such period but not included in such interest expense, without
duplication, determined in each case on a consolidated basis in accordance with
GAAP, except to the extent related to Non-Recourse Debt and Limited Recourse
Debt:
(1) interest expense attributable to Capital Lease Obligations and the imputed interest with respect to Attributable Debt;
(2) amortization of debt discount;
(3) amortization of debt issuance costs (other than any such costs associated with the Indebtedness incurred by the Company or its Subsidiaries in accordance with the Plan of Reorganization);
(4) amortization of capitalized interest;
(5) noncash interest expense;
(6) commissions, discounts and other fees and charges attributable to letters of credit and bankers' acceptance financings;
(7) interest or dividends accrued and unpaid on any Indebtedness of any other Person to the extent such Indebtedness is Guaranteed by the Company or any Consolidated Subsidiary;
(8) net payments, if any, pursuant to Hedging Obligations (including amortization of fees);
(9) dividends in respect of all Disqualified Stock of the Company and all Preferred Stock of any of its Consolidated Subsidiaries, to the extent held by Persons other than the Company or another Consolidated Subsidiary; and
(10) cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company) in connection with Indebtedness incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income or loss of the Company and its Consolidated Subsidiaries for such period determined in accordance with GAAP; provided, however, that:
(1) net income of any Person (other than the Company) which is not a Restricted Subsidiary, shall be excluded from such Consolidated Net Income, except that:
(A) subject to the limitations contained in clause (4) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary of the Company as a dividend or other distribution (subject, in the case of a dividend or other distribution made to a Restricted Subsidiary of the Company, to the limitations contained in clause (2) below); and
(B) the Company's equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income;
(2) net income (or loss) of any Restricted Subsidiary of the Company, other than a Guarantor, to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of that income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or is, directly or indirectly, restricted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary or its stockholders or other holders of its equity, which restrictions have not been legally and effectively waived, shall be excluded from such Consolidated Net Income except that:
(A) subject to the limitations contained in clause (4) below, the Company's equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary of the Company as a dividend or other distribution (subject, in the case of a dividend or other distribution made to another Restricted Subsidiary of the Company, to the limitation contained in this clause); and
(B) the Company's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income;
(3) any gain (or loss) realized upon the sale or other disposition of any asset of the Company or any of its Restricted Subsidiaries (including pursuant to any Sale/Leaseback Transaction) that is not sold or otherwise disposed of in the ordinary course of business and any gain (or loss) realized upon the sale or other disposition of any Capital Stock of any Subsidiary of the Company shall be excluded from such Consolidated Net Income (without regard to abandonments or reserves relating thereto);
(4) amounts specified in clause (ii)(a) of the definition of Adjusted EBITDA (determined in accordance with such definition) shall be excluded from such Consolidated Net Income;
(5) any extraordinary gain or loss shall be excluded from such Consolidated Net Income;
(6) the cumulative effect of a change in accounting principles shall be excluded from such Consolidated Net Income;
(7) gains or losses due solely to fluctuations in currency values and the related tax effects determined in accordance with GAAP shall be excluded from such Consolidated Net Income;
(8) any non-cash deferred tax expense shall be excluded from such Consolidated Net Income;
(9) Fresh Start Charges and reorganization charges taken in connection with the Plan of Reorganization shall be excluded from such Consolidated Net Income;
(10) amortization of debt issuance costs in respect of Indebtedness incurred by the Company or its Subsidiaries in accordance with the Plan of Reorganization shall be excluded from such Consolidated Net Income;
(11) any charges resulting from the application of Statement of Financial Accounting Standards No. 142 or 145 shall be excluded from such Consolidated Net Income; and
(12) the results of operations of CPIH and its Subsidiaries shall be excluded in determining such Consolidated Net Income.
"Consolidated Subsidiaries" means the Restricted Subsidiaries of the Company; provided, however, that the interest of the Company or any of its Restricted Subsidiaries in an Unrestricted Subsidiary shall be accounted for as an Investment.
"Continuing Directors" means, as of any date of determination, those members of the Board of Directors who: (a) were members of the Board of Directors on the Issue Date; or (b) were nominated for election or elected to the Board of Directors with the affirmative vote of, or whose election or appointment was otherwise approved or ratified (whether before or after nomination or election) by, at least a majority of the Continuing Directors who were members of the Board of Directors at the time of the nomination, election or approval, as applicable.
"Corporate Services Reimbursement Agreement" means the corporate services and expense reimbursement agreement entered into by DHC and the Company dated March 10, 2004 and any amendments, modifications or extensions thereof on terms not materially less favorable to the Company and its Restricted Subsidiaries, taken as a whole, than the terms of such agreement as in effect on the Issue Date.
"Corporate Trust Office of the Trustee" will be at the address of the Trustee specified in Section 13.02 or such other address as to which the Trustee may give notice to the Company.
"CPIH" means Covanta Power International Holdings, Inc., a Delaware corporation, and any and all successors thereto.
"CPIH Reimbursement Agreement" means the Management Services and Reimbursement Agreement entered into by CPIH, the Company and certain of their respective Subsidiaries on the Issue Date, as such agreement may be amended, supplemented or otherwise modified from time to time.
"CPIH Subsidiaries" means, on and after the Issue Date, CPIH and its Subsidiaries.
"Credit Agents" means, at any time, the Persons serving at such time as the sole lender or as the "Agent," "Administrative Agent" or in some other similar capacity under each of the Credit Agreements, respectively (each of them being referred to individually herein as a "Credit Agent").
"Credit Agreements" means the First Lien Letter of Credit Facility and the Second Lien Letter of Credit Facility (each being referred to individually herein as a "Credit Agreement") and any other revolving credit or letter of credit facility entered into by the Company or any of its Restricted Subsidiaries.
"Credit Agreement Obligations" means (i) all Bank Indebtedness and (ii) all other obligations (not constituting Indebtedness) of the Company or any Guarantor under the Credit Agreements.
"Custodian" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto.
"Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.
"Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06, substantially in the form of Exhibit A hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture.
"DHC" means Danielson Holding Corporation, a Delaware corporation, and any and all successors thereto.
"Discharge of Credit Agreement Obligations" means payment in full in cash of the principal of and interest and premium, if any, on all Bank Indebtedness, payment in full in cash of any other Credit Agreement Obligations that are due and payable or otherwise accrued and owing at or prior to the time such principal, interest and premium, if any, are paid and the termination of all letter of credit commitments and other commitments thereunder.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder of such Capital Stock), or upon the happening of any event, matures, excluding any maturity as the result of the redemption thereof at the option of the issuer thereof, or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of such Capital Stock, in whole or in part, on or prior to the date on which the Notes mature, except to the extent that such Capital Stock is solely redeemable with, or solely exchangeable for, any Capital Stock that is not Disqualified Stock; provided that only the portion of the Capital Stock or other security which so matures, is mandatorily redeemable or is so redeemable at the option of the holder prior to such date shall be deemed to be Disqualified Stock; provided further that if such Capital Stock or other security is issued to and held by any employee pursuant to any plan program or arrangement or any plan for the benefit of employees of the Company or its Subsidiaries or by any such plan to such employees, such Capital Stock or other security shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Company or any of its Subsidiaries in order to satisfy applicable statutory or regulatory obligations or as a result of such employee's termination, death or disability. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of such Capital Stock have the right to require the Company to repurchase such Capital Stock upon the occurrence of a change of control or an Asset Sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.07.
"Domestic Subsidiary" means any Restricted Subsidiary of the Company that was formed under the laws of the United States or any state of the United States or the District of Columbia.
"Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Euroclear Bank S.A./N.V., as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Subsidiary" means any Domestic Subsidiary which is not a "Borrower", and is not required to be a "Borrower", under either the First Lien Letter of Credit Facility or the Second Lien Letter of Credit Facility, as such term is defined in those agreements.
"Existing Indebtedness" means Indebtedness of the Company and its Restricted Subsidiaries (other than Indebtedness under the Credit Agreements) in existence on the Issue Date or otherwise issued in accordance with the Plan of Reorganization.
"Existing IPP International Project Guaranties" means, collectively,
(i) the existing guaranty by Covanta Energy Group, Inc. of the obligations of
the CPIH Subsidiaries under certain agreements relating to the Haripur Project,
the Samalpatti Project and the Trezzo Project, (ii) the existing guaranty by
Covanta Projects, Inc. of the obligations of the CPIH Subsidiaries under certain
agreements relating to the Quezon Project and (iii) the existing guaranty by the
Company of the obligations of the CPIH Subsidiaries under certain agreements
relating to the Balaji/Madurai Project and the LICA Project, as each such
guaranty may be amended, restated, supplemented or otherwise modified on terms
not materially less favorable to the Company and its Restricted Subsidiaries,
taken as a whole, than the terms of such guaranty as in effect on the Issue
Date.
"Expansion" means, with respect to any waste-to-energy Project in existence on the Issue Date, additions or improvements to the existing facilities of such Project that involve the addition of a boiler or an increase in turbine generating capacity.
"First Lien Letter of Credit Facility" means the Credit Agreement, dated as of March 10, 2004, by and among the Company, the guarantors party thereto, Deutsche Bank Securities, Inc., as documentation agent, Bank of America, N.A., as administrative agent, and the lenders party thereto, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended (including any amendment and restatement thereof), modified, renewed, increased, supplemented, refunded, replaced or refinanced in whole or in part from time to time, including any agreement extending the maturity of, consolidating or otherwise restructuring (including adding subsidiaries of the Company as additional guarantors thereunder) all or any portion of the Indebtedness under such agreement or any successor or replacement agreement and whether by the same or any other agent, lender or group.
"Fresh Start Charges" means, for any period, the aggregate non-cash charges of the Company and its Restricted Subsidiaries arising from the application of fresh start accounting principles, determined on a consolidated basis in accordance with GAAP.
"GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, as in effect from time to time.
"Global Notes" means one or more global Notes registered in the name of the Depositary or its nominee issued in accordance with Article 2, substantially in the form of Exhibit A hereto, and bearing the Global Note Legend and including the "Schedule of Exchanges of Interests in the Global Note" attached thereto.
"Global Note Legend" means the legend set forth in Section 2.06(f), which is required to be placed on all Global Notes issued under this Indenture.
"Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America, and the payment for which the United States pledges its full faith and credit.
"Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person:
(1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or
(2) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include (i) endorsements of negotiable instruments for collection or deposit in the ordinary course of business or (ii) Performance Guarantees. The term "guarantee" used as a verb has a corresponding meaning.
"Guarantors" means each of:
(1) the Company's Domestic Subsidiaries on the Issue Date other than Excluded Subsidiaries; and
(2) any other Subsidiary of the Company that executes a Subsidiary Guarantee in accordance with the provisions of this Indenture;
and their respective successors and assigns.
"Haverhill Deferred PPA Income" means, for any period, all non-cash income resulting from payments made in 1998 by the counterparty to the power purchase agreement relating to the Haverhill Project in order to "buydown" its obligations under such agreement, to the extent such non-cash income is included in consolidated revenue or consolidated earnings of the Company and its Subsidiaries during such period.
"Hedging Obligations" means, with respect to any specified Person, the obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements;
(2) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates or interest rates; and
(3) forward agreements or arrangements designed to hedge against fluctuation in electricity rates pertaining to electricity produced by a Project, so long as the contractual arrangements relating to such Project contemplate that the Company or its Subsidiaries shall deliver such electricity to third parties.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person on any date of determination (without duplication) the following items if and to the extent that any of them (other than items specified under clauses (3), (8) and (9) below) would appear as a liability or, in the case of clause (6) only, Preferred Stock on the balance sheet of such Person, prepared in accordance with GAAP:
(1) the principal amount of and premium, if any, in respect of indebtedness of such Person for borrowed money;
(2) the principal amount of and premium, if any, in respect of obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;
(3) all obligations of such Person in respect of letters of credit, bankers' acceptances, or other similar instruments (including reimbursement obligations with respect thereto, but excluding obligations in respect of letters of credit issued in respect of Trade Payables);
(4) all obligations of such Person to pay the deferred and unpaid purchase price of property or services (except Trade Payables), which purchase price is due more than twelve months after the date of placing such property in service or taking delivery and title thereto or the completion of such services;
(5) all Capital Lease Obligations and all Attributable Debt of such Person;
(6) the amount of all obligations of such Person with respect to the redemption, repayment or repurchase of any Disqualified Stock or, with respect to any Subsidiary of such Person, any Preferred Stock (but excluding, in each case, any accrued dividends);
(7) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided, however, that the amount of Indebtedness of such Person shall be the lesser of:
(A) the fair market value of such asset at such date of determination and
(B) the amount of such Indebtedness of such other Persons;
8) Hedging Obligations of such Person;
(9) all obligations of such Person in respect of Insurance Premium Financing Arrangements; and
(10) all obligations of the type referred to in clauses
(1) through (9) of other Persons and all dividends or distributions of
other Persons for the payment of which, in either case, such Person is
responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise, including by means of any Guarantee.
The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations described above, at such date; provided, however, that the amount outstanding at any time of any Indebtedness issued with original issue discount shall be deemed to be the face amount of such Indebtedness less the remaining unaccreted portion of the original issue discount of such Indebtedness at such time, as determined in accordance with GAAP.
"Indenture" means this indenture, as amended or supplemented from time to time.
"Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant.
"Initial Principal Amount" means, with respect to each $1,000 principal amount at Stated Maturity of Notes, $891.30.
"Insurance Premium Financers" means Persons who are not Affiliates of the Company who advance insurance premiums for the Company and its Subsidiaries pursuant to Insurance Premium Financing Arrangements.
"Insurance Premium Financing Arrangements" means, with respect to any
Person, agreements with Insurance Premium Financers pursuant to which such
Insurance Premium Financers advance insurance premiums for or on behalf of such
Person. Insurance Premium Financing Arrangements (i) shall not provide, for the
benefit of such Insurance Premium Financers, any security interest in any
property of the Company or any of its Subsidiaries other than gross unearned
premiums for the insurance policies that are the subject of such arrangements,
(ii) shall not purport to prohibit any of the Liens created in favor of Trustee
for the benefit of Holders pursuant to the Security Documents, and (iii) shall
not contain any provision or contemplate any transaction prohibited by the
Indenture.
"Intercreditor Agreement" means that certain intercreditor agreement, dated as of March 10, 2004, by and among the Company, the Company's subsidiaries listed on the signature pages thereto, the financial institutions listed on the signature pages thereto, Bank of America, N.A., as administration agent, Deutsche Bank Securities, Inc., as documentation agent, DHC and the Trustee, as amended (including any amendment and restatement thereof), supplemented or otherwise modified from time to time.
"Interest Accrual Period" means the period from (and including) the date of issuance of the Notes to but excluding the first Interest Payment Date after issuance, and each successive six-month period from and including each Interest Payment Date to but excluding the following Interest Payment Date.
"Interest Payment Date" means March 15 and September 15 of each year, commencing on September 15, 2004, or if any such day is not a Business Day, the next succeeding Business Day.
"Investments" means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the form of loans (including Guarantees or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Company's Investments in such Restricted Subsidiary that were not sold or disposed of in an amount determined as provided in the final paragraph of Section 4.07. Any deemed investment in any Person not involving a transfer of cash or other assets to such Person and resulting solely from the application of pushdown accounting rules shall not constitute an Investment.
"Investor Parties" means (i) D.E. Shaw Laminar Portfolios, L.L.C., (ii) SZ Investments, LLC, and (iii) Third Avenue Value Fund, Inc.
"Issue Date" means the first date on which the Notes are issued.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in the City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Limited Recourse Debt" means, with respect to any Subsidiary of the Company, Indebtedness of such Subsidiary with respect to which the recourse of the holder or obligee of such Indebtedness is limited to (i) assets associated with a Project (which in any event shall not include assets held by the Company or any Subsidiary other than a Subsidiary whose sole business is the ownership and/or operation of such Project and substantially all of whose assets are associated with such Project) in respect of which such Indebtedness was incurred or (ii) the Equity Interests in such Subsidiary, but in the case of clause (ii) only if such Subsidiary's sole business is the ownership and/or operation of such Project and substantially all of such Subsidiary's assets are associated with such Project. Indebtedness of a Subsidiary of the
Company shall not fail to be Limited Recourse Debt solely by virtue of the fact that the holders of such Limited Recourse Debt have recourse to the Company or another Subsidiary of the Company pursuant to a Performance Guaranty, so long as such Performance Guaranty is not prohibited by Section 4.20.
"Management Investors" means the officers and employees of the Company or a Subsidiary of the Company who acquire Voting Stock of DHC or the Company on or after the Issue Date.
"Moody's" means Moody's Investors Service, Inc. or any successor to the rating agency business of Moody's Investors Service, Inc.
"Mortgage" means a mortgage, deed of trust, assignment of leases and rents, leasehold mortgage or other security document granting a Lien on any parcel of real property to secure the Obligations under the Notes.
"Net Depreciation and Amortization Expense" means, for any period, (i) the sum of the amounts (each expressed as a positive number) for such period of "Depreciation" and "Amortization", as each such line item is reflected in the Company's consolidated statement of cash flows prepared in conformity with GAAP and reported in a manner consistent with the Company's reporting of such amount in its last quarterly or annual report (as the case may be) on Form 10-Q or Form 10-K, respectively, filed with the Commission prior to the Issue Date, whether such line items are so titled or otherwise titled, plus other non-cash charges, minus (ii) Haverhill Deferred PPA Income.
"Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of (i) the costs directly related to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, sales commissions and consent fees, (ii) taxes paid or payable as a result of such Asset Sale, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, (iii) amounts required to be applied to the repayment or cash collateralization of Indebtedness secured by a Lien on the asset or assets that were the subject of such Asset Sale, and (iv) any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither the Company, any Guarantor, nor any Restricted Subsidiary (i) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (ii) is directly liable as a guarantor or otherwise, or (iii) constitutes the lender; and
(2) no default with respect to which (including any rights that the holders of the Indebtedness may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness (other than the Notes) of the Company, any Guarantor, or any Restricted
Subsidiary to declare a default on such other Indebtedness or cause the payment of such other Indebtedness to be accelerated or payable prior to its stated maturity;
provided that Performance Guarantees permitted under this Indenture shall not cause any such Indebtedness not to be Non-Recourse Debt.
"Notes" has the meaning assigned to it in the preamble to this Indenture.
"Obligations" means all principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable (including post-petition interest whether or not allowable as a claim in any proceeding) under the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Financial Officer, the Treasurer, any Senior Vice President, or any Vice President of such Person.
"Officer's Certificate" means a certificate signed on behalf of the Company by an Officer of the Company that meets the requirements of Section 13.05.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee and, that meets the requirements of Section
13.05. Such counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream).
"Performance Guaranty" means any agreement entered into by the Company or any Restricted Subsidiary of the Company under which the Company or such Restricted Subsidiary (i) guarantees the performance of a Subsidiary of the Company under a lease or sublease or under a service, management or operating agreement relating to a Project or (ii) guarantees the performance of CPIH or any of its Subsidiaries under a lease or sublease or under a service, management or operating agreement in existence on the Issue Date, as amended or modified on terms not materially less advantageous to the Company or such Restricted Subsidiary.
"Permitted Business" means any business of the type engaged in by the Company or any of its Restricted Subsidiaries as of the Issue Date or any business reasonably related, ancillary or complementary thereto.
"Permitted Holders" means (i) DHC and the Management Investors and (ii) any Related Party of a Person referred to in the immediately preceding clause (i).
"Permitted Investment" means an Investment by the Company or any Restricted Subsidiary of the Company:
(1) in the Company, a Restricted Subsidiary of the Company (other than a Bankrupt Subsidiary) or a Person that will, upon the making of such Investment, become a Restricted Subsidiary of the Company;
(2) consisting of intercompany loans to Bankrupt Subsidiaries, so long as (a) the proceeds of such loans are applied to working capital, maintenance, operation, payroll and other liquidity requirements in the ordinary course of business of such Bankrupt Subsidiaries, and (b) the aggregate amount of such intercompany loans outstanding to all Bankrupt Subsidiaries at any time does not exceed $3.0 million;
(3) in another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary of the Company;
(4) in Cash Equivalents;
(5) in receivables owing to the Company or any Restricted Subsidiary of the Company if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances;
(6) in payroll, travel and similar advances to employees to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business;
(7) in loans or advances to employees made in the ordinary course of business and not exceeding $2.0 million in the aggregate outstanding at any one time, of which not more than $1.0 million shall be for purposes other than employee relocation expenses;
(8) received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments;
(9) in any Person to the extent such Investment represents the non-cash portion of the consideration received for an Asset Sale that was made pursuant to and in compliance with Section 4.10 or a transaction not constituting an Asset Sale by reason of the $10.0 million threshold contained in the definition thereof;
(10) that constitutes a Hedging Obligation or commodity hedging arrangement entered into for bona fide hedging purposes of the Company in the ordinary course of business and otherwise in accordance with this Indenture;
(11) in securities of any trade creditor, supplier or customer received in settlement of obligations or pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditor, supplier or customer;
(12) acquired as a result of a foreclosure with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;
(13) consisting of purchases and acquisitions of inventory, supplies, materials, equipment or contract rights or licenses or leases of intellectual property, in any case, in the ordinary course of business;
(14) consisting of intercompany Indebtedness not prohibited under Section 4.09;
(15) consisting of a Guarantee not prohibited under
Section 4.09;
(16) the consideration for which consists solely of shares of Capital Stock (other than Disqualified Stock) of the Company;
(17) required to be made by the Company and its Restricted Subsidiaries under Performance Guarantees in effect on the Issue Date or entered into in compliance with the terms of Section 4.20;
(18) deemed to have been made as a result of the acquisition of a Person that at the time of such acquisition held instruments constituting Investments that were not made or acquired in contemplation of such acquisition;
(19) in prepaid expenses and leases, and in utility and workers' compensation performance and other similar deposits made in ordinary course of business;
(20) in CPIH and its Subsidiaries and in Unrestricted Subsidiaries of the Company to fund administrative services including, but not limited to, payroll, cash management, administration, billing, procurement, and equity investments the Company is required to make in CPIH and its Subsidiaries in a net amount not to exceed $20.0 million in the aggregate outstanding at any one time;
(21) under the CPIH Reimbursement Agreement or the Tax Sharing Agreement;
(22) advances by the Company or a Restricted Subsidiary of the Company to fund expansion, replacements or improvements in respect of a publicly-owned Project, which advances are reimbursable by the owner of the Project;
(23) made pursuant to the Plan of Reorganization; and
(24) other Investments having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value) not exceeding $70.0 million in the aggregate outstanding at any one time.
"Permitted Liens" means:
(1) Liens securing the Credit Agreement Obligations and obligations to the cash management bank with respect to the Cash Management System;
(2) Liens securing the Notes and the Subsidiary Guarantees;
(3) Liens in favor of the Company or any Guarantor;
(4) Liens on property or assets of a Person existing at the time such Person is acquired by, merged with or into or consolidated with the Company or any Restricted Subsidiary; provided that such Liens were not put in place in contemplation of such acquisition, merger or consolidation and do not extend to any assets other than those of the Person acquired by, merged into or consolidated with the Company or the Restricted Subsidiary;
(5) Liens on property or assets existing at the time of acquisition of the property or assets by the Company or any Restricted Subsidiary of the Company; provided that such Liens were not put in place in contemplation of such acquisition;
(6) Liens existing on the Issue Date or otherwise granted to secure Existing Indebtedness in accordance to the Plan of Reorganization;
(7) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent, that are not yet subject to penalties or interest for non-payment or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefor;
(8) Liens securing Permitted Refinancing Indebtedness where the Liens securing Indebtedness being refinanced were permitted under this Indenture;
(9) easements, rights-of-way, zoning and similar restrictions and other similar encumbrances or title defects incurred or imposed, as applicable, in the ordinary course of business;
(10) Liens securing Indebtedness permitted by clause (5) of Section 4.09(b) covering only the assets acquired with such Indebtedness;
(11) Liens with respect to Permitted Indebtedness incurred pursuant to clause (8) or (10) of Section 4.09(b).
(12) Liens securing Hedging Obligations permitted under this Indenture;
(13) Liens arising from the filing of Uniform Commercial Code financing statements in connection with operating leases;
(14) attachment or judgment Liens not giving rise to an Event of Default;
(15) Liens encumbering property or assets of the Company or any Restricted Subsidiary of the Company consisting of carriers', warehousemen's, mechanics', materialmen's, repairmen's, landlords', suppliers' and other similar Liens, and other Liens arising by operation of law and incurred in the ordinary course of business for sums that are not overdue or that are being contested in good faith by appropriate proceedings and (if so contested) for which appropriate reserves with respect thereto have been established and maintained on the books of the Company or such Restricted Subsidiary in accordance with GAAP;
(16) Liens incurred, or pledges or deposits made in the ordinary course of business and consistent with industry practice in connection with, workers' compensation, unemployment insurance, or other forms of governmental insurance or benefits, including any Liens securing letters of credit issued in the ordinary course of business in connection with the foregoing;
(17) Liens in the nature of rights of set-off of banks and other Persons;
(18) Liens in favor of customs and revenue authorities and other similar authorities to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;
(19) leases or subleases granted to third Person not materially interfering with the business of the Company and its Restricted Subsidiaries taken as a whole;
(20) any interest or title of a lessor or lessee or sublessor or sublessee under any operating lease;
(21) Liens under licensing agreements for use of intellectual property entered into in the ordinary course of business;
(22) Liens incurred or deposits made in connection with the purchase of inventory; provided that any such purchase of inventory is incidental to the conduct of the business of the Company or a Restricted Subsidiary of the Company in accordance with its then current business practices, such Liens are in the nature of a vendor's lien or a reservation of title and the obligations secured by such Liens are Trade Payables incurred in the ordinary course of business of the Company or such Restricted Subsidiary;
(23) minor imperfections of, or encumbrances on, title that do not materially impair the value of property for its intended use;
(24) Liens incurred or deposits made to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money);
(25) Liens securing reimbursement obligations with respect to letters of credit incurred in accordance with this Indenture that encumber documents and other property relating to such letters of credit and the products and proceeds thereof;
(26) Liens on assets of any Subsidiary of the Company or on the Equity Interests of such Subsidiary, in each case to the extent such Liens secure Limited Recourse Debt or Non-Recourse Debt of such Subsidiary permitted by Section 4.09;
(27) Liens on cash collateral of the Company securing insurance deductibles or self-insurance retentions required by third party insurers in connection with insurance arrangements entered into in the ordinary course of business by the Company and its Subsidiaries with such insurers;
(28) Liens pursuant to Insurance Premium Financing Arrangements permitted under this Indenture, so long as such Liens attach only to the gross unearned premiums for the insurance policies which are the subject of such arrangements; and
(29) Liens not otherwise permitted by clauses (1) through
(28) above securing Indebtedness in an aggregate amount at the time of
incurrence, together with all other Indebtedness secured by then
outstanding Liens previously incurred or assumed pursuant to this
clause (29), not in excess of $10.0 million.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries incurred or issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund (A) other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness extended, refinanced, renewed, replaced, defeased (whether legally or as to covenants only) or refunded (plus all accrued interest on such Indebtedness and the amount of all fees, expenses and premiums incurred in connection therewith); provided, however, that, notwithstanding the foregoing, Permitted Refinancing Indebtedness with respect to Permitted Debt described in clauses (3) and (4) of Section 4.09(b) may be incurred in an amount not in excess of 110% of the principal amount of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest on such Indebtedness and the amount of all fees, expenses and premiums incurred in connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by the Company or by the Restricted Subsidiary of the Company which is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded;
or (B) Limited Recourse Debt or Non-Recourse Debt of municipally-sponsored privately-owned Projects so long as the terms of such Permitted Refinancing Indebtedness, taken as a whole, are not materially more restrictive to the Company and its Subsidiaries.
"Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.
"Plan of Reorganization" means the Debtors' Second Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code, as filed with the Bankruptcy Court on January 14, 2004, together with the Reorganization Plan Supplement to Debtors' Second Joint Plan of Reorganization filed with the Bankruptcy Court on February 18, 2004 in connection therewith.
"Preferred Stock" as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person.
"Project" means any waste-to-energy facility, electrical generation plant, cogeneration plant, water treatment facility or other facility for the generation of electricity or engaged in another line of business in which the Company and its Subsidiaries are permitted to be engaged hereunder for which a Subsidiary or Subsidiaries of the Company was, is or will be (as the case may be) an owner, operator, manager or builder, and shall also mean any two or more of such plants or facilities in which an interest has been acquired in a single transaction, so long as such interest constitutes an existing Investment on the Issue Date permitted hereunder; provided however, that a Project shall cease to be a Project at such time that the Company or any of its Subsidiaries ceases to have any existing or future rights or obligations (whether direct or indirect, contingent or matured) associated therewith.
"Related Party" means (a) with respect to DHC, (i) any direct or indirect wholly-owned Subsidiary of DHC, any Approved DHC Investor and any officer, director or employee of DHC or any wholly-owned Subsidiary of DHC, (ii) any spouse or lineal descendant (including by adoption and stepchildren) of the officers, directors and employees referred to in clause (a)(i) of this definition or (iii) any trust, corporation or partnership 100%-in-interest of the beneficiaries, stockholders or partners of which consists of one or more of the persons described in clauses (a)(i) or (a)(ii) of this definition; or (b) with respect to any Management Investor (i) any spouse or lineal descendant (including by adoption and stepchildren) of such officer or employee or (ii) any trust, corporation or partnership 100%-in-interest of the beneficiaries, stockholders or
partners of which consists of such officer or employee, any of the persons described in clause (b)(i) of this definition or any combination thereof.
"Responsible Officer," when used with respect to the Trustee, means any officer within the Corporate Trust Office of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject.
"Restricted Investment" means an Investment other than a Permitted Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill, Inc., or any successor to the rating agency business thereof.
"Sale/Leaseback Transaction" means an arrangement relating to property now owned or hereafter acquired by the Company or a Restricted Subsidiary of the Company whereby the Company or such Restricted Subsidiary transfers such property to another Person and the Company or such Restricted Subsidiary leases it from such Person, other than leases between the Company and a Guarantor or between Guarantors.
"Second Lien Letter of Credit Facility" means (i) the Credit Agreement, dated as of March 10, 2004, by and among the Company, each of its Subsidiaries listed on the signature pages thereof, the financial institution listed on the signature pages thereof and Bank One, N.A., as administrative agent, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended (including any amendment and restatement thereof), modified, renewed, increased, supplemented, refunded, replaced or refinanced in whole or in part from time to time, including any agreement extending the maturity of, consolidating or otherwise restructuring (including adding subsidiaries of the Company as additional guarantors thereunder) all or any portion of the Indebtedness under such agreement or any successor or replacement agreement and whether by the same or any other agent, lender or group.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" means the Security Agreement, dated as of the date of this Indenture, by and among the Company, the Grantors (as defined therein) and the Collateral Agent, as amended, modified or supplemented from time to time in accordance with the terms of this Indenture.
"Security Documents" means the Security Agreement, the Intercreditor Agreement and the Mortgages, dated as of the date of this Indenture, and any other document or instrument pursuant to which a Lien is granted by the Company or any Guarantor to secure any Obligations
under the Notes and this Indenture or under which rights or remedies with respect to such Lien are governed, as such agreements may be amended, modified or supplemented from time to time.
"Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the Issue Date.
"Stated Maturity" means, with respect to any installment of interest or principal on any Indebtedness, the fixed date on which the payment of interest or principal is scheduled to be paid in the documentation governing such Indebtedness, but does not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the fixed date scheduled for the payment thereof.
"Subsidiary" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (i) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (ii) the only general partners of which are that Person or one or more Subsidiaries of such Person (or any combination thereof);
provided, however, that, except to the extent expressly indicated, the term "Subsidiary," when used with respect to the Company or its Restricted Subsidiaries, shall not include CPIH or any of its Subsidiaries.
"Subsidiary Guarantee" means, the Guarantee by each Guarantor of the Company's Obligations under this Indenture and the Notes, executed pursuant to the terms of this Indenture.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA.
"Tax Sharing Agreement" means the Tax Sharing Agreement among DHC, the Company and CPIH and any amendments, modifications or extensions thereof on terms not materially less favorable to the Company and its Restricted Subsidiaries, taken as a whole, than the terms of such agreement as in effect on the Issue Date.
"Trade Payables" means, with respect to any Person, any accounts payable or any indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person arising in the ordinary course of business in connection with the acquisition of goods or services.
"Trustee" means the party named as such in the preamble to this Indenture until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder.
"Unrestricted Subsidiary" means any Subsidiary of the Company that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a resolution of the Board of Directors, but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are not materially less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company;
(3) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (i) to subscribe for additional Equity Interests or (ii) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; and
(4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries.
Any designation of a Subsidiary of the Company as an Unrestricted
Subsidiary shall be evidenced by filing with the Trustee a certified copy of the
resolution of the Board of Directors giving effect to such designation and an
Officer's Certificate certifying that such designation complied with the
preceding conditions and was permitted by Section 4.07. If, at any time, any
Unrestricted Subsidiary would fail to meet the preceding requirements to be an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of this Indenture and any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date and, if such Indebtedness is not permitted to be
incurred as of such date under Section 4.09, the Company will be in default of
such covenant. The Board of Directors may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (1) such Indebtedness is permitted under
Section 4.09, calculated on a pro forma basis as if such designation had
occurred at the beginning of the four-quarter reference period; and (2) no
Default or Event of Default would be in existence following such designation.
"Unsecured Notes" means the 7.5% Subordinated Unsecured Notes due 2011 issued by the Company pursuant to an indenture dated March 10, 2004.
"Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the board of directors or comparable governing body of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by
(2) the then outstanding principal amount of such Indebtedness.
SECTION 1.02 Other Definitions.
Term Defined in Section ---- ------------------ "Affiliate Transaction"............................................................ 4.11 "Asset Sale Offer"................................................................. 3.09 "Authentication Order"............................................................. 2.02 "Change of Control Offer".......................................................... 4.15 "Change of Control Payment"........................................................ 4.15 "Change of Control Payment Date"................................................... 4.15 "Covenant Defeasance".............................................................. 8.03 "DTC".............................................................................. 2.03 "Event of Default"................................................................. 6.01 "Excess Proceeds".................................................................. 4.10 "Exemption" ....................................................................... 10.03 "incur"............................................................................ 4.09 "Legal Defeasance"................................................................. 8.02 "Offer Amount"..................................................................... 3.09 "Offer Period"..................................................................... 3.09 "Paying Agent"..................................................................... 2.03 "Permitted Debt"................................................................... 4.09 "Prepayment Amount"................................................................ 3.10 "Purchase Date".................................................................... 3.09 "Registrar"........................................................................ 2.03 "Relevant Liabilities"............................................................. 10.07 "Restricted Payments".............................................................. 4.07 "Subject Property"................................................................. 10.03 |
SECTION 1.03 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes and the Subsidiary Guarantees means the Company and the Guarantors, respectively, and any successor obligor upon the Notes and the Subsidiary Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule under the TIA have the meanings so assigned to them.
SECTION 1.04 Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include the singular;
(5) "will" shall be interpreted to express a command;
(6) provisions apply to successive events and transactions;
(7) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the Commission from time to time; and
(8) references to "Sections" or "Articles" are to the portions of this Indenture so designated.
ARTICLE 2.
THE NOTES
SECTION 2.01 Form and Dating.
(a) General. The Notes shall be known and designated as the "8.25% Senior Secured Notes Due 2011" of the Company. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof and shall be initially issued only in global form.
The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture, and the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling.
(b) Global Notes. Notes issued in global form shall be substantially in the form of Exhibit A attached hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and shall provide that it represents the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06.
(c) Book-Entry Provisions. Participants and Indirect Participants shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary or by the Trustee as the custodian for the Depositary or under such Global Note, and the Depositary shall be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Participants or Indirect Participants, the Applicable Procedures or the operation of customary practices of the Depositary governing the exercise of the rights of a holder of a beneficial interest in any Global Note.
SECTION 2.02 Execution and Authentication.
An Officer must sign the Notes for the Company and an Officer or director of each Guarantor must sign such Guarantor's Subsidiary Guarantee, in each case, by manual or
facsimile signature. If an Officer or director whose signature is on a Note or Subsidiary Guarantee no longer holds that office at the time a Note or Subsidiary Guarantee is authenticated, the Note or Subsidiary Guarantee shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual or facsimile signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. On the date of the Indenture, the Trustee shall, upon receipt of a written order of the Company signed by two Officers (an "Authentication Order"), authenticate the Notes for $230.0 million in aggregate principal amount at Stated Maturity.
The Trustee may appoint an authenticating agent acceptable to the Company to authenticate the Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company.
SECTION 2.03 Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Custodian with respect to the Global Notes.
SECTION 2.04 Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal of or premium, if any, or interest on the Notes, and shall notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05 Holder Lists.
The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA Section 312(a).
SECTION 2.06 Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. Global Notes will be exchanged by the Company for Definitive Notes only if:
(1) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary; or
(2) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee;
Upon the occurrence of either of the preceding events in (1) or (2) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a); provided that, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f).
(b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (1) or (2) below, as applicable:
(1) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Global Note. No written orders or
instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(1).
(2) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(1), the transferor of such beneficial interest must deliver to the Registrar either:
(A) both:
(i) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged; and
(ii) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase; or
(B) both:
(i) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged; and
(ii) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above.
(c) Transfer or Exchange of Beneficial Interests for Definitive
Notes. Subject to Section 2.06(a), if any holder of a beneficial interest in a
Global Note proposes to exchange such beneficial interest for a Definitive Note
or to transfer such beneficial interest to a Person who takes delivery thereof
in the form of a Definitive Note, then, upon satisfaction of the conditions set
forth in Section 2.06(b)(2), the Trustee shall cause the aggregate principal
amount of the applicable Global Note to be reduced accordingly pursuant to
Section 2.06(g), and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Note in the appropriate principal amount. Any Definitive Note issued
in exchange for a beneficial interest pursuant to this Section 2.06(c)(1) shall
be registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest requests through
instructions to the Registrar from or through the Depositary and the Participant
or Indirect Participant. The Trustee shall deliver such Definitive Notes to the
Persons in whose names such Notes are so registered.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests. A Holder of a Definitive Note may exchange such Note for a beneficial interest in a Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Global Notes.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder must present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing.
(f) Global Note Legend. Each Global Note shall bear a legend in substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.06 OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED
IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS
GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION
2.11 OF THE INDENTURE AND (4) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR
DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN."
(g) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase.
(h) General Provisions Relating to Transfers and Exchanges.
(1) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon receipt of an Authentication Order in accordance with Section 2.02 or at the Registrar's request.
(2) No service charge will be made to a Holder of a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require a Holder to pay a sum sufficient to pay all transfer tax or similar governmental charges payable in connection therewith (other than any such transfer taxes or similar governmental charges payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 3.10, 4.10, 4.15 and 9.05). The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part.
(3) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange.
(4) The Company shall not be required:
(A) to issue, to register the transfer of or to exchange any Notes (i) during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 and ending at the close of business on the day of selection, or (ii) during a period beginning at the opening of business 15 days before any Interest Payment Date and ending at the closing of business on such Interest Payment Date;
(B) to register the transfer of or to exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part; or
(C) to register the transfer of or to exchange a Note between a record date and the next succeeding Interest Payment Date.
(5) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary.
(6) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02.
SECTION 2.07 Replacement Notes.
If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder.
SECTION 2.08 Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09, a Note does not
cease to be outstanding because the Company or an Affiliate of the Company holds
the Note; provided that, Notes held by the Company or a Subsidiary of the
Company shall not be deemed to be outstanding for purposes of Section 3.07(a).
If a Note is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the principal amount or Accreted Value of any Note is considered paid under Section 4.01, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest.
SECTION 2.09 Treasury Notes.
In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Affiliate of the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned shall be so disregarded.
SECTION 2.10 Temporary Notes.
Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as may be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture.
SECTION 2.11 Cancellation.
The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy or return to the Company canceled Notes (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all canceled Notes shall be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12 Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date; provided that no such special record date may be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01 Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07, it must furnish to the Trustee, at least 45 days but not more than 75 days before a redemption date, an Officer's Certificate setting forth:
(1) the clause of this Indenture pursuant to which the redemption shall occur;
(2) the redemption date;
(3) the principal amount of Notes to be redeemed; and
(4) the redemption price.
SECTION 3.02 Selection of Notes to Be Redeemed or Purchased.
(a) If there is more than one Holder, and if less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee shall select Notes for redemption or purchase as follows:
(1) if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed; or
(2) if the Notes are not listed on any national securities exchange, by lot.
(b) In the event of partial redemption or purchase by lot, the particular Notes to be redeemed or purchased shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption or purchase date by the Trustee from the outstanding Notes not previously called for redemption or purchase.
(c) The Trustee shall promptly notify the Company in writing of the Notes selected for redemption or purchase and, in the case of any Note selected for partial redemption or purchase, the principal amount thereof to be redeemed or purchased. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; provided that if all of the Notes of a Holder are to be redeemed or purchased, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed or purchased. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption or purchase also apply to portions of Notes called for redemption or purchase.
SECTION 3.03 Notice of Redemption.
(a) Subject to the provisions of Sections 3.09 and 3.10, at least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its
registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of this Indenture pursuant to Articles 8 or 12.
(b) The notice shall identify the Notes to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price;
(6) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date;
(7) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and
(8) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes.
(c) At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company has delivered to the Trustee, at least 45 days prior to the redemption date, an Officer's Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph.
SECTION 3.04 Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. If the Company complies with the provisions of Article 3, on and after the redemption or purchase date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption or purchase.
SECTION 3.05 Deposit of Redemption or Purchase Price.
(a) One Business Day prior to the redemption or purchase date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption or purchase price of and accrued interest on all Notes to be redeemed or purchased on that date.
The Trustee or the Paying Agent will promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption or purchase price of, and accrued interest on, all Notes to be redeemed or purchased.
(b) If a Note is redeemed or purchased on or after an interest record date but on or prior to the related Interest Payment Date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption or purchase is not so paid upon surrender for redemption or purchase because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption or purchase date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01.
SECTION 3.06 Notes Redeemed or Purchased in Part.
Upon surrender of a Note that is redeemed or purchased in part, the Company shall issue and, upon receipt of an Authentication Order, the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed or unpurchased portion of the Note surrendered.
SECTION 3.07 Optional Redemption.
(a) At any time after the Issue Date and on or before March 15, 2006, the Company may on any one or more occasions redeem all or a part of the Notes, upon not less than 30 nor more than 60 days' notice, at the Accreted Value on the redemption date, plus accrued and unpaid interest to the redemption date.
(b) At any time after March 15, 2006, the Company may on any one or more occasions redeem all or a part of the Notes, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of Accreted Value) set forth below, plus accrued and unpaid interest to the redemption date, if redeemed during the twelve-month period beginning on March 15 of the years indicated below:
Year Percentage ---- ---------- 2006.......................................................................... 104.625% 2007.......................................................................... 103.469% 2008.......................................................................... 102.313% 2009.......................................................................... 101.156% 2010 and thereafter........................................................... 100.000% |
(c) Any redemption pursuant to this Section 3.07 shall be made in accordance with the provisions of Section 3.01 through 3.06. Any notice to the Holders of Notes of a redemption pursuant to this Section 3.07 shall include the appropriate calculation of the redemption price, but need not include the redemption price itself. The actual redemption price, calculated as described above, shall be set forth in an Officers' Certificate delivered to the Trustee no later than two Business Days prior to the redemption date.
SECTION 3.08 Mandatory Redemption.
The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes.
SECTION 3.09 Offer to Purchase by Application of Excess Proceeds.
(a) In the event that, pursuant to Section 4.10, the Company is required to commence an offer to all Holders to purchase Notes (an "Asset Sale Offer"), it shall follow the procedures specified below.
(b) Subject to the Intercreditor Agreement, the Asset Sale Offer shall be made to all Holders and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets. The Asset Sale Offer shall remain open for a period of at least 20 Business Days following its commencement and not more than 30 Business Days, except to the extent that a longer period is required by applicable law (the "Offer Period"). No later than three Business Days after the termination of the Offer Period (the "Purchase Date"), the Company shall apply all Excess Proceeds (the "Offer Amount") to the purchase or redemption of Notes and such other pari passu Indebtedness containing provisions similar to this Section 3.09 (on a pro rata basis, if applicable) or, if less than the Offer Amount has been tendered, all Notes and other Indebtedness tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made.
(c) If the Purchase Date is on or after an interest record date and on or before the related Interest Payment Date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Asset Sale Offer.
(d) Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to the Trustee and each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The notice, which shall govern the terms of the Asset Sale Offer, shall state:
(1) that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.10 and the length of time the Asset Sale Offer will remain open;
(2) the Offer Amount, the offer price and the Purchase Date;
(3) that any Note not tendered or accepted for payment shall continue to accrue interest;
(4) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Purchase Date;
(5) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may elect to have Notes purchased in integral multiples of $1,000 of principal at Stated Maturity only;
(6) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a Depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date;
(7) that Holders shall be entitled to withdraw their election if the Company, the Depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased;
(8) that, if the aggregate purchase or redemption price of Notes and other pari passu Indebtedness surrendered by Holders exceeds the Offer Amount, the Company shall select the Notes and other pari passu Indebtedness to be purchased or redeemed on a pro rata basis based on the Accreted Value of Notes and principal of such other pari passu Indebtedness surrendered (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000 of principal at Stated Maturity, or integral multiples thereof, shall be purchased); and
(9) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount at Stated Maturity to that of the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer).
(e) On or before the Purchase Date, the Company shall, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and shall deliver to the Trustee an Officer's Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as the case may be, shall promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Note, and the Trustee, upon written request from the Company shall authenticate and mail or deliver such new Note to such Holder, in a principal amount at Stated Maturity equal to that of any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Asset Sale Offer on the Purchase Date.
(f) Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 shall be made in accordance with the provisions of Sections 3.01 through 3.06.
(g) Notwithstanding the foregoing, to the extent the Intercreditor Agreement is in effect, any Asset Sale Offer shall be governed by the terms of the Intercreditor Agreement to the extent that the applicable terms of this Indenture are inconsistent therewith.
SECTION 3.10 Mandatory Prepayment.
On the Interest Payment Date in September, 2010, the Company shall make
a prepayment of principal on the Notes equal to $5.50 for each $1,000 of
principal at Stated Maturity (the "Prepayment Amount"). Such prepayment shall be
made to Holders of record on the preceding September 1. From and after the date
of such prepayment, the Accreted Value of the Notes and the amount due on the
Notes as principal at Stated Maturity shall be reduced by the Prepayment Amount
and all payments of interest (including additional interest payable pursuant to
Section 4.21) and premium payable on the Notes shall be calculated based upon
the amount payable as principal at Stated Maturity of the Notes as so reduced.
ARTICLE 4.
COVENANTS
SECTION 4.01 Payment of Notes.
The Company shall pay or cause to be paid the principal or Accreted Value of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes and in this Indenture. Principal, Accreted Value, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by or on behalf of the Company in immediately available funds and designated for and sufficient to pay all principal, Accreted Value, premium, if any, and interest then due. Payments of Accreted Value of the Notes prior to the Stated Maturity of principal of the Notes shall reduce proportionately, for purposes of calculation of interest payable thereon and for future determinations of Accreted Value and principal thereof, the principal amount at Stated Maturity of the Notes with respect to which such payments of Accreted Value have been made.
SECTION 4.02 Maintenance of Office or Agency.
(a) The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company fails to maintain any such required office or agency or fails to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.
(b) The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York, for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.
(c) The Company hereby designates the Corporate Trust Office of
the Trustee as one such office or agency of the Company in accordance with
Section 2.03.
SECTION 4.03 Reports.
(a) Notwithstanding that the Company may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, so long as any Notes remain outstanding, the Company shall:
(1) provide the Trustee and the Holders with the annual, quarterly and current reports as are required in such Sections 13 and 15(d) to be filed by a United States corporation subject to such Sections in respect of debt securities not listed on an exchange, within 15 days after the times specified for the filing of the information, documents and reports under such Sections; and
(2) to the extent permitted, file with the Commission the reports referred to in clause (1) of this Section 4.03(a) within 15 days after the times specified for such filings under the Exchange Act (whether or not applicable to the Company).
(b) The quarterly and annual financial information required by
Section 4.03(a) shall include a reasonably detailed presentation, either on the
face of the financial statements or in the footnotes thereto, and in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, of condensed consolidating financial information with respect to the
financial condition and results of operations of the Company and its
Subsidiaries (excluding CPIH and its Subsidiaries) separate from the financial
condition and results of operations of the Company and all of its Subsidiaries
(including, for that purpose, CPIH and its Subsidiaries).
SECTION 4.04 Compliance Certificate.
(a) The Company and each Guarantor (to the extent that such Guarantor is so required under the TIA) shall deliver to the Trustee, within 105 days after the end of each fiscal year, an Officer's Certificate of the Company and such Guarantor, respectively, stating that, in the course of performing his or her duties as officers of the Company or such Guarantor, as applicable, a review of the activities of the Company or such Guarantor and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company or such Guarantor has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default has occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company or such Guarantor is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and
remains in existence by reason of which payments on account of the principal or Accreted Value of, or interest or premium, if any, on, the Notes are prohibited or if such event has occurred, a description of the event and what action the Company or such Guarantor is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03(a)(1) shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in connection with their audit, nothing has come to their attention that caused them to believe that, with respect to financial and accounting matters, the Company failed to comply with any provisions of Article 4 or Article 5 or, if any such event of noncompliance has come to their attention, specifying the nature and period of existence thereof, it being understood that their audit was not directed primarily toward obtaining knowledge of such noncompliance and that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such noncompliance.
(c) So long as any of the Notes are outstanding, the Company shall deliver to the Trustee, within five Business Days after the date on which any Officer of the Company becomes aware of any Default or Event of Default, an Officer's Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto.
SECTION 4.05 Taxes.
The Company shall, and shall cause each of its Subsidiaries to, pay or discharge or cause to be paid or discharged, prior to delinquency, all taxes, assessments, and governmental charges levied or imposed upon its or such Subsidiaries' income, profits or property, except such as are contested in good faith and by appropriate proceedings or where stayed by the Bankruptcy Court or other court of competent jurisdiction or where the failure to effect such payment or discharge is not adverse in any material respect to the Holders of the Notes.
SECTION 4.06 Stay, Extension and Usury Laws.
The Company and each of the Guarantors covenant (to the extent that it may lawfully do so) that they shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture or the Security Documents; and the Company and each of the Guarantors (to the extent that it may lawfully do so) hereby expressly waive all benefit or advantage of any such law, and covenant that they shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law has been enacted.
SECTION 4.07 Restricted Payments.
(a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company and other than dividends or distributions payable to the Company or a Guarantor or, in the case of a Restricted Subsidiary that is not a Guarantor, to the Company or any Restricted Subsidiary);
(2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company held by a Person other than the Company or a Restricted Subsidiary of the Company;
(3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value, any Indebtedness that is subordinated by its terms in right of payment to the Notes or the Subsidiary Guarantees, except payments of interest or principal at the Stated Maturity thereof; or
(4) make any Restricted Investment (all such payments and other actions set forth in these clauses (1) through (4) being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(5) no Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment;
(6) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Coverage Ratio test set forth in Section 4.09(a); and
(7) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Company and its
Restricted Subsidiaries after the Issue Date (excluding Restricted
Payments permitted by clauses (2), (3), (4), (5), (6), (7), (8), (9),
(10), (11) (other than payments with respect to Equity Interests of the
Company or any of its Restricted Subsidiaries), (12) and (13) of
Section 4.07(b)), is less than the sum, without duplication, of:
(A) 50% of the aggregate Consolidated Net Income of the Company (or, in the event such Consolidated Net Income shall be a deficit, minus 100% of such deficit) accrued for the period beginning on the Issue Date and ending on the last day of the Company's most recent fiscal quarter for which financial
information is available to the Company ending prior to the date of such proposed Restricted Payment, taken as one accounting period, plus
(B) 100% of the aggregate net cash proceeds
received by the Company since the Issue Date (x) from the
issue or sale of Equity Interests of the Company (other than
Disqualified Stock) or Disqualified Stock or debt or other
securities of the Company that have been converted into or
exchanged for such Equity Interests (other than (i) Equity
Interests (or Disqualified Stock or convertible or
exchangeable debt or other securities) sold to a Subsidiary of
the Company or any employee stock ownership plan or other
trust established by the Company or any of its Subsidiaries
for the benefit of its employees to the extent that the
purchase by such plan or trust is financed by Indebtedness of
such plan or trust owed to the Company or any of its
Subsidiaries or Indebtedness Guaranteed by the Company or any
of its Subsidiaries, and (ii) Disqualified Stock or
convertible or exchangeable debt or other securities that have
been converted into or exchanged for Disqualified Stock), and
(y) as capital contributions from its shareholders, plus ----
(C) to the extent that any Unrestricted Subsidiary is redesignated as a Restricted Subsidiary after the Issue Date, the fair market value of such Subsidiary, as determined by the Board of Directors, as of the date of such redesignation, plus
(D) the sum of (i) the aggregate amount in cash returned to the Company or any of its Restricted Subsidiaries and (ii) the aggregate principal amount of Indebtedness of the Company or any of its Restricted Subsidiaries cancelled, in each case with respect to Restricted Investments made after the Issue Date whether through interest payments, principal payments, dividends, or other distributions or the forgiveness or cancellation of Indebtedness, plus
(E) the net cash proceeds received by the Company or any of its Restricted Subsidiaries from the disposition or sale (other than to a Restricted Subsidiary), or liquidation, retirement or redemption of all or any portion of Restricted Investments made after the Issue Date, plus
(F) the net reduction in Investments in Unrestricted Subsidiaries resulting from payments of dividends, repayments of the principal of loans or advances or other transfers of assets from Unrestricted Subsidiaries to the Company or any of its Restricted Subsidiaries, plus
(G) in the event that the Company or any of its Restricted Subsidiaries makes any Investment in a Person that, as a result of or in connection with such Restricted Investment, becomes a Restricted Subsidiary, an amount equal to such portion of the Company's or any of its Restricted Subsidiaries' existing Investments in such Person that was previously treated as a Restricted Payment.
(b) The provisions of Section 4.07(a) will not prohibit:
(1) the payment of any dividend within 60 days after the date of declaration of the dividend, if at the date of declaration the dividend payment would have complied with the provisions of this Indenture; provided, however, that any such dividend will be included in the calculation of the amount of Restricted Payments (without duplication for declaration);
(2) the making of any Restricted Investment or the payment on or with respect to or, the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness of the Company or any of its Restricted Subsidiaries or of any Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale of, Equity Interests of the Company (other than (i) Disqualified Stock and (ii) Equity Interests issued or sold to a Restricted Subsidiary of the Company or to any employee stock ownership plan or other trust established by the Company or any of its Subsidiaries for the benefit of its employees to the extent that the purchase by such plan or trust is financed by Indebtedness of such plan or trust owed to the Company or any of its Subsidiaries or Indebtedness Guaranteed by the Company or any of its Subsidiaries) or out of the net cash proceeds of substantially concurrent capital contributions made to the Company; provided that the amount of any such net cash proceeds that are utilized for any such Restricted Investment redemption, repurchase, retirement, defeasance or other acquisition will be excluded from clause (7)(B) of Section 4.07(a);
(3) the defeasance (whether legally or as to covenants only), redemption, repurchase or other acquisition of subordinated Indebtedness of the Company or any of its Restricted Subsidiaries or Disqualified Stock of the Company with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness;
(4) the declaration and payment of any dividend by a Restricted Subsidiary of the Company to the holders of such Restricted Subsidiary's Equity Interests on a pro rata basis;
(5) the retirement of any shares of Disqualified Stock of the Company by conversion into, or by exchange for, shares of Disqualified Stock of the Company, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of other shares of Disqualified Stock of the Company; provided that the Disqualified Stock of the Company that replaces the retired shares of Disqualified Stock of the Company shall not require the direct or indirect payment of any liquidation preference earlier in time than the final stated maturity of the retired shares of Disqualified Stock of the Company;
(6) payments required to be made or otherwise contemplated pursuant to the Plan of Reorganization;
(7) payments required to be made pursuant to the CPIH Reimbursement Agreement, the Corporate Services Reimbursement Agreement or the Tax Sharing Agreement;
(8) payments in respect of the limited partnership interests in Covanta Onondaga Limited Partnership and Covanta Huntington Limited Partnership pursuant to the limited partnership agreements of such entities as in effect on the Issue Date and as amended, modified or extended on terms not materially less favorable to the Company and its Restricted Subsidiaries, taken as a whole;
(9) repurchases of Equity Interests deemed to occur upon the exercise of stock options if such Equity Interests represent a portion of the exercise price thereof;
(10) payments in satisfaction of earn-out and deferred purchase price obligations pursuant to agreements relating to the acquisition of any Person which, following such acquisition, would be a Restricted Subsidiary of the Company;
(11) any Restricted Payments made pursuant to any employee benefit plan, arrangement or perquisite (including plans, arrangements or perquisites for the benefit of directors) or employment agreements or other compensation arrangements, in each case as approved by the Board of Directors in its good faith judgment;
(12) the distribution, as a dividend or otherwise, of Equity Interests of, or Indebtedness owed to the Company or a Restricted Subsidiary of the Company by, any Unrestricted Subsidiary of the Company;
(13) payments or distributions to dissenting stockholders pursuant to applicable law or pursuant to or in connection with a consolidation, merger or transfer of assets that complies with Section 5.01;
(14) any purchase, redemption, retirement or other acquisition for value of any subordinated Indebtedness pursuant to the provisions of such Indebtedness relating to a change of control or sale of assets; provided that the Company shall have complied with any requirement to make a Change of Control Offer or Asset Sale Offer, as the case may be, in connection with such change of control or sale of assets; and
(15) other Restricted Payments in an aggregate amount not to exceed $10.0 million.
(c) The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the assets or securities proposed to be transferred or issued by the Company or any Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this covenant shall be determined, in good faith, by the Board of Directors. The Board of Directors' determination must be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if the fair market value exceeds $15.0 million and if the Restricted Payment is to be made to an Affiliate of the Company or to the holders of or in respect of any Equity Interest. Not later than the date of making any Restricted Payment having a fair market value exceeding $15.0 million, the Company shall deliver to the Trustee an Officer's Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.07(c) were
computed, together with a copy of the fairness opinion or appraisal required by this Indenture. In determining whether any Restricted Payment is permitted by the covenant described above, the Company may in its sole discretion allocate all or any portion of such Restricted Payment among the categories described in the immediately preceding paragraph or among such categories and the types of Restricted Payments described in the first paragraph under the "Restricted Payments" heading above; provided that at the time of such allocation, all such Restricted Payments, or allocated portions thereof, would be permitted under the various provisions of the covenant described above.
SECTION 4.08 Dividend and Other Payment Restrictions Affecting Subsidiaries.
(a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock to the Company or any of its Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries;
(2) make loans or advances to the Company or any of its Restricted Subsidiaries; or
(3) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries.
(b) The provisions of Section 4.08(a) shall not apply to encumbrances or restrictions existing under or by reason of:
(1) agreements governing Existing Indebtedness, the Credit Agreements or the Indemnification Agreement as in effect on the Issue Date and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of those agreements; provided that the amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are not materially more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those provisions contained in those agreements on the Issue Date;
(2) this Indenture, the Notes, the Subsidiary Guarantees and the Security Documents;
(3) applicable law, rule, regulation or order;
(4) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness or Capital Stock was incurred or issued in connection with or in contemplation of such acquisition), which encumbrance
or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; provided that, in the case of Acquired Debt, such Indebtedness was permitted by the terms of this Indenture to be incurred;
(5) customary non-assignment provisions in leases and other agreements entered into in the ordinary course of business;
(6) Permitted Refinancing Indebtedness; provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are materially not more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in the agreements governing the Indebtedness being refinanced;
(7) provisions with respect to the disposition or distribution of assets or property held under joint venture agreements, or subject to asset sale agreements, stock sale agreements and other similar agreements;
(8) restrictions on cash or other deposits or net worth requirements imposed by customers under contracts or net worth requirements contained in leases and other agreements entered into in the ordinary course of business;
(9) customary restrictions with respect to Restricted Subsidiaries of the Company pursuant to agreements creating Permitted Liens or agreements entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of any such Restricted Subsidiary pending the closing of such sale or disposition; provided that such restrictions apply solely to the Capital Stock or assets of the Restricted Subsidiary that are being sold or that are subject to the Permitted Lien;
(10) any encumbrance or restriction existing under or by reason of Insurance Premium Financing Arrangements permitted pursuant to Section 4.09;
(11) purchase money obligations for property acquired in the ordinary course of business that impose restrictions on that property of the nature described in clause (3) of the preceding paragraph;
(12) Liens securing Indebtedness otherwise permitted to be incurred pursuant to Section 4.12 that limit the right of the debtor to dispose of the assets subject to such Liens;
(13) Non-Recourse Debt, Limited Recourse Debt, or leases or operating agreements related to Projects, so long as such encumbrances or restrictions relate solely to Project assets and distributions of Project earnings or Project cash flow;
(14) any instrument governing any other Indebtedness the incurrence of which is not prohibited by Section 4.09; provided that the terms of such Indebtedness are not materially more restrictive, taken as a whole, with respect to such dividend and other
payment restrictions than the provisions with respect to such dividend and other payment restrictions contained in this Indenture at the time of such incurrence; and
(15) any encumbrance or restriction of the type referred to in Section 4.08(a) imposed by any extension, amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing of an agreement, contract, instrument or obligation referred to in clauses (1) through (14) of this Section 4.08(b) that is not materially more restrictive, taken as a whole, than the encumbrance or restriction imposed by the applicable predecessor agreement, contract, instrument or obligation.
SECTION 4.09 Restrictions on Indebtedness.
(a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt); provided, however, that the Company or any Guarantor may incur Indebtedness (including Acquired Debt), and any Restricted Subsidiary of the Company (other than a Bankrupt Subsidiary) may incur Acquired Debt not incurred by the acquired Person in contemplation of the related acquisition of such Person by such Restricted Subsidiary, if the Company's Consolidated Coverage Ratio at the time of incurrence of such Indebtedness, after giving pro forma effect to such incurrence or issuance as of such date and to the use of proceeds therefrom, as if the same had occurred at the beginning of the most recently ended four fiscal quarter period of the Company (commencing on or after the Issue Date) for which internal financial statements are available, would have been no less than 2.00 to 1.00.
(b) Section 4.09(a) will not prohibit the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"):
(1) the incurrence by the Company or any Restricted
Subsidiary of Indebtedness and letters of credit under the Credit
Agreements in an aggregate principal amount at any one time outstanding
(with letters of credit being deemed to have a principal amount equal
to the maximum potential liability of the Company and its Restricted
Subsidiaries thereunder) not to exceed $280.0 million, less the
aggregate amount of all Net Proceeds of Asset Sales applied to repay
Indebtedness under the Credit Agreements in order to comply with
Section 4.10(b);
(2) the incurrence by the Company of Indebtedness consisting solely of its obligations under Insurance Premium Financing Arrangements, which obligations shall not exceed at any time $30.0 million in the aggregate;
(3) the incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness, including without limitation the Unsecured Notes;
(4) the incurrence by the Company and the Guarantors of Indebtedness represented by the Notes and the related Subsidiary Guarantees to be issued on the Issue Date;
(5) the incurrence by the Company or any of its
Restricted Subsidiaries of Indebtedness represented by Capital Lease
Obligations, mortgage financings or purchase money obligations incurred
for the purpose of financing all or any part of the purchase price or
cost of construction or improvement of property, plant or equipment
used in a Permitted Business in an aggregate principal amount,
including all Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any Indebtedness incurred pursuant to this clause
(5), not to exceed $15.0 million at any time outstanding;
(6) the incurrence by the Company or any of its
Restricted Subsidiaries of Permitted Refinancing Indebtedness in
exchange for, or the net proceeds of which are used to refund,
refinance, defease or replace, Indebtedness (other than intercompany
Indebtedness) that was permitted by this Indenture to be incurred under
Section 4.09(a) or any of clauses (3), (4), (5), (6), (9), (15), (16)
or (18) of this paragraph;
(7) the incurrence (i) by the Company or any of the Guarantors of intercompany Indebtedness between or among the Company and any of the Guarantors and (ii) by non-Guarantor Restricted Subsidiaries of the Company of Indebtedness to the Company or a Guarantor in an aggregate net amount not to exceed $20.0 million; provided, however, that (a) if the Company or any Guarantor is the obligor on such Indebtedness, such Indebtedness must be unsecured and expressly subordinated to the prior payment in full in cash of all obligations with respect to the Notes (in the case of the Company) or the related Subsidiary Guarantee (in the case of a Guarantor); and (b) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Guarantor and any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Guarantor will be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Guarantor, as the case may be, that was not permitted by this clause (7);
(8) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations that are incurred for the bona fide purpose of hedging (w) interest rate risk with respect to Indebtedness of the Company or any of its Restricted Subsidiaries permitted to be incurred under this Indenture and which has a notional amount no greater than the payments due with respect to the Indebtedness being hedged thereby, or (x) currency exchange rate risk in connection with then existing financial obligations, or (y) the acquisition of goods or services or (z) against fluctuations in electricity rates pertaining to electricity produced by a Project; and in no event for purposes of speculation;
(9) Guarantees provided under Section 4.17 and the Guarantees by the Company or any Restricted Subsidiary of Indebtedness of the Company or a Restricted Subsidiary that was permitted to be incurred by another provision of this Section 4.09;
(10) (A) Indebtedness incurred in the ordinary course of business solely in respect of bid, surety and similar bonds and standby letters of credit issued for the purpose of supporting workers' compensation liabilities or other insurance obligations of the Company or any of its Restricted Subsidiaries, to the extent that such incurrence does not
result in the incurrence of any obligation for the payment of borrowed money to others and (B) Indebtedness owed to, including obligations in respect of letters of credit for the benefit of, any Person in connection with workers' compensation, health, disability or other employee benefits or property, casualty or liability insurance provided by such Person to the Company or a Restricted Subsidiary of the Company, pursuant to reimbursement or indemnification obligations to such Person, in each case incurred in the ordinary course of business;
(11) obligations in respect of Performance Guarantees entered into in accordance with Section 4.20;
(12) obligations in respect of any Existing IPP International Project Guaranties;
(13) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds in the ordinary course of business, and such Indebtedness is extinguished within five business days after incurrence thereof;
(14) Indebtedness arising from agreements of the Company or any of its Restricted Subsidiaries providing for indemnification, adjustment of purchase price, earn-out or other similar obligations, in each case, incurred or assumed in connection with the disposition of any business or assets or a Subsidiary of the Company;
(15) Indebtedness of the Company or any of its Restricted Subsidiaries, to the extent the net proceeds thereof are promptly (a) used to purchase Notes tendered pursuant to a Change of Control Offer under Section 4.15 or (b) deposited to defease the Notes in accordance with Article 8;
(16) the incurrence by the Company or any of its Restricted Subsidiaries of Non-Recourse Debt or Limited Recourse Debt, in an aggregate amount not to exceed the greater of (i) $40.0 million and (ii) 33% of the aggregate reduction in principal amount of Non-Recourse Debt and Limited Recourse Debt in existence on the Issue Date, up to a maximum amount of $150.0 million, at any time outstanding;
(17) the incurrence by any Restricted Subsidiary of the Company of Limited Recourse Debt relating to waste-to-energy Projects, so long as the incurrence by such Restricted Subsidiary of such Limited Recourse Debt is required, as evidenced by a resolution of the Board of Directors, by the existing client (if such client is a governmental authority) of the relevant Project; provided that during the continuance of an Event of Default, the Company and its Restricted Subsidiaries shall not enter into any new commitments for any such Indebtedness;
(18) Non-Recourse Debt or Limited Recourse Debt incurred by any of the Company's Restricted Subsidiaries, the net proceeds of which are used to repay, redeem or repurchase the Notes or any other secured unsubordinated Indebtedness of the Company; and
(19) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (19), not to exceed $30.0 million at any time outstanding.
(c) For purposes of determining compliance with this Section 4.09,
in the event that an item of proposed Indebtedness meets the criteria of more
than one of the categories of Permitted Debt described in clause (1) through
(19) of Section 4.09(b), or is permitted to be incurred pursuant to Section
4.09(a), the Company will be permitted to classify such item of Indebtedness on
the date of its incurrence, or later reclassify all or a portion of such item of
Indebtedness, in any manner that complies with this Section 4.09. The maximum
amount of Indebtedness that the Company or any of its Restricted Subsidiaries
may incur pursuant to this covenant shall not be deemed to be exceeded solely as
a result of fluctuations in currency exchange rates. Indebtedness under the
Credit Agreements, including Guarantees of such Indebtedness, on the Issue Date
will be deemed to have been incurred on such date in reliance on the exception
provided by clause (1) of Section 4.09(b).
(d) Accrual of interest or dividends, the accretion of accreted value or original issue discount and the payment of interest or dividends in the form of additional Indebtedness will not be deemed to be an incurrence of Indebtedness for purposes of this Section 4.09.
(e) For purposes of determining compliance with any U.S. dollar-denominated restriction on Indebtedness, the U.S. dollar-equivalent principal amount of Indebtedness denominated in a foreign currency will be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred, in the case of term debt, or first committed, in the case of revolving credit debt; provided that (1) the U.S. dollar-equivalent principal amount of any such Indebtedness outstanding or committed on the Issue Date will be calculated based on the relevant currency exchange rate in effect on the Issue Date of this Indenture, and (2) if such Indebtedness is incurred to refinance other Indebtedness denominated in a foreign currency, and such refinancing would cause the applicable U.S. dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such Refinancing Indebtedness does not exceed the principal amount of such Indebtedness being refinanced. The principal amount of any Indebtedness incurred to refinance other Indebtedness, if incurred in a different currency than the Indebtedness being refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such respective Indebtedness is denominated that is in effect on the date of such refinancing.
SECTION 4.10 Asset Sales.
(a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless:
(1) the Company (or such Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of;
(2) the fair market value is determined by the Board of Directors and evidenced by a resolution of the Board of Directors and, if such fair market value is in excess of $15.0 million, is set forth in an Officer's Certificate delivered to the Trustee; and
(3) at least 75% of the consideration received in the Asset Sale by the Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents. For purposes of this clause (3), each of the following shall be deemed to be cash:
(A) any liabilities, as shown on the Company's most recent consolidated balance sheet, of the Company or any of its Restricted Subsidiaries (other than contingent liabilities and liabilities that are by their terms subordinated in right of payment to the Notes or any Subsidiary Guarantee) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability;
(B) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee converted by the Company or such Restricted Subsidiary within 90 days into cash or Cash Equivalents, to the extent of the cash and Cash Equivalents received in that conversion; and
(C) any Voting Stock or assets of the kind referred to in clause (2) or (4) of Section 4.10(b).
(b) Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Company or such Restricted Subsidiary may, at its option and to the extent it elects, apply (i) 33% of all such Net Proceeds received after the Issue Date and until the aggregate Net Proceeds received by the Company and all of its Restricted Subsidiaries equal $7.5 million, and (ii) thereafter, 100% of such Net Proceeds:
(1) to repay or cash collateralize Bank Indebtedness and, to the extent the Bank Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto;
(2) to acquire all or substantially all of the assets of, or a majority of the Voting Stock of, a Permitted Business, or to make a Permitted Investment in another Person that is engaged in a Permitted Business;
(3) to make capital expenditures that are used or useful in a Permitted Business;
(4) to acquire other assets that are used or useful in a Permitted Business; or
(5) any combination of the foregoing;
provided that the Company and any such Restricted Subsidiary will be deemed to have applied such Net Proceeds in accordance with clause (2) or clause (4) of this Section 4.10(b) if, within 365 days after the date of such Asset Sale, the Company or such Restricted Subsidiary shall have entered into, and not abandoned or rejected, a binding agreement with respect to an acquisition, expenditure or Investment that would result in such application of such Net Proceeds and that acquisition, expenditure or Investment is thereafter completed within 455 days after the date of such Asset Sale.
(c) Pending the final application of any Net Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited by this Indenture.
(d) Any Net Proceeds from Asset Sales that are not applied or invested as provided in Section 4.10(b), other than Net Proceeds not required to be applied or invested in the manner specified in Section 4.10(b), shall constitute "Excess Proceeds". When the aggregate amount of Excess Proceeds exceeds $15.0 million, the Company shall , to the extent permitted under the Intercreditor Agreement, make an Asset Sale Offer to all Holders of Notes and to all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase or redeem the maximum principal amount of the Notes and such other pari passu Indebtedness that may be purchased or redeemed out of the Excess Proceeds. The offer price for the Notes in any Asset Sale Offer will be equal to 100% of the Accreted Value plus accrued and unpaid interest on the Notes to be purchased, to the date fixed for the closing of such Asset Sale Offer in accordance with the procedures set forth in this Indenture, and shall be payable in cash. If the date of purchase is on or after an interest record date and on or before the related Interest Payment Date, accrued and unpaid interest, if any, shall be paid to the Holder in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender pursuant to the Asset Sale Offer. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company and its Restricted Subsidiaries may use those Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate Accreted Value of Notes and the amount of other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other pari passu Indebtedness to be purchased or redeemed on a pro rata basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.
(e) The Company shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent those laws and regulations are applicable in connection with each
repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with Section 3.09 or
this Section 4.10, the Company shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations under
Section 3.09 or this Section 4.10 by virtue of such conflict.
(f) Notwithstanding the foregoing, to the extent the Intercreditor Agreement is in effect, any Asset Sale shall be governed by the terms of the Intercreditor Agreement to the extent that the applicable terms of this Indenture are inconsistent therewith.
SECTION 4.11 Transactions with Affiliates.
(a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any of its Affiliates (each, an "Affiliate Transaction"), unless:
(1) the Affiliate Transaction is on terms that are no less favorable to the Company or such Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person; and
(2) the Company delivers to the Trustee:
(A) with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving aggregate
consideration in excess of $5.0 million, a resolution of the
Board of Directors set forth in an Officer's Certificate
certifying that such Affiliate Transaction complies with this
Section 4.11 and that such Affiliate Transaction has been
approved by a majority of the members of the Board of
Directors having no personal stake in such Affiliate
Transaction; and
(B) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $15.0 million, an opinion as to the fairness to the Company and its Restricted Subsidiaries of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing.
(b) The following transactions will not be deemed to be Affiliate Transactions and therefore will not be subject to the provisions of Section 4.11(a):
(1) any Restricted Payment permitted to be made pursuant to Section 4.07 and any Permitted Investment;
(2) payments made pursuant to the CPIH Reimbursement Agreement, the Corporate Services Reimbursement Agreement or the Tax Sharing Agreement;
(3) any employment, service or termination agreement entered into in the ordinary course of business;
(4) any issuance of Equity Interests (other than Disqualified Stock), or other payments, awards or grants in cash, Equity Interests (other than Disqualified Stock) or
otherwise pursuant to, or the funding of, employment arrangements, employee stock options and employee stock ownership plans approved by the Board of Directors;
(5) loans or advances to employees of the Company or its Subsidiaries in the ordinary course of business permitted by clause (7) of the definition of Permitted Investments;
(6) the payment or provision of reasonable fees, compensation or employee benefit plans, arrangements or perquisites to, and any indemnity provided for the benefit of, directors, officers, consultants or employees of the Company or any Subsidiary in the ordinary course of business;
(7) any transaction between or among the Company and its Restricted Subsidiaries or between Restricted Subsidiaries of the Company;
(8) transactions with customers, suppliers, contractors, joint venture partners or purchasers or sellers of goods or services, in each case which are in the ordinary course of business (including, without limitation, pursuant to joint venture agreements) and otherwise in compliance with the terms of this Indenture, and which are fair to the Company and its Restricted Subsidiaries, as applicable, in the reasonable determination of the Board of Directors;
(9) transactions with the Investor Parties pursuant to the Indemnification Agreement, the Second Lien Letter of Credit Facility and any other agreement in existence on the Issue Date, between the Company, DHC or any Investor Party, as such agreement may thereafter be amended, modified, restated, renewed, extended, refinanced, refunded or replaced, as applicable, on terms not materially less favorable to the Company and its Restricted Subsidiaries, taken as a whole, than those terms in effect on the Issue Date, and any such amendment, modification, restatement, renewal, extension, refinancing, refunding or replacement;
(10) transactions with CPIH and its Subsidiaries pursuant to agreements in existence or entered into on the Issue Date, as such agreements may thereafter be amended, modified, restated, renewed, extended, refinanced, refunded or replaced, as applicable, on terms not materially less favorable to the Company and its Restricted Subsidiaries, taken as a whole, than the terms of such agreements as in effect on the Issue Date, and any such amendment, modification, restatement, renewal, extension, refinancing, refunding or replacement;
(11) transactions pursuant to any other arrangement, contract or agreement in existence on the Issue Date, as such arrangement, contract or agreement may thereafter be amended, modified, restated, renewed, extended, refinanced, refunded or replaced from time to time; provided that any such amendment, modification, restatement, renewal, extension, refinancing, refunding or replacement is on terms not materially less favorable to the Company and its Restricted Subsidiaries, taken as a whole, than the arrangement, contract or agreement in existence on the Issue Date; and
(12) sales of Equity Interests, other than Disqualified Stock, of the Company to Affiliates of the Company.
SECTION 4.12 Liens.
(a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien of any kind securing Indebtedness or trade payables on any asset now owned or hereafter acquired, except Permitted Liens.
(b) If the Company or any of its Restricted Subsidiaries
shall create, incur, assume or suffer to exist any such Lien not permitted by
the provisions of Section 4.12(a), the Company and such Restricted Subsidiary
(i) shall be deemed to have automatically and without further action secured the
Obligations under the Notes with such Lien equally and ratably with any and all
other Indebtedness secured thereby as long as any such Indebtedness shall be so
secured, and (ii) shall take or cause to be taken such actions as Holders deem
necessary or advisable to evidence such equal and ratable Lien; provided that,
notwithstanding the foregoing, this covenant shall not be construed as a consent
by Holders to the creation of any such Lien not permitted by the provisions of
Section 4.12(a) and the creation or assumption of any such Lien not permitted by
the provisions of Section 4.12(a) shall constitute an Event of Default.
SECTION 4.13 Business Activities.
The Company shall not, and shall not permit any of its Subsidiaries to, engage in any business other than Permitted Businesses, except to such extent as would not be material to the Company and its Subsidiaries taken as a whole.
SECTION 4.14 Corporate Existence.
Subject to Article 5, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect:
(1) its corporate existence, and the corporate, partnership or other existence of each of its Restricted Subsidiaries, in accordance with the respective or organizational documents (as the same may be amended from time to time) of the Company or any such Restricted Subsidiary; and
(2) the material rights (charter and statutory), licenses and franchises of the Company and its Restricted Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, of the Company or any of its Restricted Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Restricted Subsidiaries, taken as a whole, and that the loss thereof is not materially adverse to the Holders of the Notes or such action as is otherwise permitted by this Indenture.
SECTION 4.15 Offer to Repurchase Upon Change of Control.
(a) Subject to the Company's right to redeem the Notes pursuant to
Section 3.07, upon the occurrence of a Change of Control, the Company shall make
an offer (a "Change of Control Offer") to each Holder to repurchase all or any
part (in a minimum aggregate principal amount at Stated Maturity of $1,000 or an
integral multiple of $1,000) of such Holder's Notes at a purchase price in cash
equal to 101% of the Accreted Value of the Notes repurchased plus accrued and
unpaid interest on the Notes repurchased to the date of repurchase (the "Change
of Control Payment"). Within 10 days following any Change of Control, if the
Company has not sent a redemption notice pursuant to Section 3.03 for all of the
Notes, the Company shall mail a notice to each Holder describing the transaction
or transactions that constitute the Change of Control and stating:
(1) that the Change of Control Offer is being made pursuant to this Section 4.15 and that all Notes tendered will be accepted for payment;
(2) the purchase price and the purchase date, which date shall be no earlier than 30 days and no later than 60 days after the date on which such notice is mailed (the "Change of Control Payment Date");
(3) that any Note not tendered shall continue to accrue interest;
(4) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date;
(5) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer shall be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date;
(6) that Holders shall be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder; the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have the Notes purchased; and
(7) that Holders whose Notes are being purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof.
(b) The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a
Change in Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions of Sections 3.09, 3.10 or 4.15, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under Section 3.09, 3.10 or this Section 4.15 by virtue of such conflict.
(c) On the Change of Control Payment Date, the Company shall, to the extent lawful:
(1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and
(3) deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officer's Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company.
Any Note so accepted for payment shall cease to accrue interest on and after the Change of Control Payment Date.
(d) The Paying Agent shall promptly mail to each Holder of Notes properly tendered the Change of Control Payment for such Notes, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each new Note shall be in a minimum aggregate principal amount of $1,000 or an integral multiple thereof. If the Change of Control Payment Date is on or after an interest record date and on or before the related Interest Payment Date, accrued and unpaid interest, if any, shall be paid to the Holder in whose name a note is registered at the close of business on such record date, and no additional interest shall be payable to the holders who tender pursuant to the Change of Control Offer. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.
(e) Notwithstanding anything to the contrary in this Section 4.15, the Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.15 and Section 3.09 and purchases all Notes validly tendered and not withdrawn under the Change of Control Offer.
SECTION 4.16 Payments for Consent.
The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture, the Notes or the Security Documents unless such consideration is offered to be paid and is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement.
SECTION 4.17 Additional Subsidiary Guarantees and Liens.
If the Company or any of its Restricted Subsidiaries acquires or creates another Domestic Subsidiary after the Issue Date, excluding any Subsidiary that has been properly designated as an Unrestricted Subsidiary in accordance with this Indenture for so long as it continues to constitute an Unrestricted Subsidiary, then that newly acquired or created Domestic Subsidiary shall become a Guarantor and (a) execute a supplemental indenture and deliver an Opinion of Counsel reasonably satisfactory to the Trustee within 10 Business Days of the date on which it was acquired or created, (b) if such Domestic Subsidiary grants any Lien upon any of its assets and property as security for any Credit Agreement Obligations, execute any and all further Security Documents, financing statements, agreements and instruments, upon substantially the same terms as the security documents in respect of such Credit Agreement Obligations, but subject to the Intercreditor Agreement, that grants the Trustee a third-priority Lien upon such assets and property for the benefit of the Holders and take all such actions (including the filing and recording of financing statements, fixture filings, Mortgages and other documents) that may be required under any applicable law, or which the Trustee may reasonably request to create such third-priority Lien, all at the expense of the Company, including all reasonable fees and expenses of counsel incurred by the Trustee in connection therewith, and (c) deliver to the Trustee an Opinion of Counsel, reasonably satisfactory to the Trustee, that such Subsidiary Guarantee and any such Security Documents, as the case may be, are valid, binding and enforceable obligations of such Subsidiary, subject to customary exceptions for bankruptcy, fraudulent conveyance and equitable principles.
SECTION 4.18 Designation of Restricted and Unrestricted Subsidiaries.
The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary, if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary properly so designated will be deemed to be an Investment made as of the time of the designation and shall reduce the amount available for Restricted Payments under the first paragraph of Section 4.07 or Permitted Investments, as determined by the Company. Such a designation shall only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the criteria for being an Unrestricted Subsidiary. The Board of Directors may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation would not cause a Default.
SECTION 4.19 Limitation on Sale and Leaseback Transactions.
The Company shall not, and shall not permit any of its Restricted Subsidiaries to, enter into any Sale/Leaseback Transaction; provided that the Company or any Restricted Subsidiary may enter into a Sale/Leaseback transaction if:
(1) the Company or that Restricted Subsidiary, as applicable, could have incurred Indebtedness in an amount equal to the Attributable Debt relating to such Sale/Leaseback Transaction in compliance with Section 4.09;
(2) the gross cash proceeds of such Sale/Leaseback Transaction are at least equal to the fair market value (in the case of gross cash proceeds in excess of $5.0 million, as determined in good faith by the Board of Directors, and as so determined by the Board of Directors and set forth in an Officer's Certificate delivered to the Trustee in the case of gross cash proceeds in excess of $15.0 million), of the property that is the subject of such Sale/Leaseback Transaction; and
(3) the transfer of assets in such Sale/Leaseback Transaction is permitted by, and the Company applies the proceeds of such transaction in compliance with, Section 4.10.
SECTION 4.20 Limitation on Performance Guarantees.
The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or become obligated with respect to any Performance Guarantee other than Performance Guarantees which are unsecured and which:
(1) are in effect on the Issue Date;
(2) replace, renew or extend Performance Guarantees permitted pursuant to clause (1) above;
(3) support Expansions of existing waste-to-energy Projects;
(4) are required in connection with waste-to-energy Projects undertaken by the Company or any of its Restricted Subsidiaries after the Issue Date (i) with respect to which the Company's or such Restricted Subsidiary's Investment therein constitutes a Permitted Investment or a Restricted Payment not prohibited by Section 4.07 or (ii) in which neither the Company nor any of its Restricted Subsidiaries has any Investment; or
(5) are entered into in connection with a Bankrupt Subsidiary ceasing to be a Bankrupt Subsidiary, for the purpose of replacing a Performance Guarantee relating to such Bankrupt Subsidiary that was in effect immediately prior to the Issue Date but was terminated on the Issue Date, so long as no Persons enter into any such replacement Performance Guarantee as obligors other than the obligors under the Performance Guaranty being so replaced.
SECTION 4.21 Payment of Additional Interest
The Company shall apply for and use reasonable business efforts to obtain and maintain ratings of the Notes from both Moody's and S&P. If the Notes have not been rated by either Moody's or S&P within 90 days after the Issue Date, the Company shall pay, as additional interest on the Notes, an amount equal to 0.25% of the principal amount of the Notes at maturity until a rating is obtained from one or both of Moody's or S&P. Such additional interest shall be computed in the same manner and shall be payable at the same times and to the same Persons as other interest on the Notes. Any failure by the Company to obtain or maintain the ratings required by this Section 4.21 solely as a result of the inaction or refusal to act by any such rating
agency that is beyond the control of the Company shall not constitute a breach of this Section 4.21 or require the payment of such additional interest. The Company shall give prompt written notice to the Trustee of the occurrence of any event requiring the payment of additional interest pursuant to this Section 4.21.
ARTICLE 5.
SUCCESSORS
SECTION 5.01 Merger, Consolidation, or Sale of Assets.
(a) The Company shall not, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not the Company is the surviving corporation); or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole, in one or more related transactions, to another Person; unless:
(1) either: (a) the Company is the surviving corporation; or (b) the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition has been made is a Person organized or existing under the laws of the United States, any state of the United States or the District of Columbia;
(2) the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, conveyance or other disposition has been made assumes all the obligations of the Company under the Notes and this Indenture, pursuant to a supplemental indenture or other agreements reasonably satisfactory to the Trustee;
(3) immediately after giving effect to such transaction no Default or Event of Default exists;
(4) the Company or the Person formed by or surviving any
such consolidation or merger (if other than the Company), or to which
such sale, assignment, transfer, conveyance or other disposition has
been made shall, on the date of such transaction after giving pro forma
effect thereto and any related financing transactions as if the same
had occurred at the beginning of the applicable four-quarter period,
(i) be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Consolidated Coverage Ratio test set forth in the first
paragraph of Section 4.09(a) or (ii) (A) would have a Consolidated
Coverage Ratio greater than the Consolidated Coverage Ratio of the
Company immediately prior to such transaction and without taking into
account such transaction and any related financing transactions and (B)
has received and delivered to the Trustee letters from Moody's and S&P
stating that the Notes, after giving effect to such transaction and any
related financing transactions, will be rated at least "Ba1" and "BB+"
by such agencies, respectively; and
(5) the Company shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture, if any, comply with this Indenture.
(b) In addition, the Company shall not, directly or indirectly,
lease all or substantially all of its properties or assets, in one or more
related transactions, to any other Person. This Section 5.01 will not prohibit
(i) any sale, assignment, transfer, conveyance or other disposition of assets
between or among the Company and any Guarantor, (ii) any Restricted Subsidiary
from consolidating with, merging into or transferring all or part of its assets
to the Company or any Guarantor, or (iii) the Company from merging with an
Affiliate incorporated solely for the purpose of reincorporating the Company in
another jurisdiction to realize tax or other benefits.
(c) In the event of any transaction (other than a lease) described in and complying with the conditions listed in the immediately preceding paragraph in which the Company is not the surviving Person and the surviving Person is to assume all the obligations of the Company under the Notes and this Indenture pursuant to a supplemental indenture, such surviving Person shall succeed to, and be substituted for, and may exercise every right and power of, the Company, and the Company would be discharged from its obligations under this Indenture and the Notes.
SECTION 5.02 Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in a transaction that is subject to, and that complies with the provisions of, Section 5.01, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor Company shall not be relieved from the obligation to pay the principal or Accreted Value of, and interest and premium, if any, on, the Notes except in the case of a sale of all of the Company's assets in a transaction that is subject to, and that complies with the provisions of, Section 5.01.
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01 Events of Default.
Each of the following is an "Event of Default":
(1) the Company defaults for 30 consecutive days in the payment when due of interest on the Notes;
(2) the Company defaults in payment when due of the principal or Accreted Value of, or premium, if any, on the Notes;
(3) failure by the Company or any of its Restricted Subsidiaries to comply with its obligations to make any Change of Control Payment pursuant to Section 4.15 or to comply with the provisions of Section 5.01;
(4) failure by the Company or any of its Restricted Subsidiaries for 30 days after written notice from the Trustee or Holders of at least 25% in aggregate principal amount of the outstanding Notes to comply with the provisions of any of Sections 4.07, 4.09 or 4.10;
(5) failure by the Company or any of its Restricted Subsidiaries for 60 days after written notice from the Trustee or Holders of at least 25% in aggregate principal amount of the outstanding Notes to comply with any of the other agreements in this Indenture or the Security Documents;
(6) default under any mortgage, indenture, agreement or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness of the Company or any of its Restricted Subsidiaries whether such Indebtedness now exists, or is created after the Issue Date, if that default:
(A) is caused by a failure to pay principal of or liquidation preference of such Indebtedness at the final stated maturity thereof (giving effect to any applicable grace periods and any extensions thereof); or
(B) results in the acceleration of such Indebtedness prior to its express maturity; or
(C) results in a requirement that the Company or any of its Restricted Subsidiaries collateralize any letter of credit thereunder and the Company or such Restricted Subsidiary fails to provide the required collateral on the terms and within the times set forth therein (giving effect to any applicable grace periods and any extensions thereof);
and, in each case, if the principal amount of such Indebtedness or the amount of such collateralization requirement aggregates $20.0 million or more;
(7) any final judgment or judgments for the payment of money in an aggregate amount in excess of $10.0 million (or its foreign currency equivalent at the time) in excess of amounts which the Company's insurance carriers have agreed to pay under applicable policies shall have been rendered against the Company or any Restricted Subsidiary of the Company that is a Significant Subsidiary and shall not have been waived, satisfied, bonded or discharged for any period of 60 consecutive days during which a stay of enforcement is not in effect;
(8) the Company or any Restricted Subsidiary of the Company (other than a Bankrupt Subsidiary) that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in an involuntary case;
(C) consents to the appointment of or taking possession by a custodian, receiver, liquidator, trustee, assignee or sequestrator of it or for all or substantially all of its property; or
(D) makes a general assignment for the benefit of its creditors; or
(9) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:
(A) is for relief against the Company or any Restricted Subsidiary of the Company (other than a Bankrupt Subsidiary) that is a Significant Subsidiary or any group of Restricted Subsidiaries of the Company that, taken as a whole, would constitute a Significant Subsidiary in an involuntary case; or
(B) appoints a custodian, receiver, liquidator, trustee, assignee or sequestrator of the Company or any Restricted Subsidiary of the Company (other than a Bankrupt Subsidiary) that is a Significant Subsidiary or for all or substantially all of the property of the Company or any Restricted Subsidiary of the Company that is a Significant Subsidiary or, in either case, any group of Restricted Subsidiaries of the Company that, taken as a whole, would constitute a Significant Subsidiary; or
(C) orders the liquidation of the Company or any Restricted Subsidiary of the Company (other than a Bankrupt Subsidiary) that is a Significant Subsidiary or any group of Restricted Subsidiaries of the Company that, taken as a whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive days; or
(10) (A) any Subsidiary Guarantee or any Security Document or any security interest granted thereby is held in any judicial proceeding to be unenforceable or invalid, or ceases for any reason to be in full force and effect and such default continues for ten days after written notice, or (B) the Company or any Guarantor, or any Person acting on behalf of the Company or any Guarantor, denies or disaffirms its obligations under any Subsidiary Guarantee or Security Document.
SECTION 6.02 Acceleration.
(a) In the case of an Event of Default specified in clauses (8) or
(9) of Section 6.01, all outstanding Notes will become due and payable
immediately without further action or notice. If any other Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount at Stated Maturity of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Upon any such declaration the
Notes shall become due and payable immediately. The amount due and payable with
respect to principal of the Notes upon any acceleration hereunder shall be the
Accreted Value of the Notes as of the date of acceleration.
(b) In the event of a declaration of acceleration of the Notes because an Event of Default has occurred and is continuing as a result of the acceleration of any Indebtedness described in clause (6) of Section 6.01, the declaration of acceleration of the Notes shall be automatically annulled if the holders of any Indebtedness described in clause (6) of Section 6.01 have rescinded the declaration of acceleration in respect of the Indebtedness within 30 days of the date of the declaration and if:
(1) the annulment of the acceleration of Notes would not conflict with any judgment or decree of a court of competent jurisdiction; and
(2) all existing Events of Default, except nonpayment of principal or interest on the Notes that became due solely because of the acceleration of the Notes, have been cured or waived.
(c) The Holders of a majority in aggregate principal amount at Stated Maturity of the then outstanding Notes by written notice to the Trustee may on behalf of all of the Holders rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal, interest or premium that has become due solely because of the acceleration) have been cured or waived.
(d) If an Event of Default occurs by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the Company
with the intention of avoiding payment of the premium that the Company would
have had to pay if the Company then had elected to redeem the Notes pursuant to
Section 3.07, then, upon acceleration of the Notes, an equivalent premium, based
upon the Accreted Value of the Notes as of the date of acceleration, shall also
become and be immediately due and payable, to the extent permitted by law,
anything in this Indenture or in the Notes to the contrary notwithstanding.
SECTION 6.03 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal or Accreted Value of and premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All remedies are cumulative to the extent permitted by law.
SECTION 6.04 Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal or Accreted Value of or premium or interest on, the Notes, including in connection with an offer to purchase (other than a rescission of acceleration of the Notes by the Holders of a majority in aggregate principal amount at Stated Maturity of the then outstanding Notes); provided, however, that the Holders of a majority in aggregate principal amount at Stated Maturity of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon.
SECTION 6.05 Control by Majority.
Holders of a majority in aggregate principal amount at Stated Maturity of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law, this Indenture or the Security Documents that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability and may take any other action it deems proper that is not inconsistent with such direction.
SECTION 6.06 Limitation on Suits.
(a) A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if:
(1) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default;
(2) the Holders of at least 25% in aggregate principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy;
(3) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and
(5) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note.
SECTION 6.07 Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal or Accreted Value of, and premium, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.08 Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal or Accreted Value of, premium, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09 Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers
or documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07. To the extent that the payment of any such compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07 out of the estate in any such
proceeding, shall be denied for any reason, payment of the same shall be secured
by a Lien on, and shall be paid out of, any and all distributions, dividends,
money, securities and other properties that the Holders may be entitled to
receive in such proceeding whether in liquidation or under any plan of
reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10 Priorities.
(a) If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys (including any Collateral Agent) for amounts due under Section 7.07, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes for principal or Accreted Value, premium and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal or Accreted Value, premium and interest, respectively; and
Third: to the Company or to such party as a court of competent jurisdiction shall direct.
(b) The Trustee may, upon prior written notice to the Company, fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10.
SECTION 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee or any Collateral Agent for any action taken or omitted by it as Trustee or as Collateral Agent, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee or by any Collateral Agent, a suit by a Holder of a Note pursuant to Section 6.07, or a suit by Holders of more than 25% in principal amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
SECTION 7.01 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default known to the Trustee:
(1) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:
(1) this paragraph does not limit the effect of paragraph
(b) of this Section 7.01;
(2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05.
(d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to the provisions of this Article 7.
(e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder has offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.
SECTION 7.02 Rights of Trustee.
(a) The Trustee may conclusively rely upon any document reasonably believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an Officer's Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officer's Certificate or Opinion of Counsel. The Trustee may consult with counsel and the advice of such counsel or any Opinion
of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it reasonably takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture, provided, however, that the Trustee's conduct does not constitute willful misconduct or negligence.
(e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction.
SECTION 7.03 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11.
SECTION 7.04 Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication.
The Trustee shall not be responsible for and makes no representation as to the value or condition of the Collateral or any part thereof, or as to the title of the Company thereto, or as to the security afforded thereby or hereby, or as to the validity or genuineness of any Collateral pledged and deposited with the Trustee. The Trustee makes no representation with respect to the effectiveness or adequacy of the Security Documents, or the validity or perfection of Liens granted under this Indenture or the Security Documents. The Trustee shall not be responsible for independently ascertaining or maintaining such validity or perfection, if any and shall be fully protected in relying upon certificates and opinions delivered to it in accordance with the terms of this Indenture or the Security Documents.
SECTION 7.05 Notice of Defaults.
If a Default or Event of Default occurs and is continuing and the Trustee receives actual notice of such event, the Trustee shall mail to the Holders of the Notes, as their names and addresses appear on the Noteholder list described in Section 2.05, a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes.
SECTION 7.06 Reports by Trustee to Holders.
(a) Within 60 days after each May 15 beginning May 15, 2005, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also will comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c).
(b) A copy of each report at the time of its mailing to the Holders of Notes shall be mailed by the Trustee to the Company and filed by the Trustee with the Commission and each stock exchange, if any, on which the Notes are listed in accordance with TIA Section 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange and of any delisting thereof.
SECTION 7.07 Compensation and Indemnity.
(a) The Company shall pay to the Trustee such compensation for its acceptance of this Indenture and services hereunder as agreed from time to time by the Company and the Trustee. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel.
(b) The Company and each Guarantor shall indemnify the Trustee and any Collateral Agent, and hold them harmless, against any and all losses, liabilities or expenses incurred by them arising out of or in connection with the acceptance or administration of their duties under this Indenture, including the reasonable costs and expenses of enforcing this Indenture against the Company and the Guarantors (including this Section 7.07) and defending themselves against any claim (whether asserted by the Company, the Guarantors or any Holder or any other Person) or liability in connection with the exercise or performance of any of their powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to their negligence or bad faith. The Trustee (or, if the claim is against a Collateral Agent, the applicable Collateral Agent) shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee or a Collateral Agent to so notify the Company shall not relieve the Company or any of the Guarantors of their obligations hereunder. The Company or
such Guarantor shall defend the claim and the Trustee (or the Collateral Agent, as applicable) shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. Neither the Company nor any Guarantor need pay for any settlement made without its consent, which consent shall not be unreasonably withheld.
(c) The obligations of the Company and the Guarantors under this
Section 7.07 shall survive the satisfaction and discharge of this Indenture,
resignation or removal of any Trustee and the discharge of the Company's
obligations pursuant to Article 8 hereof.
(d) To secure the Company's payment obligations in this Section 7.07, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture.
(e) When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(8) or (9) occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) shall be preferred over the status of the Holders in a proceeding under any Bankruptcy Law, and are intended to constitute expenses of administration under any Bankruptcy Law.
(f) The Trustee shall comply with the provisions of TIA Section 313(b)(2) to the extent applicable.
SECTION 7.08 Replacement of Trustee.
(a) A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08.
(b) The Trustee may resign, upon 30 days written notice to the Company, in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law;
(3) a custodian or public officer takes charge of the Trustee or its property; or
(4) the Trustee becomes incapable of acting.
(c) If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after
the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company.
(d) If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of at least 25% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee.
(e) If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.
(f) A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.07. Notwithstanding replacement of the Trustee pursuant to this Section 7.08,
the Company's obligations under Section 7.07 shall continue for the benefit of
the retiring Trustee.
SECTION 7.09 Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee.
SECTION 7.10 Eligibility; Disqualification.
(a) There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition.
(b) This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b).
SECTION 7.11 Preferential Collection of Claims Against Company.
The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01 Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of the Board of Directors evidenced by a resolution set forth in an Officer's Certificate, at any time, elect to have either Section 8.02 or 8.03 be applied to all outstanding Notes (including the Subsidiary Guarantees) upon compliance with the conditions set forth below in this Article 8.
SECTION 8.02 Legal Defeasance and Discharge.
(a) Upon the Company's exercise under Section 8.01 of the option applicable to this Section 8.02 and subject to the satisfaction of the conditions set forth in Section 8.04, the Subsidiary Guarantees shall be released and the Company and each of the Guarantors shall be deemed to have been discharged from their obligations with respect to all outstanding Notes (including the Subsidiary Guarantees) on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company and the Guarantors will be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes (including the Subsidiary Guarantees), which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 and the other Sections of this Indenture referred to in clauses (1) and (2) below, and to have satisfied all their other obligations under such Notes, the Subsidiary Guarantees and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder:
(1) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, or interest or premium, if any, on such Notes when such payments are due from the trust referred to in Section 8.04;
(2) the Company's obligations with respect to such Notes under Article 2 and Section 4.02;
(3) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's and the Guarantors' obligations in connection therewith; and
(4) this Article 8.
(b) Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03. SECTION 8.03 Covenant Defeasance.
Upon the Company's exercise under Section 8.01 of the option applicable to this Section 8.03, the Company and its Restricted Subsidiaries shall, subject to the satisfaction of the conditions set forth in Section 8.04, be released from each of their obligations under the
covenants contained in Sections 3.09, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13,
4.15, 4.16, 4.17, 4.18, 4.19, 4.20 and 4.21 and clause (4) of Section 5.01(a)
and the first sentence of Section 5.01(b) with respect to the outstanding Notes
on and after the date the conditions set forth in Section 8.04 are satisfied
(hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed
not "outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes shall not
be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes and Subsidiary
Guarantees, the Company and the Guarantors may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under
Section 6.01, but, except as specified above, the remainder of this Indenture
and such Notes and Subsidiary Guarantees shall be unaffected thereby. In
addition, upon the Company's exercise under Section 8.01 of the option
applicable to this Section 8.03, subject to the satisfaction of the conditions
set forth in Section 8.04, Sections 6.01(3) through 6.01(6) will not constitute
Events of Default.
SECTION 8.04 Conditions to Legal or Covenant Defeasance.
(a) In order to exercise either Legal Defeasance or Covenant Defeasance under either Section 8.02 or 8.03:
(1) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in United States dollars, non-callable Government Securities, or a combination thereof, in such amounts as shall be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal or Accreted Value of, and premium, if any, and interest on the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date;
(2) in the case of an election under Section 8.02, the Company must deliver to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that:
(A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling; or
(B) since the Issue Date, there has been a change in the applicable federal income tax law,
in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and
will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;
(3) in the case of an election under Section 8.03, the Company must deliver to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit);
(5) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound;
(6) the Company must deliver to the Trustee an Officer's Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or others; and
(7) the Company must deliver to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with.
(b) Notwithstanding the foregoing, the Opinion of Counsel required by clause (7) of Section 8.04(a) need not be delivered if all Notes not therefore delivered to the Trustee for cancellation (i) have become due and payable or (ii) will become due and payable on their maturity date within one year under arrangements satisfactory to the Trustee for the giving of notice of assumption by the Trustee in the name, and at the expense, of the Company.
SECTION 8.05 Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions.
(a) Subject to Section 8.06, all money and noncallable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium (if any) and interest, but such money need not be segregated from other funds except to the extent required by law.
(b) The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes.
(c) Notwithstanding anything in this Article 8 to the contrary,
the Trustee shall deliver or pay to the Company from time to time upon the
request of the Company any money or non-callable Government Securities held by
it as provided in Section 8.04 which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(a)), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
SECTION 8.06 Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of or premium or interest on any Note and remaining unclaimed for two years after such principal, premium or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter be permitted to look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining shall be repaid to the Company.
SECTION 8.07 Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's and the Guarantor's obligations under this Indenture and the Notes and the Subsidiary Guarantees shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03, as the case may be; provided, however, that, if the Company makes any payment of principal or Accreted Value of or premium or interest on any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01 Without Consent of Holders of Notes.
(a) Notwithstanding Section 9.02, the Company, the Guarantors and the Trustee may amend or supplement this Indenture, the Subsidiary Guarantees, the Notes or the Security Documents without the consent of any Holder of a Note:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or in place of certificated Notes;
(3) to provide for the assumption of the Company's obligations to Holders of Notes in the case of a merger or consolidation or sale of all or substantially all of the Company's assets;
(4) to make any change that would provide any additional rights or benefits to the Holders of Notes or that would not adversely affect the legal rights under this Indenture of any such Holder;
(5) to comply with requirements of the Commission in order to effect or maintain the qualification of this Indenture under the TIA;
(6) to allow any Guarantor to execute a supplemental indenture and/or a Subsidiary Guarantee with respect to the Notes; or
(7) if necessary, in connection with any addition or release of Collateral permitted under the terms of this Indenture or the Security Documents.
(b) Upon the request of the Company accompanied by a resolution of the Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 7.02, the Trustee shall join with the Company and the Guarantors in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise.
(c) The Company shall be entitled to releases of the Collateral or the Subsidiary Guarantees as described in Sections 10.03, 11.05 and 11.06.
SECTION 9.02 With Consent of Holders of Notes.
(a) Except as provided below in this Section 9.02, the Company, the Guarantors and the Trustee may amend or supplement any provision of this Indenture, the Subsidiary Guarantees, the Notes or the Security Documents with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding voting as a single class (including, without limitation, consents obtained in connection with a purchase of or a tender offer or exchange offer for the Notes), and, subject to Sections 6.04 and 6.07, any existing Default or compliance with any provision of this Indenture, the Notes or the Security Documents may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes). Section 2.08 shall determine which Notes are considered to be "outstanding" for purposes of this Section 9.02.
(b) Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture or other amendment, and upon the filing with the Trustee
of evidence satisfactory to the Trustee of the consent of the Holders of Notes
as aforesaid, and upon receipt by the Trustee of the documents described in
Section 7.02, the Trustee shall join with the Company in the execution of such
amended or supplemental Indenture or other amendment unless such amended or
supplemental Indenture or other amendment directly affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter into
such amended or supplemental Indenture or other amendment.
(c) It is not necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it is sufficient if such consent approves the substance thereof.
(d) After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07, the Holders of a majority in aggregate principal amount of the Notes then outstanding voting as a single class may waive compliance in a particular instance by the Company with any provision of this Indenture, the Notes or the Security Documents. However, without the consent of each Holder affected, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder):
(1) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver;
(2) reduce the principal or Accreted Value of or change the stated maturity of any Note or alter or waive any of the provisions with respect to the redemption or repurchase of the Notes;
(3) reduce the rate of or change the time for payment of interest, including default interest, on any Note;
(4) waive a Default or Event of Default in the payment of principal or Accreted Value of or premium or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of a majority in aggregate principal amount of
the then outstanding Notes and a waiver of the payment default that resulted from such acceleration);
(5) make any Note payable in money other than that stated in this Indenture;
(6) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal or Accreted Value of, or interest or premium on, the Notes;
(7) waive a redemption payment with respect to any Note other than a payment required by Sections 3.09, 4.10 and 4.15;
(8) subordinate in right of payment the Notes or any Subsidiary Guarantee to any other Indebtedness of the Company or any Guarantor; or
(9) make any change in the preceding amendment and waiver provisions;
(e) Any amendment to, or waiver of, the provisions of this Indenture or the Security Documents relating to the release of any Guarantor from any of its Obligations under its Subsidiary Guarantee, this Indenture or the Security Documents, except in accordance with the terms of this Indenture, shall require the consent of the Holders of at least 75% in aggregate principal amount of Notes then outstanding.
SECTION 9.03 Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be set forth in a amended or supplemental Indenture that complies with the TIA as then in effect.
SECTION 9.04 Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder.
SECTION 9.05 Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note will not affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06 Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture or other amendment authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amended or supplemental Indenture or other amendment until the Board of Directors approves it. In executing any amended or supplemental indenture or other amendment, the Trustee shall be entitled to receive and (subject to Section 7.01) shall be fully protected in relying upon, in addition to the documents required by Section 13.04, an Officer's Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental Indenture or other amendment is authorized or permitted by this Indenture.
ARTICLE 10.
COLLATERAL AND SECURITY
SECTION 10.01 Security Documents.
The due and punctual payment of the principal and Accreted Value of and interest and premium (if any) on the Notes when and as the same shall be due and payable, whether on an Interest Payment Date, at maturity, by acceleration, repurchase, redemption or otherwise, and interest on the overdue principal or Accreted Value of and interest on the Notes and performance of all other obligations of the Company to the Holders or the Trustee under this Indenture and the Notes, according to the terms hereunder or thereunder, are secured as provided in the Security Documents which the Company and certain of the Guarantors have entered into simultaneously with the execution of this Indenture, subject to the terms of the Intercreditor Agreement. Each Holder of a Note, by its acceptance thereof, consents and agrees to the terms of this Indenture and the Security Documents (including the provisions providing for foreclosure and release of Collateral) as the same may be in effect or may be amended from time to time in accordance with its terms or the terms hereof and authorizes and directs the Collateral Agent to enter into the Security Documents and to perform its obligations and exercise its rights thereunder in accordance therewith. The Company shall deliver to the Trustee (if it is not itself then the Collateral Agent) copies of all documents delivered to the Collateral Agent pursuant to the Security Documents, and shall do or cause to be done all such acts and things as may be required by the next sentence of this Section 10.01, to assure and confirm to the Trustee and the Collateral Agent the security interest in the Collateral contemplated hereby, by the Security Documents or any part thereof, as from time to time constituted, so as to render the same available for the security and benefit of this Indenture and of the Notes secured hereby, according to the intent and purposes herein expressed. The Company shall take, and shall cause its Restricted Subsidiaries to take, any and all actions reasonably required to cause the Security Documents to create and maintain, as security for the Obligations of the Company and the Guarantors hereunder, a valid and enforceable perfected Lien and security interest in and on 100% of the capital stock of, or other Equity Interests in, existing and future Domestic Subsidiaries owned by the Company and its Restricted Subsidiaries, substantially all the personal property assets of the Company and the Guarantors party to the Security Documents, all fee interests in real property assets and all leasehold interests, in favor of the Collateral Agent for the benefit of the Holders, junior in priority (subject to Permitted Liens) to Liens securing Credit Agreement Obligations.
SECTION 10.02 Recording and Opinions.
(a) The Company shall furnish to the Collateral Agent and the Trustee on January 15 in each year beginning with January 15, 2005, an Opinion of Counsel, which may be rendered by internal counsel to the Company, dated as of such date, either:
(1) (A) stating that, in the opinion of such counsel, action has been taken with respect to the recording, registering, filing, re-recording, re-registering and re-filing of all supplemental indentures, financing statements, continuation statements or other instruments of further assurance as is necessary to maintain and perfect the Lien of the Security Documents and reciting with respect to the security interests in the Collateral the details of such action or referring to prior Opinions of Counsel in which such details are given, and (B) stating that, in the opinion of such counsel, based on relevant laws as in effect on the date of such Opinion of Counsel, all financing statements and continuation statements have been executed and filed that are necessary as of such date and during the succeeding 12 months fully to preserve, perfect and protect, to the extent such protection and preservation are possible by filing, the rights of the Collateral Agent and the Trustee hereunder and under the Security Documents with respect to the security interests in the Collateral; or
(2) stating that, in the opinion of such counsel, no such action is necessary to maintain and perfect such Lien and assignment.
(b) The Company shall otherwise comply with the provisions of TIA
Section 314(b).
SECTION 10.03 Release of Collateral/Additional Liens.
(a) Subject to subsections (b), (c) and (d) of this Section 10.03, Collateral may be released from the Lien and security interest created by the Security Documents at any time or from time to time in accordance with the provisions of the Security Documents or as provided hereby. Whether prior to or after the Discharge of Credit Agreement Obligations, upon the request of the Company pursuant to an Officer's Certificate certifying that all conditions precedent hereunder have been met and without the consent of any Holder, the Company and the Guarantors party to the Security Documents shall be entitled to a release (or in the case of clause (3) below, a subordination) of the security interests on assets included in the Collateral from the Liens securing the Notes and the Subsidiary Guarantees under any one or more of the following circumstances:
(1) to enable the Company or any Guarantor to consummate any sale, lease, conveyance or other disposition of any assets or rights permitted or not prohibited under Section 4.10;
(2) in respect of assets subject to a permitted purchase money lien;
(3) if all of the stock of any Subsidiary of the Company that is pledged as part of the Collateral is released or if any Subsidiary that is a Guarantor is released from its Subsidiary Guarantee, such Subsidiary's assets will also be released; or
(4) pursuant to an amendment, waiver or supplement in accordance with Article 9;
provided that, in the case of a release requested under clauses (1), (2) or (3), above, or a subordination under clause (2) above, the Credit Agent concurrently releases (or in the case of a requested subordination under clause (2) above, subordinates) the Liens securing Credit Agreement Obligations with respect to the affected assets; provided further, that if there are any subordinated Liens on such assets, such subordinated Liens are similarly released or subordinated.
Upon receipt of such Officer's Certificate, the Collateral Agent shall execute, deliver or acknowledge any necessary or proper instruments of termination, satisfaction or release to evidence the release (or in the case of clause (2) above, the subordination) of any Collateral permitted to be released (or in the case of clause (2) above, subordinated) pursuant to this Indenture or the Security Documents.
Notwithstanding anything to the contrary in this Section 10.03(a) or in
Section 10.03(b), as long as the Company is in compliance with the provisions of
Section 10.03(f), the Company or any Guarantor may, pursuant to and in
accordance with this Indenture and the Security Documents, without requesting
the release or consent of the Trustee or the Collateral Agent or any Holder and
without delivering an Officer's Certificate:
(A) sell or dispose of in the ordinary course of business, free from the Lien and security interest created by the Security Documents, any machinery, equipment, furniture, apparatus, tools, implements, materials, supplies or other similar property ("Subject Property") which, in the Company's reasonable opinion, may have become obsolete or unfit for use in the conduct of its business or the operation of the Collateral upon replacing the same with, or substituting for the same, new Subject Property constituting Collateral not necessarily of the same character but being of at least equal value and utility as the Subject Property so disposed of, as long as such new Subject Property becomes subject to the Lien and security interest created by the Security Documents;
(B) abandon, sell, assign, transfer, license or otherwise dispose of in the ordinary course of business any personal property the use of which is no longer necessary or desirable in the proper conduct of the business or maintenance of the earnings of the Company and its Subsidiaries, taken as a whole, and is not material to the conduct of the business of the Company and its Subsidiaries, taken as a whole;
(C) grant in the ordinary course of business rights-of-way and easements over or in respect of any of the Company's or any Guarantor's real property; provided that such grant shall not, in the reasonable opinion of the Board of Directors, impair the usefulness of such property in the conduct of the Company's and its Subsidiaries' business, taken as a whole, and shall not be materially prejudicial to the interests of the Holders;
(D) sell, transfer or otherwise dispose of inventory in the ordinary course of business;
(E) sell, collect, liquidate, factor or otherwise dispose of accounts receivable in the ordinary course of business; and
(F) make cash payments (including for the scheduled repayment of Indebtedness) from cash that is at any time part of the Collateral in the ordinary course of business that are not otherwise prohibited by this Indenture and the Security Documents.
(b) Except as may be otherwise provided in the Security Documents
or in this Section 10.03, no Collateral may be released from the Lien and
security interest created by the Security Documents pursuant to the provisions
of the Security Documents unless the Officer's Certificate required by this
Section 10.03 has been delivered to the Collateral Agent.
(c) At any time when a Default or Event of Default has occurred and is continuing and the maturity of the Notes has been accelerated (whether by declaration or otherwise) and the Trustee has delivered a notice of acceleration to the Collateral Agent, no release of Collateral pursuant to the provisions of the Security Documents shall be effective as against the Holders, except as otherwise provided in the Security Documents.
(d) The release of any Collateral from the terms of this Indenture
and the Security Documents shall not be deemed to impair the security under this
Indenture in contravention of the provisions hereof if and to the extent the
Collateral is released pursuant to the terms of the Security Documents and this
Indenture. To the extent applicable, the Company and the Guarantors shall cause
TIA Section 313(b), relating to reports, and TIA Section 314(d), relating to the
release of property or securities from the Lien and security interest of the
Security Documents and relating to the substitution therefor of any property or
securities to be subjected to the Lien and security interest of the Security
Documents, to be complied with. Any certificate or opinion required by TIA
Section 314(d) may be made by an Officer of the Company or the Guarantors except
in cases where TIA Section 314(d) requires that such certificate or opinion be
made by an independent Person, which Person shall be an independent engineer,
appraiser or other expert selected or approved by the Trustee and the Collateral
Agent in the exercise of reasonable care, and in accordance with the TIA;
provided that the fair value of Collateral released from the Lien and security
interest of the Security Documents pursuant to the last paragraph of Section
10.03(a) shall not be considered in determining whether the aggregate fair value
of Collateral released from the Lien and security interest of the Security
Documents in any calendar year exceeds the 10% threshold specified in TIA
Section 314(d)(1). The Company's and each Guarantor's right to rely on the
immediately preceding proviso at any time is conditioned upon the Company and
the Guarantors having furnished to the Trustee all certificates described in
Section 10.03(f) that were required to be furnished to the Trustee at or prior
to such time.
(e) The Company may from time to time file with the Commission a request for an exemption (an "Exemption") from the requirements of TIA Section 314(d) for purposes of the releases of Collateral described in the last paragraph of Section 10.03(a). The Company shall
provide the Trustee with a copy of any such Exemption and promptly inform the Trustee of any rescission or termination of, or amendment to, such Exemption.
(f) In the case of transactions permitted by the last paragraph of
Section 10.03(a), the Company and the Guarantors shall deliver to the Trustee,
within 15 days after the end of each of the six month periods ended on March 15
and September 15 of each year, a certificate signed on behalf of the Company by
an Officer of the Company to the effect that all transactions effected pursuant
to the last paragraph of Section 10.03(a) during the immediately preceding six
month period were made by the Company and the Guarantors in the ordinary course
of business and that all proceeds therefrom were used by the Company and the
Guarantors in connection with their respective businesses or to make payments on
the Notes or as otherwise permitted under this Indenture and the Security
Documents.
SECTION 10.04 Certificates and Opinions of Counsel.
(a) To the extent applicable, the Company shall furnish to the Trustee and the Collateral Agent, prior to each proposed release of Collateral pursuant to the Security Documents:
(1) all documents required by TIA Section 314(d); and
(2) an Opinion of Counsel, to the effect that such accompanying documents constitute all documents required by TIA Section 314(d).
(b) The Trustee may, to the extent permitted by Sections 7.01 and 7.02, accept as conclusive evidence of compliance with the foregoing provisions the appropriate statements contained in such documents and such Opinion of Counsel.
SECTION 10.05 Certificates of the Trustee.
In the event that the Company wishes to release Collateral in
accordance with the Security Documents at a time when the Trustee is not itself
also the Collateral Agent and has delivered the certificates and documents
required by the Security Documents and Sections 10.03 and 10.04, the Trustee
shall determine whether it has received all documentation required by TIA
Section 314(d) in connection with such release and, based on such determination
and the Opinion of Counsel delivered pursuant to Section 10.04(b), shall deliver
a certificate to the Collateral Agent setting forth such determination.
SECTION 10.06 Authorization of Actions to be Taken by the Trustee Under the Security Documents.
(a) Subject to the provisions of Section 7.01 and 7.02 and the Intercreditor Agreement, the Trustee may, in its sole discretion and without the consent of the Holders, direct, on behalf of the Holders, the Collateral Agent to take all actions it deems necessary or appropriate in order to:
(1) enforce any of the terms of the Security Documents; and
(2) collect and receive any and all amounts payable in respect of the Obligations of the Company hereunder.
(b) Subject to the terms of the Intercreditor Agreement, the Trustee shall have power to institute and maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Collateral by any acts that may be unlawful or in violation of the Security Documents or this Indenture, and such suits and proceedings as the Trustee may deem expedient to preserve or protect its interests and the interests of the Holders in the Collateral (including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the security interest hereunder or be prejudicial to the interests of the Holders or of the Trustee).
SECTION 10.07 Authorization of Receipt of Funds by the Trustee Under the Security Documents.
The Trustee is authorized to receive any funds for the benefit of the Holders distributed under the Security Documents, and to make further distributions of such funds to the Holders according to the provisions of this Indenture.
SECTION 10.08 Termination of Security Interest.
The Trustee shall, at the request of the Company, deliver a certificate to the Collateral Agent stating that all Obligations under the Notes, the Subsidiary Guarantees, this Indenture and the Security Documents have been paid in full, and instruct the Collateral Agent to take the actions set forth in the next sentence pursuant to this Indenture and the Security Documents upon (1) payment in full of the principal of, accrued and unpaid interest on the Notes and all other Obligations under this Indenture, the Subsidiary Guarantees and the Security Documents that are due and payable at or prior to the time such principal, accrued and unpaid interest are paid, (2) a satisfaction and discharge of this Indenture as described in Article 12 or (3) a legal defeasance or covenant defeasance as described in Article 8. Upon receipt of such instruction, the Collateral Agent shall execute, deliver or acknowledge any necessary or proper instruments of termination, satisfaction or release to evidence the release of all such Liens.
ARTICLE 11.
NOTE GUARANTEES
SECTION 11.01 Guarantee.
(a) Subject to this Article 11, each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Company hereunder or thereunder, that:
(1) the principal and Accreted Value of and premium, if any, and interest on the Notes shall be promptly paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue principal and Accreted Value of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder shall be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and
(2) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise.
(b) Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection.
(c) Subject to Section 11.02, the Guarantors hereby agree that their obligations hereunder are full and unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenant that this Subsidiary Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and this Indenture.
(d) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect.
(e) Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (1) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 for the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (2) in the event of any declaration of acceleration of such obligations as provided in Article 6, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Subsidiary Guarantee. Each Guarantor shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under this Subsidiary Guarantee.
SECTION 11.02 Limitation on Guarantor Liability.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Subsidiary Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Subsidiary Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of such Guarantor shall, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 11, result in the obligations of such Guarantor under its Subsidiary Guarantee not constituting a fraudulent transfer or conveyance.
SECTION 11.03 Execution and Delivery of Subsidiary Guarantees.
(a) To evidence its Subsidiary Guarantee set forth in Section 11.01, each Guarantor hereby agrees that a notation of such Subsidiary Guarantee substantially in the form attached as Exhibit B hereto shall be endorsed by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Guarantor by one of its Officers.
(b) Each Guarantor hereby agrees that its Subsidiary Guarantee set forth in Section 11.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee.
(c) If an Officer whose signature is on this Indenture or on the Subsidiary Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall be valid nevertheless.
(d) The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee set forth in this Indenture on behalf of the Guarantors.
(e) In the event that the Company creates or acquires any Domestic Subsidiary after the Issue Date, if required by Section 4.17, the Company shall cause such Domestic Subsidiary to comply with the provisions of Section 4.17 and this Article 11, to the extent applicable.
SECTION 11.04 Guarantors May Consolidate, etc., on Certain Terms.
(a) Except as otherwise provided in Section 11.05, no Guarantor may sell or otherwise dispose of all or substantially all of its assets to, or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person, other than the Company or another Guarantor, except that a Restricted Subsidiary may merge with or into any Guarantor so long as such Guarantor is the surviving entity, unless:
(1) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing;
(2) if the Person acquiring the property in any such sale or disposition or the Person formed by or surviving any such consolidation or merger is a Restricted Subsidiary immediately following such transaction, such Person assumes all the obligations of that Guarantor under its Subsidiary Guarantee pursuant to a supplemental indenture satisfactory to the Trustee; and
(3) the Company shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture, if any, comply with this Indenture;
provided, however, that the foregoing shall not apply to any such consolidation or merger with or into, or conveyance, transfer or lease to, any Person if the resulting, survivor or transferee Person will not be a Subsidiary of the Company and the other terms of this Indenture, including Section 4.10, are complied with.
(b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor Person shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under this Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof.
(c) Except as set forth in Article 4, and notwithstanding Section 11.04(a), nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor.
SECTION 11.05 Releases Following Sale of Assets.
(a) In the event of any sale or other disposition of all or substantially all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of Capital Stock of any Guarantor such that it is no longer a Subsidiary of the Company, in each case to a Person that is not (either before or after giving effect to such transaction) a Restricted Subsidiary of the Company, or the liquidation of any Guarantor, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Guarantor or in the event of the liquidation of such Guarantor) or the Person acquiring the property (in the event of a sale or other disposition of all or substantially all of the
assets of such Guarantor) shall be released and relieved of any obligations under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of this Indenture, including without limitation Section 4.10. Upon delivery by the Company to the Trustee of an Officer's Certificate and an Opinion of Counsel to the effect that such sale or other disposition, merger or consolidation was made by the Company or a Subsidiary of the Company in accordance with the provisions of this Indenture, including without limitation Section 4.10, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Subsidiary Guarantee.
(b) Any Guarantor not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal or Accreted Value of and premium and interest on the Notes and for the other obligations of such Guarantor under this Indenture as provided in this Article 11.
SECTION 11.06 Release Following Designation as an Unrestricted Subsidiary.
In the event the Company designates any Guarantor as an Unrestricted Subsidiary in accordance with Section 4.18, the Obligations of such Guarantor under its Subsidiary Guarantee pursuant to this Article 11 shall be released.
ARTICLE 12.
SATISFACTION AND DISCHARGE
SECTION 12.01 Satisfaction and Discharge.
(a) This Indenture shall be discharged and shall cease to be of further effect as to all Notes issued hereunder, when:
(1) either:
(A) all Notes that have been authenticated (except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company) have been delivered to the Trustee for cancellation; or
(B) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise or shall become due and payable within one year and the Company or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as shall be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation for principal or Accreted Value, premium (if any) and accrued interest to the date of maturity or redemption;
(2) no Default or Event of Default has occurred and is continuing on the date of such deposit or will occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or any Guarantor is a party or by which the Company or any Guarantor is bound;
(3) the Company or any Guarantor has paid or caused to be paid all sums payable under this Indenture;
(4) the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be; and
(5) the Company has delivered an Officer's Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.
(b) Notwithstanding the satisfaction and discharge of this
Indenture; if money has been deposited with the Trustee pursuant to subclause
(b) of clause (1) of Section 12.01(a), the provisions of Section 12.02 and
Section 8.06 shall survive. In addition, nothing in this Section 12.01 shall be
deemed to discharge those provisions of Section 7.07, that, by their terms,
survive the satisfaction and discharge of this Indenture.
SECTION 12.02 Application of Trust Money.
(a) Subject to the provisions of Section 8.06, all money deposited with the Trustee pursuant to Section 12.01 shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal or Accreted Value (and premium, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law.
(b) If the Trustee or Paying Agent is unable to apply any money or
Government Securities in accordance with Section 12.01 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's and any Guarantor's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 12.01; provided that if the Company has made any payment of principal
of, premium, if any, or interest on any Notes because of the reinstatement of
its obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money or Government Securities held
by the Trustee or Paying Agent.
ARTICLE 13.
MISCELLANEOUS
SECTION 13.01 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA Section 318(c), the imposed duties shall control.
SECTION 13.02 Notices.
(a) Any notice or communication by the Company, any Guarantor or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the others' address:
If to the Company and/or any Guarantor:
Covanta Energy Corporation
40 Lane Road
Fairfield, New Jersey 07007
Attention: Tim Simpson, Esq.
If to the Trustee:
U.S. Bank National Association
225 Asylum Street, 23rd Floor
Hartford, Connecticut 06103
Attention: Corporate Trust Services Facsimile: (860)241-6881
(b) The Company, any Guarantor or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications.
(c) All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery.
(d) Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed as delivered to any Person described in TIA Section 313(c), to the extent required by the TIA. Failure to mail or deliver a notice or communication to a Holder or any defect in it will not affect its sufficiency with respect to other Holders.
(e) If a notice or communication is mailed or delivered in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it.
(f) If the Company mails or delivers a notice or communication to Holders, it shall mail or deliver a copy to the Trustee and each Agent at the same time.
SECTION 13.03 Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c).
SECTION 13.04 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officer's Certificate in form and substance reasonably satisfactory to the Trustee (which must include the statements set forth in Section 13.05) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and
(2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which must include the statements set forth in Section 13.05) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied.
SECTION 13.05 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA Section 314(a)(4)) must comply with the provisions of TIA
Section 314(e) and must include:
(1) a statement that the Person making such certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been satisfied; and
(4) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied; provided that an Opinion of Counsel can rely as to matters of fact on an Officer's Certificate or a certificate of a public official.
SECTION 13.06 Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of Holders. The Trustee shall provide the Company reasonable notice of such rules. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions.
SECTION 13.07 No Personal Liability of Directors, Officers, Employees and Stockholders.
No past, present or future director, officer, employee, incorporator, stockholder, member or agent of the Company or any Guarantor, as such, will have any liability for any obligations of the Company or the Guarantors under the Notes, this Indenture, the Subsidiary Guarantees or the Security Documents or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws.
SECTION 13.08 Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 13.09 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 13.10 Successors.
All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. All agreements of each Guarantor in this Indenture shall bind its successors, except as otherwise provided in Section 11.05.
SECTION 13.11 Severability.
In case any provision in this Indenture or in the Notes is invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 13.12 Counterpart Originals.
The parties may sign any number of copies or counterparts of this Indenture. Each signed copy or counterpart shall be an original, but all of them together represent the same agreement.
SECTION 13.13 Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof.
S I G N A T U R E S
Dated as of March 10, 2004
COVANTA ENERGY CORPORATION, a
Delaware Corporation
By: _______________________________
Name: Anthony Orlando
Title: President
GUARANTORS LISTED ON SCHEDULE I
By: _______________________________
Name: Anthony Orlando
Title: As an authorized
officer of each of the
entities referred to
above
U.S. BANK NATIONAL ASSOCIATION, as
Trustee
By: _______________________________
Name:
Title:
SCHEDULE I
SCHEDULE OF GUARANTORS
The following schedule lists each Guarantor under this Indenture as of the Issue Date:
1. AMOR 14 Corporation
2. Burney Mountain Power
3. Covanta Acquisition, Inc.
4. Covanta Alexandria/Arlington, Inc.
5. Covanta Bessemer, Inc.
6. Covanta Bristol, Inc.
7. Covanta Cunningham Environmental Support, Inc.
8. Covanta Energy Americas, Inc.
9. Covanta Energy Construction, Inc.
10. Covanta Energy Group, Inc.
11. Covanta Energy International, Inc.
12. Covanta Energy Resource Corp.
13. Covanta Energy Services, Inc.
14. Covanta Energy West, Inc.
15. Covanta Engineering Services, Inc.
16. Covanta Fairfax, Inc.
17. Covanta Geothermal Operations Holdings, Inc.
18. Covanta Geothermal Operations, Inc.
19. Covanta Haverhill Properties, Inc.
20. Covanta Haverhill, Inc.
21. Covanta Heber Field Energy, Inc.
22. Covanta Hennepin Energy Resource Co., Limited Partnership
23. Covanta Hillsborough, Inc.
24. Covanta Honolulu Resource Recovery Venture
25. Covanta Huntsville, Inc.
26. Covanta Hydro Energy, Inc.
27. Covanta Hydro Operations West, Inc.
28. Covanta Hydro Operations, Inc.
29. Covanta Imperial Power Services, Inc.
30. Covanta Indianapolis, Inc.
31. Covanta Kent, Inc.
32. Covanta Lancaster, Inc.
33. Covanta Lee, Inc.
34. Covanta Long Island, Inc.
35. Covanta Marion Land Corp.
36. Covanta Marion, Inc.
37. Covanta Mid-Conn, Inc.
38. Covanta Montgomery, Inc.
39. Covanta New Martinsville Hydroelectric Corporation
40. Covanta New Martinsville Hydro-Operations Corporation
41. Covanta Oahu Waste Energy Recovery, Inc.
42. Covanta Omega Lease, Inc.
43. Covanta Onondaga Operations, Inc.
44. Covanta Operations of Union, LLC
45. Covanta OPW Associates, Inc.
46. Covanta OPWH, Inc.
47. Covanta Pasco, Inc.
48. Covanta Plant Services of New Jersey, Inc.
49. Covanta Power Equity Corporation
50. Covanta Power Pacific, Inc.
51. Covanta Power Plant Operations
52. Covanta Projects of Hawaii, Inc.
53. Covanta Projects, Inc.
54. Covanta RRS Holdings, Inc.
55. Covanta Secure Services, Inc.
56. Covanta SIGC Energy, Inc.
57. Covanta SIGC Energy II, Inc.
58. Covanta SIGC Geothermal Operations, Inc.
59. Covanta Stanislaus, Inc.
60. Covanta Systems, LLC
61. Covanta Wallingford Associates, Inc.
62. Covanta Waste to Energy , LLC
63. Covanta Water Holdings, Inc.
64. Covanta Water Systems, Inc.
65. Covanta Water Treatment Services, Inc.
66. ERC Energy II, Inc.
67. ERC Energy, Inc.
68. Haverhill Power, LLC
69. Heber Field Energy II, Inc.
70. Heber Loan Partners
71. LMI, Inc.
72. Mammoth Geothermal Company
73. Mammoth Power Company
74. Michigan Waste Energy, Inc.
75. Mt. Lassen Power
76. Pacific Geothermal Company
77. Pacific Oroville Power, Inc.
78. Pacific Wood Fuels Company
79. Pacific Wood Services Company
80. Three Mountain Operations, Inc.
81. Three Mountain Power, LLC
EXHIBIT A
8.25% Senior Secured Notes Due 2011
No. _________ $230,000,000 at Stated Maturity
COVANTA ENERGY CORPORATION
promises to pay to__________________________________ or registered assigns,
the principal sum of TWO HUNDRED THIRTY MILLION DOLLARS
on March 15, 2011.
Interest Payment Dates: March 15 and September 15
Record Dates: March 1 and September 1
Dated: March 10, 2004
COVANTA ENERGY CORPORATION
By: _______________________________
Name:
Title:
This is one of the Notes referred
to in the within-mentioned Indenture:
U.S. Bank National Association, as Trustee
By:__________________________________
Authorized Signatory
[BACK OF NOTE]
8.25% Senior Secured Notes Due 2011
[INSERT THE GLOBAL NOTE LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS OF THE INDENTURE]
Capitalized terms used herein have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.
(1) INTEREST. Covanta Energy Corporation, a Delaware corporation (the "Company"), promises to pay interest on the principal amount at Stated Maturity of this Note at a rate equal to 8.25% per annum plus any additional amounts payable pursuant to Section 4.21 of the Indenture. The Company shall pay interest semiannually in arrears on March 15 and September 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each, an "Interest Payment Date"). Interest on the Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be September 15, 2004. Interest shall be computed on the basis of a 360-day year of twelve 30-day months.
(2) METHOD OF PAYMENT. The Company shall pay interest on the Notes (except defaulted interest) to the Persons who are registered Holders of Notes at the close of business on the March 1 or September 1 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes shall be payable as to principal or Accreted Value, premium, if any, and interest at the office or agency of the Company maintained for such purpose within the City and State of New York, or, at the option of the Company, payment of interest may be made by check mailed to the Holders at their addresses set forth in the register of Holders; provided that payment by wire transfer of immediately available funds shall be required with respect to principal and Accreted Value of and premium, if any, and interest on all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debt.
(3) PAYING AGENT AND REGISTRAR. Initially, U.S. Bank
National Association, the Trustee under the Indenture, shall act as
Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar without notice to any Holder. The Company or any of its
Subsidiaries may act in any such capacity.
(4) INDENTURE. The Company issued the Notes under an Indenture dated as of March 10, 2004 (the "Indenture") among the Company, the Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and these made part
of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and the TIA for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are secured obligations of the Company pursuant to the Security Documents and subject to the terms of the Intercreditor Agreement.
(5) OPTIONAL REDEMPTION.
(a) At any time after the Issue Date and on or before March 15, 2006, the Company may on any one or more occasions redeem all or a part of the Notes, upon not less than 30 nor more than 60 days' notice, at the Accreted Value on the redemption date, plus accrued and unpaid interest to the redemption date.
(b) At any time after March 15, 2006, the Company may on any one or more occasions redeem all or a part of the Notes, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of Accreted Value) set forth below, plus accrued and unpaid interest to the redemption date, if redeemed during the twelve-month period beginning on March 15 of the years indicated below:
Year Percentage ---- ---------- 2006.......................................................................... 104.625% 2007.......................................................................... 103.469% 2008.......................................................................... 102.313% 2009.......................................................................... 101.156% 2010 and thereafter........................................................... 100.000% |
(c) Any redemption pursuant to Section 3.07 of the Indenture shall be made in accordance with the provisions of Sections 3.01 through 3.06 of the Indenture.
(6) MANDATORY REDEMPTION.
The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes.
(7) MANDATORY PREPAYMENT. On the Interest Payment Date in September, 2010, the Company shall make a prepayment of principal on the Notes equal to $5.50 for each $1,000 of principal at Stated Maturity (the "Prepayment Amount"). Such prepayment shall be made to Holders of record on the preceding September 1. From and after the date of such prepayment, the Accreted Value of the Notes and the amount due on the Notes as principal at Stated Maturity shall be reduced by the Prepayment Amount and all payments of interest (including additional interest payable pursuant to Section 4.21) and premium payable on the Notes shall be calculated based upon the amount payable as principal at Stated Maturity of the Notes as so reduced.
(8) REPURCHASE AT OPTION OF HOLDER.
(a) Subject to the Company's right to redeem the Notes pursuant to Section 3.07 of the Indenture, upon the occurrence of a Change of Control, the Company shall be required to make an offer (a "Change of Control Offer") to each Holder to repurchase all or any part (in a minimum aggregate principal amount at Stated Maturity of $1,000 or an integral multiple of $1,000) of such Holder's Notes at a purchase price in cash equal to 101% of the Accreted Value of the Notes repurchased plus accrued and unpaid interest on the Notes repurchased to the date of repurchase (the "Change of Control Payment"). Within 10 days following any Change of Control, if the Company has not sent a redemption notice pursuant to Section 3.03 of the Indenture for all of the Notes, the Company shall mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sale, and the aggregate amount of Excess Proceeds exceeds $15.0 million, the Company shall, subject to the Intercreditor Agreement, commence an offer to all Holders and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets (an "Asset Sale Offer") pursuant to Section 4.10 of the Indenture to purchase or redeem the maximum principal amount at Stated Maturity of Notes and such other pari passu Indebtedness that may be purchased or redeemed out of the Excess Proceeds. The offer price for the Notes in any Asset Sale Offer shall be equal to 100% of the Accreted Value thereof plus accrued and unpaid interest on the Notes to be purchased to the date fixed for the closing of such Asset Sale Offer in accordance with the procedures set forth in the Indenture, and shall be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company and its Restricted Subsidiaries may use those Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate Accreted Value of Notes and principal amount of other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and other pari passu Indebtedness to be purchased or redeemed on a pro rata basis. Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to each of the Holders containing all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a Depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date.
(9) NOTICE OF REDEMPTION. Subject to the provisions of
Section 3.09 of the Indenture, notice of redemption shall be mailed at
least 30 days but not more than 60 days before the redemption date to
each Holder whose Notes are to be redeemed at its registered address,
except that redemption notices may be mailed more than 60 days prior to
a redemption date if the notice is issued in connection with a
defeasance of the Notes
or a satisfaction and discharge of the Indenture pursuant to Articles 8 or 12 of the Indenture. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption.
(10) DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company shall not be required to register the transfer of or to exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. Also, the Company shall not be required to issue, to register the transfer of or to exchange any Notes (i) during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 of the Indenture and ending at the close of business on the day of selection, or (ii) during a period beginning at the opening of business 15 days before any Interest Payment Date and ending at the closing of business on such Interest Payment Date.
(11) PERSONS DEEMED OWNERS. The Holder of a Note may be treated as its owner for all purposes.
(12) AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture, the Subsidiary Guarantees, the Notes or the Security Documents may be amended or supplemented with the consent of the Holders of at least a majority in principal amount at Stated Maturity of the then outstanding Notes voting as a single class, and any existing default or compliance with any provision of the Indenture, the Subsidiary Guarantees, the Notes or the Security Documents may be waived with the consent of the Holders of a majority in principal amount at Stated maturity of the then outstanding Notes, voting as a single class. Without the consent of any Holder of a Note, the Indenture, the Subsidiary Guarantees, the Notes or the Security Documents may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders of the Notes in case of a merger or consolidation or sale of all or substantially all of the Company's assets, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that would not adversely affect the legal rights under the Indenture of any such Holder, to comply with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act, to allow any Guarantor to execute a supplemental indenture and/or a Subsidiary Guarantee with respect to the Notes, or if necessary, in connection with any addition or release of Collateral permitted under the terms of the Indenture or the Security Documents.
(13) DEFAULTS AND REMEDIES. Events of Default include: (i)
the Company defaults for 30 consecutive days in the payment when due of
interest on the Notes; (ii) the Company defaults in payment when due of
the principal or Accreted Value of, or premium, if any, on the Notes;
(iii) failure by the Company or any of its Restricted Subsidiaries to
comply with its obligations to make any Change of Control Payment
pursuant to Section 4.15 or to comply with the provisions of Section
5.01 of the Indenture; (iv) failure by the Company or any of its
Restricted Subsidiaries for 30 days after written notice from the
Trustee or Holders of at least 25% in aggregate principal amount of the
outstanding Notes to comply with the provisions of any of Section 4.07,
4.09 or 4.10 of the Indenture; (v) failure by the Company or any of its
Restricted Subsidiaries for 60 days after written notice from the
Trustee or Holders of at least 25% in aggregate principal amount of the
outstanding Notes to comply with any of the other agreements in the
Indenture or the Security Documents; (vi) default under any mortgage,
indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness of the Company or
any of its Restricted Subsidiaries whether such Indebtedness now
exists, or is created after the Issue Date, if that default (A) is
caused by a failure to pay principal of or liquidation preference of
such Indebtedness at the final stated maturity thereof (giving effect
to any applicable grace periods and any extensions thereof), (B)
results in the acceleration of such Indebtedness prior to its express
maturity, or (C) results in a requirement that the Company or any of
its Restricted Subsidiaries collateralize any letter of credit
thereunder and the Company or such Restricted Subsidiary fails to
provide the required collateral on the terms and within the times set
forth therein (giving effect to any applicable grace periods and any
extensions thereof), and, in each case, if the principal amount of any
such Indebtedness aggregates $20.0 million or more; (vii) any final
judgment or judgments for the payment of money in an aggregate amount
in excess of $10.0 million (or its foreign currency equivalent at the
time) in excess of amounts which the Company's insurance carriers have
agreed to pay under applicable policies shall have been rendered
against the Company or any Restricted Subsidiary of the Company that is
a Significant Subsidiary and shall not have been waived, satisfied,
bonded or discharged for any period of 60 consecutive days during which
a stay of enforcement is not in effect; (viii) certain events of
bankruptcy or insolvency described in the Indenture with respect to the
Company or any of its Significant Subsidiaries; and (ix) (a) any
Subsidiary Guarantee or any Security Document or any security interest
granted thereby is held in any judicial proceeding to be unenforceable
or invalid, or ceases for any reason to be in full force and effect and
such default continues for ten days after written notice, or (b) the
Company or any Guarantor, or any Person acting on behalf of the Company
or any Guarantor, denies or disaffirms its obligations under any
Subsidiary Guarantee or Security Document. If any Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount at Stated maturity of the then outstanding Notes may
declare all the Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, with respect
to the Company or a Significant Subsidiary, all outstanding Notes shall
become due and payable without further action or notice. The amount
payable with respect to principal of the Notes upon any acceleration
shall be the Accreted Value of the Notes as of the date of such
acceleration. Holders may not enforce the Indenture or the Notes except
as
provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount at Stated Maturity of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Holders of a majority in aggregate principal amount at Stated Maturity of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of principal or Accreted Value of or premium or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of a majority in aggregate principal amount at Stated Maturity of the then outstanding Notes). The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required, within five Business Days after the date on which any Officer of the Company becomes aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default.
(14) TRUSTEE DEALINGS WITH COMPANY. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue as trustee or resign.
(15) NO RECOURSE AGAINST OTHERS. A past, present or future director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, shall not have any liability for any obligations of the Company or Guarantors under the Notes, the Subsidiary Guarantees, the Indenture or the Security Documents or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes.
(16) AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent.
(17) ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
(18) CUSIP NUMBERS AND ISNs. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers and ISNs to be printed on the Notes and the Trustee may use CUSIP numbers and ISNs in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.
The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to:
Covanta Energy Corporation
40 Lane Road
Fairfield, New Jersey 07007
Attention: General Counsel
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:___________________________________
(Insert assignee's legal name)
and irrevocably appoint ________________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him.
Date:_____________________
Your Signature:_________________________________________
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee*:___________________________
* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to Section 3.09 or 4.15 of the Indenture, check the appropriate box below:
[ ] Section 3.09 [ ] Section 4.15
If you want to elect to have only part of the principal amount at Stated Maturity of the Note purchased by the Company pursuant to Section 3.09 or 4.15 of the Indenture, state the principal amount at Stated Maturity you elect to have purchased:
$_______________
Date:______________________
Your Signature:__________________________________ (Sign exactly as your name appears on the face of this Note)
Tax Identification No.:___________________________
Signature Guarantee*:________________________________
* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Principal Amount of
Amount of decrease Amount of increase in this Global Note Signature of authorized
in Principal Amount Principal Amount of following such officer of Trustee or
Date of Exchange of this Global Note this Global Note decrease (or increase) Custodian
---------------- ------------------- --------------------- ---------------------- -----------------------
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EXHIBIT B
FORM OF NOTATION OF GUARANTEE
For value received, each Guarantor (which term includes any successor Person under the Indenture) has, jointly and severally, unconditionally guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture dated as of March 10, 2004 (the "Indenture") among Covanta Energy Corporation, (the "Company", the Guarantors listed on Schedule I thereto and U.S. Bank National Association, as trustee (the "Trustee"), (a) the due and punctual payment of the principal or Accreted Value of, premium, if any, and interest on the Notes (as defined in the Indenture), whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on overdue principal of and interest on the Notes, if any, if lawful, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to the Subsidiary Guarantee and the Indenture are expressly set forth in Article 11 of the Indenture and reference is hereby made to the Indenture for the precise terms of the Subsidiary Guarantee. Each Holder of a Note, by accepting the same, agrees to and shall be bound by such provisions.
GUARANTORS LISTED ON SCHEDULE I
TO THE INDENTURE
By: _______________________________
Name: Anthony Orlando
Title: An authorized officer of
each of the entities
referred to above
EXHIBIT C
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of ___________, 20__, among ___________________________ (the "Guaranteeing Subsidiary"), a subsidiary of Covanta Energy Corporation (or its permitted successor), a Delaware corporation (the "Company"), the Company, the other Guarantors (as defined in the Indenture referred to herein) and U.S. Bank National Association, as trustee under the indenture referred to below (the "Trustee").
WITNESSETH
WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of March 10, 2004 providing for the issuance of an aggregate principal amount at Stated Maturity of $230.0 million of 8.25% Senior Secured Notes Due 2011 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Subsidiary Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as follows:
(a) Along with all Guarantors named in the Indenture, to jointly and severally Guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, the Notes or the obligations of the Company hereunder or thereunder, that:
(i) the principal or Accreted Value of, and premium, if any, and interest on the Notes shall be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of
and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder shall be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and
(ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately.
(b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor.
(c) The following is hereby waived: diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever.
(d) Except as otherwise provided herein or in the Indenture, this Subsidiary Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and the Indenture, and the Guaranteeing Subsidiary accepts all obligations of a Guarantor under the Indenture.
(e) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the
Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article
6 of the Indenture for the purposes of this Subsidiary Guarantee,
notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and
(y) in the event of any declaration of acceleration of such obligations
as provided in Article 6 of the Indenture, such obligations (whether or
not due and payable) shall forthwith become due and payable by the
Guarantors for the purpose of this Subsidiary Guarantee.
(h) The Guarantors shall have the right to seek contribution from any nonpaying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Subsidiary Guarantee.
(i) Pursuant to Section 11.02 of the Indenture, after giving effect to any maximum amount and all other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under Article 11 of the Indenture, this new Subsidiary Guarantee shall be limited to the maximum amount permissible such that the obligations of such Guarantor under this Subsidiary Guarantee will not constitute a fraudulent transfer or conveyance.
3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the Subsidiary Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee.
4. RELEASES.
(a) In the event of any sale or other disposition of all or substantially all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of Capital Stock of any Guarantor such that it is no longer a Subsidiary of the Company, in each case to a Person that is not (either before or after giving effect to such transaction) a Restricted Subsidiary of the Company, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the Person acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) shall be released and relieved of any obligations under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture, including without limitation Section 4.10 of the Indenture. Upon delivery by the Company to the Trustee of an Officer's Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company or a Subsidiary of the Company in accordance with the provisions of the Indenture, including without limitation Section 4.10 of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Subsidiary Guarantee.
(b) Any Guarantor not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal or Accreted Value of and interest on the Notes and for the other obligations of such Guarantor under the Indenture as provided in Article 11 of the Indenture.
5. NO PERSONAL LIABILITY. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, any Subsidiary Guarantees, the Indenture, this Supplemental Indenture or the Security Documents or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each
Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws.
6. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
7. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.
8. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof.
9. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written.
Dated: _________________, 20__
[GUARANTEEING SUBSIDIARY]
By: _______________________________
Name:
Title:
COVANTA ENERGY CORPORATION
By: _______________________________
Name:
Title:
[GUARANTORS]
By: _______________________________
Name:
Title:
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By: _______________________________
Authorized Signatory
EXECUTION VERSION
EXHIBIT 4.21
COVANTA ENERGY CORPORATION
AND
U.S. BANK TRUST NATIONAL ASSOCIATION
AS TRUSTEE
7.5% SUBORDINATED UNSECURED NOTES DUE 2012
INDENTURE
DATED AS OF MARCH 10, 2004
THE 7.5% SUBORDINATED UNSECURED NOTES DUE 2012 (THE "NOTES") WILL BE INITIALLY ISSUED IN GLOBAL FORM AND HELD BY DTC. PLAN PARTICIPANTS ENTITLED TO RECEIVE NOTES WILL BE REQUIRED TO HOLD THEIR INTERESTS DIRECTLY OR INDIRECTLY THROUGH DTC PARTICIPANTS, AND WILL NOT BE ENTITLED TO RECEIVE PHYSICAL NOTES EXCEPT IN THE LIMITED CIRCUMSTANCES SET FORTH IN THE INDENTURE.
EXECUTION VERSION
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
----------- -----------------
310(a)............................................................. 7.10
(b)............................................................. 7.10
(b)(1).......................................................... 7.10
311(a)............................................................. 7.11
(b)............................................................. 7.11
312(b)............................................................. 11.3
(c)............................................................. 11.3
313 7.6
314(a)(4).......................................................... 3.4
316(c)............................................................. 9.4
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* This Cross Reference Table is not part of the Indenture.
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
1.1 Definitions................................................................................... 1
1.2 Incorporation by Reference of Trust Indenture Act............................................. 27
1.3 Rules of Construction......................................................................... 27
ARTICLE II
THE NOTES
2.1 Form and Dating............................................................................... 28
2.2 Execution and Authentication.................................................................. 28
2.3 Registrar and Paying Agent.................................................................... 28
2.4 Paying Agent to Hold Money in Trust........................................................... 29
2.5 Holder Lists.................................................................................. 29
2.6 Global Note Provisions........................................................................ 29
2.7 Transfer and Exchange......................................................................... 30
2.8 Mutilated, Destroyed, Lost or Stolen Notes.................................................... 32
2.9 Temporary Notes............................................................................... 32
2.10 Cancellation.................................................................................. 33
2.11 Defaulted Interest............................................................................ 33
ARTICLE III
COVENANTS
3.1 Payment of Notes.............................................................................. 34
3.2 Maintenance of Office or Agency............................................................... 34
3.3 Corporate Existence........................................................................... 35
3.4 Compliance Certificate........................................................................ 35
3.5 Further Instruments and Acts.................................................................. 35
3.6 Restricted Payments .......................................................................... 35
3.7 Asset Sales................................................................................... 39
3.8 Transactions with Affiliates.................................................................. 42
3.9 Offer to Repurchase Upon Change of Control.................................................... 44
3.10 Designation of Restricted and Unrestricted Subsidiaries....................................... 45
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TABLE OF CONTENTS
(continued)
PAGE
ARTICLE IV
OPTIONAL REDEMPTION OF NOTES
4.1 Optional Redemption........................................................................... 46
4.2 Election to Redeem............................................................................ 46
4.3 Notice of Redemption.......................................................................... 46
4.4 Selection of Notes to Be Redeemed in Part..................................................... 47
4.5 Deposit of Redemption Price................................................................... 47
4.6 Notes Payable on Redemption Date.............................................................. 48
4.7 Unredeemed Portions of Partially Redeemed Note................................................ 48
4.8 Offer to Purchase by Application of Excess Proceeds........................................... 48
ARTICLE V
SUCCESSOR
5.1 Merger, Consolidation, or Sale of Assets...................................................... 50
5.2 Successor Corporation Substituted............................................................. 51
ARTICLE VI
DEFAULTS AND REMEDIES
6.1 Events of Default............................................................................. 52
6.2 Acceleration.................................................................................. 52
6.3 Other Remedies................................................................................ 53
6.4 Waiver of Past Defaults....................................................................... 53
6.5 Control by Majority........................................................................... 53
6.6 Limitation on Suits........................................................................... 54
6.7 Rights of Holders to Receive Payment.......................................................... 54
6.8 Collection Suit by Trustee.................................................................... 54
6.9 Trustee May File Proofs of Claim, etc......................................................... 54
6.10 Priorities.................................................................................... 55
6.11 Undertaking for Costs......................................................................... 55
ARTICLE VII
TRUSTEE
7.1 Duties of Trustee............................................................................. 55
7.2 Rights of Trustee............................................................................. 57
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TABLE OF CONTENTS
(continued)
PAGE
7.3 Individual Rights of Trustee.................................................................. 58
7.4 Trustee's Disclaimer.......................................................................... 58
7.5 Notice of Defaults............................................................................ 58
7.6 Reports by Trustee to Holders................................................................. 58
7.7 Compensation and Indemnity.................................................................... 58
7.8 Replacement of Trustee........................................................................ 59
7.9 Successor Trustee by Merger................................................................... 60
7.10 Eligibility; Disqualification................................................................. 60
7.11 Preferential Collection of Claims Against Company............................................. 60
ARTICLE VIII
DISCHARGE OF INDENTURE
8.1 Satisfaction and Discharge.................................................................... 61
8.2 Survival of Obligations....................................................................... 61
ARTICLE IX
AMENDMENTS
9.1 Without Consent of Holders.................................................................... 61
9.2 With Consent of Holders....................................................................... 62
9.3 Compliance with Trust Indenture Act........................................................... 63
9.4 Revocation and Effect of Consents and Waivers................................................. 63
9.5 Notation on or Exchange of Notes.............................................................. 63
9.6 Trustee to Sign Amendments and Supplements.................................................... 63
ARTICLE X
SUBORDINATION OF THE NOTES
10.1 Agreement to Subordinate...................................................................... 64
10.2 Liquidation, Dissolution, Bankruptcy.......................................................... 64
10.3 Default on Senior Indebtedness of the Company................................................. 64
10.4 Acceleration of Payment of Notes.............................................................. 65
10.5 When Distribution Must Be Paid Over........................................................... 65
10.6 Subrogation................................................................................... 65
10.7 Relative Rights............................................................................... 65
10.8 Subordination May Not Be Impaired by Company.................................................. 66
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TABLE OF CONTENTS
(continued)
PAGE
10.9 Rights of Trustee and Paying Agent............................................................ 66
10.10 Distribution or Notice to Representative...................................................... 66
10.11 Trust Moneys Not Subordinated................................................................. 66
10.12 Trustee Entitled to Rely...................................................................... 66
10.13 Trustee to Effectuate Subordination........................................................... 67
10.14 Trustee Not Fiduciary for Holders of Senior Indebtedness...................................... 67
10.15 Reliance by Holders of Senior Indebtedness on Subordination Provisions........................ 68
10.16 Changes in Senior Indebtedness................................................................ 68
ARTICLE XI
MISCELLANEOUS
11.1 Trust Indenture Act Controls.................................................................. 68
11.2 Notices....................................................................................... 68
11.3 Communication by Holders with Other Holders................................................... 69
11.4 Certificate and Opinion as to Conditions Precedent............................................ 69
11.5 Statements Required in Certificate or Opinion................................................. 69
11.6 Rules by Trustee, Paying Agent and Registrar.................................................. 70
11.7 Legal Holidays................................................................................ 70
11.8 Governing Law, etc............................................................................ 70
11.9 No Recourse Against Others.................................................................... 71
11.10 Successors.................................................................................... 71
11.11 Duplicate and Counterpart Originals........................................................... 71
11.12 Severability.................................................................................. 71
11.13 Table of Contents; Headings................................................................... 71
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INDENTURE, dated as of March 10, 2004, between Covanta Energy Corporation, a Delaware corporation (the "Company") and U.S. Bank Trust National Association (the "Trustee"), as Trustee.
Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Company's 7.5% Subordinated Unsecured Notes due 2012 issued hereunder.
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
1.1 Definitions.
"Agent Members" has the meaning assigned to it in Section 2.6(b).
"Adjusted EBITDA" means, for any period, for the Company and
its Consolidated Subsidiaries (i) without duplication, the aggregate amount
derived by combining the amounts for such period of (a) "Operating income
(loss)", plus (b) "Net Depreciation and Amortization Expense", plus (c)
"Amortization of premium and discount, net", plus (d) "Unbilled receivables", to
the extent associated with accretion accounting for Limited Recourse Debt
relating to Projects of the Company and its Subsidiaries, minus (e) "Equity in
income from unconsolidated investments", minus (ii) without duplication, the
aggregate amount derived by combining the amounts (each expressed as a positive
number) for such period of (a) "Payment of debt", to the extent consisting of
principal payments on Limited Recourse Debt relating to Projects of the Company
and its Subsidiaries, plus (b) "Minority interests", plus (c)
the change in accreted value of the High Yield Notes, as each such line item referred to in clauses (i)(a), (i)(e) and (ii)(b) is reflected in the Company's consolidated statement of income prepared in conformity with GAAP and as each such line item referred to in clauses (i)(c), (i)(d) and (ii)(a) is reflected in the Company's consolidated statement of cash flows prepared in conformity with GAAP, in each case reported in a manner consistent with the Company's reporting of such amount in its last quarterly or annual report (as the case may be) on Form 10-Q or Form 10-K, respectively, filed with the Commission prior to the Issue Date, whether such line items are so titled or otherwise titled; provided, however, that with respect to any such period ending during 2008, each of the line items referred to above shall be calculated as if the terms of the service agreement of the Company and its Subsidiaries relating to the Alexandria Project in effect for fiscal year 2007 continued in effect during 2008, without giving effect to any negative impact on Adjusted EBITDA from the terms of any extension in 2008 of such service agreement.
"Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Approved DHC Investor" means any Person that acquires shares of common stock of DHC pursuant to a transaction determined by at least a majority of the members of the board of directors of DHC (who are not representatives, nominees or Affiliates of such Person) to be in the best interests of DHC and its stockholders.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets, property or rights (other than the sale of Equity Interests of the Company by the Company); provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole will be governed by Section 3.9 or Section 5.1 and not by Section 3.7; and
(2) the issuance of Equity Interests by any Restricted Subsidiary of the Company or the sale of Equity Interests in any Restricted Subsidiary of the Company.
Notwithstanding the preceding, none of the following items will be deemed to be an Asset Sale:
(1) any single transaction or series of related transactions that involves assets, property or rights or the issuance of Equity Interests having a fair market value, or yielding Net Proceeds, of less than $10.0 million;
(2) any transfer of assets, property or rights by the Company to a Restricted Subsidiary of the Company or by a Restricted Subsidiary of the Company to the Company or another Restricted Subsidiary of the Company;
(3) an issuance of Equity Interests by a Restricted Subsidiary of the Company to the Company or a Restricted Subsidiary of the Company;
(4) the sale, lease, sublease or assignment of equipment, inventory, accounts receivable or other assets, property or rights in the ordinary course of business;
(5) the disposition of equipment no longer used or useful in the business of the Company or any of its Restricted Subsidiaries;
(6) a Sale/Leaseback Transaction with respect to any assets within 90 days of the acquisition of such assets which is not prohibited by the High Yield Notes Indenture;
(7) the sale or other disposition of Cash Equivalents;
(8) the grant of any license of patents or trademarks or registrations therefor and other similar intellectual property in the ordinary course of business;
(9) the granting of any lien (or the foreclosure thereon) which is not prohibited by the High Yield Notes Indenture;
(10) the surrender or waiver of contract rights or the settlement, release or surrender of a contract, tort or other litigation claim in the ordinary course of business;
(11) any sale of Indebtedness or other securities of an Unrestricted Subsidiary of the Company;
(12) a Restricted Payment permitted to be made under
Section 3.6 or a Permitted Investment; or
(13) any issuance of employee stock options or stock awards pursuant to benefit plans in existence on the Issue Date.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate implicit in such transaction, determined in accordance with GAAP) of the total obligations of the lessee for net rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended or may be, at the option of the lessor, extended).
"Authenticating Agent" has the meaning assigned to it in
Section 2.2(d).
"Bank Indebtedness" means any and all amounts payable under or in respect of the Credit Agreements and any Permitted Refinancing Indebtedness with respect thereto, as amended from time to time, including principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company or any Guarantor whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, guarantees and all other amounts payable thereunder or in respect thereof.
"Bankruptcy Court" means the United States Bankruptcy Court for the Southern District of New York and any other court properly exercising jurisdiction over any relevant case under Chapter 11 of the Bankruptcy Law.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal, state or non-U.S. law for the relief of debtors.
"Bankruptcy Event of Default" means:
(i) the Company or any Restricted Subsidiary of the Company (other than a Bankrupt Subsidiary) that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of or taking possession by a custodian, receiver, liquidator, trustee, assignee or sequestrator of it or for all or substantially all of its property; or (D) makes a general assignment for the benefit of its creditors; or
(ii) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any Restricted Subsidiary of the Company (other than a Bankrupt Subsidiary) that is a Significant Subsidiary or any group of Restricted Subsidiaries of the Company that, taken as a whole, would constitute a Significant Subsidiary in
an involuntary case; or (B) appoints a custodian, receiver, liquidator, trustee, assignee or sequestrator of the Company or any Restricted Subsidiary of the Company (other than a Bankrupt Subsidiary) that is a Significant Subsidiary or for all or substantially all of the property of the Company or any Restricted Subsidiary of the Company that is a Significant Subsidiary or, in either case, any group of Restricted Subsidiaries of the Company that, taken as a whole, would constitute a Significant Subsidiary; or (C) orders the liquidation of the Company or any Restricted Subsidiary of the Company (other than a Bankrupt Subsidiary) that is a Significant Subsidiary or any group of Restricted Subsidiaries of the Company that, taken as a whole, would constitute a Significant Subsidiary; and the order or decree remains unstayed and in effect for 60 consecutive days.
"Bankrupt Subsidiary" means any of Covanta Warren Holdings I, Inc., a Virginia corporation, Covanta Warren Holdings II, Inc., a California corporation, Covanta Warren Energy Resource Co. LP, a Delaware limited partnership, Covanta Lake II, Inc., a Florida corporation, Covanta Tampa Construction, Inc., a Delaware corporation or Covanta Tampa Bay, Inc., a Florida corporation, in each case so long as such Person remains subject to the Chapter 11 Cases before the Bankruptcy Court.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" will be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms "Beneficially Own" and "Beneficially Owned" have a corresponding meaning.
"Board of Directors" means, the Board of Directors of the Company.
"Board Resolution" means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP.
"Capital Stock" means:
(i) in the case of a corporation, corporate stock;
(ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;
(iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and
(iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.
"Cash" means money or currency, or a credit balance in a Deposit Account.
"Cash Equivalents" means:
(i) United States dollars;
(ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States government having maturities of not more than one year from the date of acquisition;
(iii) time deposits, demand deposits, certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances with maturities not exceeding one year and overnight bank deposits, in each case, with any bank lender party to the First Lien Letter of Credit Facility or an Affiliate thereof or with any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thomson Bank Watch Rating of "B" or better;
(iv) securities issued by any state of the United States or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Moody's Investor Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") or any successor thereto;
(v) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above;
(vi) commercial paper having one of the two highest ratings obtainable from Moody's or S&P and in each case maturing within one year after the date of acquisition; and
(vii) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (ii) through (vi) of this definition.
"Certificated Note" means any Note issued in fully-registered certificated form (other than a Global Note), which shall be substantially in the form of Exhibit A.
"Change of Control" means the occurrence of any of the following:
(1) any "person" (as such term is used in Section 13(d)(3) of the Exchange Act), other than one or more Permitted Holders, becomes the Beneficial Owner, directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the Company, whether as a result of the issuance of securities of the Company, any merger, consolidation, liquidation or dissolution of the Company, any direct or indirect transfer of securities or otherwise; provided that the creation of a holding company to own all of the Capital Stock of the Company will not be deemed to constitute a Change of Control
under this clause (1) if, immediately after consummation of such transaction, the holders of the Capital Stock of such holding company are the same holders of the Capital Stock of the Company immediately before such transaction and the percentage holding of such holders is unaffected by the creation of such holding company;
(2) the first day on which a majority of the members of the Board of Directors are not Continuing Directors;
(3) the adoption of a plan relating to the liquidation or dissolution of the Company, other than to effect a Change of Domicile; or
(4) the sale, lease or transfer, other than by way of merger or consolidation, in one or a series of related transactions, of all or substantially all the assets of the Company and its Restricted Subsidiaries taken as a whole to any "person" or "group" as that term is used in Section 13(d)(3) of the Exchange Act (other than to the Company, any Guarantor or one or more Permitted Holders or other than to effect a Change of Domicile).
"Change of Domicile" means a transaction or series of related transactions, including without limitation (1) a merger, amalgamation, combination or consolidation of the Company with or into another Person, (2) the acquisition of all the Capital Stock of the Company or (3) the sale, transfer, conveyance or other disposition of all or substantially all the assets of the Company and its Subsidiaries taken as a whole to another Person, the sole purpose of which is to reincorporate the Company in another jurisdiction or organize a successor entity to the Company in another jurisdiction.
"Chapter 11 Cases" means those bankruptcy cases jointly administered under the caption "In re Ogden New York Services, Inc., et al.," Case Nos. 02-40826 (CB), et al.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Company" means the party named as such in the introductory paragraph to this Indenture, and any and all successors thereto.
"Company Order" has the meaning assigned to it in Section 2.2(c).
"Consolidated Cash Interest Expense" means, for any period,
(i) Consolidated Interest Expense for such period minus (ii) to the extent
included in Consolidated Interest Expense for such period, the change in
accreted value of the High Yield Notes, interest paid in kind and not in cash
during such period and any other amounts not paid or payable in cash.
"Consolidated Coverage Ratio" means, with respect to the Company and its Consolidated Subsidiaries, as of any date of determination, the ratio of:
(1) the aggregate amount of Adjusted EBITDA for the period of the most recent four consecutive fiscal quarters (commencing on or after the Issue Date) for which internal financial statements are available prior to the date of such determination to
(2) Consolidated Cash Interest Expense for such four fiscal quarters; provided, however, that:
(A) if the Company or any of its Restricted Subsidiaries has incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an incurrence of Indebtedness, Adjusted EBITDA and Consolidated Cash Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been incurred on the first day of such period (in each case other than Indebtedness incurred under any revolving credit facility, in which case interest expense shall be computed based upon the average daily balance of such Indebtedness during the applicable period) and the discharge of any other Indebtedness repaid, repurchased, defeased (whether legally or as to covenants only) or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period;
(B) if the Company or any of its Restricted Subsidiaries has repaid, repurchased, defeased or otherwise discharged, including permanent reductions in letter of credit commitments, any Indebtedness since the beginning of such period or if any Indebtedness is to be repaid, repurchased, defeased (whether legally or as to covenants only) or otherwise discharged, including permanent reductions in letter of credit commitments (in each case, if such Indebtedness has been permanently repaid and has not been replaced, other than Indebtedness incurred under any revolving credit facility unless such Indebtedness is permanently reduced, in which case interest expense shall be computed based upon the average daily balance of such Indebtedness during the applicable period) on the date of the transaction giving rise to the need to calculate the Consolidated Coverage Ratio, Adjusted EBITDA and Consolidated Cash Interest Expense for such period shall be calculated on a pro forma basis as if such discharge had occurred on the first day of such period and as if the Company or such Restricted Subsidiary has not earned any interest income actually earned during such period in respect of cash or Cash Equivalents used to repay, repurchase, defease or otherwise discharge such Indebtedness;
(C) if since the beginning of such period, the Company or any of its Restricted Subsidiaries has made any Asset Sale, Adjusted EBITDA for such period shall be reduced by an amount equal to Adjusted EBITDA (if positive) directly attributable to the assets that are the subject of such Asset Sale for such period or increased by an amount equal to Adjusted EBITDA (if negative) directly attributable thereto for such period, and Consolidated Cash Interest Expense for such period shall be reduced by an amount equal to the Consolidated Cash Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary of the Company repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Sale for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Cash Interest
Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale);
(D) if since the beginning of such period, the Company or any of its Restricted Subsidiaries (by merger or otherwise) has made an Investment in any Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary) or an acquisition of assets, including any such Investment or acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business, Adjusted EBITDA and Consolidated Cash Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such period; and
(E) if since the beginning of such period, any Person (that subsequently became a Restricted Subsidiary of the Company or was merged with or into the Company or any of its Restricted Subsidiaries since the beginning of such period) shall have made any Asset Sale or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (C) or (D) above if made by the Company or any of its Restricted Subsidiaries during such period, Adjusted EBITDA and Consolidated Cash Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Sale, Investment or acquisition of assets occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the amount of income or earnings relating thereto and the amount of Consolidated Cash Interest Expense associated with any Indebtedness incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting officer of the Company. Any such pro forma calculations shall reflect any pro forma expense and cost reductions attributable to such acquisitions, to the extent such expense and cost reduction would be consistent with Regulation S-X, promulgated under the Securities Act, as such regulation is in effect from time to time, and permitted by the Commission to be reflected in pro forma financial statements included in a registration statement filed with the Commission.
If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Hedging Obligation applicable to such Indebtedness if such Hedging Obligation has a remaining term as at the date of determination in excess of twelve months).
"Consolidated Coverage Ratio Test" means, that the Company's Consolidated Coverage Ratio at the time of any incurrence of Indebtedness, after giving pro forma effect to such incurrence or issuance as of such date and to the use of proceeds therefrom, as if the same had occurred at the beginning of the most recently ended four fiscal quarter period of the Company (commencing on or after the Issue Date) for which internal financial statements are available, is no less than 2.00 to 1.00.
"Consolidated Interest Expense" means, for any period, (i) the total interest expense, net of interest income, of the Company and its Consolidated Subsidiaries, determined on a consolidated basis in accordance with GAAP, minus (ii) interest expense incurred by the Company or its Consolidated Subsidiaries in such period in connection with Indebtedness constituting Non-Recourse Debt or Limited Recourse Debt, determined on a consolidated basis in accordance with GAAP, plus (iii) to the extent incurred by the Company or its Consolidated Subsidiaries in such period but not included in such interest expense, without duplication, determined in each case on a consolidated basis in accordance with GAAP, except to the extent related to Non-Recourse Debt and Limited Recourse Debt:
(1) interest expense attributable to Capital Lease Obligations and the imputed interest with respect to Attributable Debt;
(2) amortization of debt discount;
(3) amortization of debt issuance costs (other than any such costs associated with the Indebtedness incurred by the Company or its Subsidiaries in accordance with the Plan of Reorganization);
(4) amortization of capitalized interest;
(5) noncash interest expense;
(6) commissions, discounts and other fees and charges attributable to letters of credit and bankers' acceptance financings;
(7) interest or dividends accrued and unpaid on any Indebtedness of any other Person to the extent such Indebtedness is Guaranteed by the Company or any Consolidated Subsidiary;
(8) net payments, if any, pursuant to Hedging Obligations (including amortization of fees);
(9) dividends in respect of all Disqualified Stock of the Company and all Preferred Stock of any of its Consolidated Subsidiaries, to the extent held by Persons other than the Company or another Consolidated Subsidiary; and
(10) cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company) in connection with Indebtedness incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income or loss of the Company and its Consolidated Subsidiaries for such period determined in accordance with GAAP; provided, however, that:
(1) net income of any Person (other than the Company) which is not a Restricted Subsidiary, shall be excluded from such Consolidated Net Income, except that:
(A) subject to the limitations contained in clause
(4) below, the Company's equity in the net income of any such
Person for such period shall be included in such Consolidated
Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to the Company
or a Restricted Subsidiary of the Company as a dividend or
other distribution (subject, in the case of a dividend or
other distribution made to a Restricted Subsidiary of the
Company, to the limitations contained in clause (2) below);
and
(B) the Company's equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income;
(2) net income (or loss) of any Restricted Subsidiary of the Company, other than a Guarantor, to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of that income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or is, directly or indirectly, restricted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary or its stockholders or other holders of its equity, which restrictions have not been legally and effectively waived, shall be excluded from such Consolidated Net Income except that:
(A) subject to the limitations contained in clause
(4) below, the Company's equity in the net income of any such
Restricted Subsidiary for such period shall be included in
such Consolidated Net Income up to the aggregate amount of
cash actually distributed by such Restricted Subsidiary during
such period to the Company or another Restricted Subsidiary of
the Company as a dividend or other distribution (subject, in
the case of a dividend or other distribution made to another
Restricted Subsidiary of the Company, to the limitation
contained in this clause); and
(B) the Company's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income;
(3) any gain (or loss) realized upon the sale or other disposition of any asset of the Company or any of its Restricted Subsidiaries (including pursuant to any Sale/Leaseback Transaction) that is not sold or otherwise disposed of in the ordinary course of business and any gain (or loss) realized upon the sale or other disposition of any Capital Stock of any Subsidiary of the Company shall be excluded from such Consolidated Net Income (without regard to abandonments or reserves relating thereto);
(4) amounts specified in clause (ii)(a) of the definition of Adjusted EBITDA (determined in accordance with such definition) shall be excluded from such Consolidated Net Income;
(5) any extraordinary gain or loss shall be excluded from such Consolidated Net Income;
(6) the cumulative effect of a change in accounting principles shall be excluded from such Consolidated Net Income;
(7) gains or losses due solely to fluctuations in currency values and the related tax effects determined in accordance with GAAP shall be excluded from such Consolidated Net Income;
(8) any non-cash deferred tax expense shall be excluded from such Consolidated Net Income;
(9) Fresh Start Charges and reorganization charges taken in connection with the Plan of Reorganization shall be excluded from such Consolidated Net Income;
(10) amortization of debt issuance costs in respect of Indebtedness incurred by the Company or its Subsidiaries in accordance with the Plan of Reorganization shall be excluded from such Consolidated Net Income;
(11) any charges resulting from the application of Statement of Financial Accounting Standards No. 142 or 145 shall be excluded from such Consolidated Net Income; and
(12) the results of operations of CPIH and its Subsidiaries shall be excluded in determining such Consolidated Net Income.
"Consolidated Subsidiaries" means the Restricted Subsidiaries of the Company; provided, however, that the interest of the Company or any of its Restricted Subsidiaries in an Unrestricted Subsidiary will be accounted for as an Investment.
"Continuing Directors" means, as of any date of determination, those members of the Board of Directors of the Company who: (a) were members of the Board of Directors on the Issue Date; or (b) were nominated for election or elected to the Board of Directors with the affirmative vote of, or whose election or appointment was otherwise approved or ratified (whether before or after nomination or election) by, at least a majority of the Continuing Directors who were members of the Board of Directors at the time of the nomination, election or approval, as applicable.
"Corporate Services Reimbursement Agreement" means the corporate services and expense reimbursement agreement entered into by DHC and the Company dated March 10, 2004, and any amendments, modifications or extensions thereof on terms not materially less favorable to the Company and its Restricted Subsidiaries, taken as a whole, than the terms of such agreement as in effect on the Issue Date.
"Corporate Trust Office" means the principal office of the Trustee at which at any time its corporate trust business shall be administered, which office at the date hereof is located at U.S. Bank National Association, 225 Asylum Street, 23rd Floor, Hartford, Connecticut, Attention: Corporate Trust Services, or such other address as the Trustee may designate from time to time by notice to the Holders and the Company, or the principal corporate trust office of
any successor Trustee (or such other address as such successor Trustee may designate from time to time by notice to the Holders and the Company).
"CPIH" means Covanta Power International Holdings, Inc., a Delaware corporation, and any and all successors thereto.
"CPIH Reimbursement Agreement" means the Management Services & Reimbursement Agreement entered into by CPIH, the Company and certain of their respective Subsidiaries on the Issue Date, as such agreement may be amended, supplemented or otherwise modified from time to time.
"Credit Agreements" means the First Lien Letter of Credit Facility and the Second Lien Letter of Credit Facility (each being referred to individually herein as a "Credit Agreement").
"Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law.
"Default" means an event or condition the occurrence of which is, or with the lapse of time or the giving of notice or both would be, an Event of Default.
"Defaulted Interest" means overdue installments of interest on the Notes.
"Deposit Account" means a demand, time, savings, passbook or similar account maintained with a Person engaged in the business of banking, including a savings bank, savings and loan association, credit union or trust company, in each case that qualifies under clause (iii) of the definition of "Cash Equivalents".
"DHC" means Danielson Holding Corporation, a Delaware corporation, and any and all successors thereto.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder of such Capital Stock), or upon the happening of any event, matures, excluding any maturity as the result of the redemption thereof at the option of the issuer thereof, or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of such Capital Stock, in whole or in part, on or prior to the date on which the Notes mature, except to the extent that such Capital Stock is solely redeemable with, or solely exchangeable for, any Capital Stock that is not Disqualified Stock; provided that only the portion of the Capital Stock or other security which so matures, is mandatorily redeemable or is so redeemable at the option of the holder prior to such date shall be deemed to be Disqualified Stock; provided further that if such Capital Stock or other security is issued to and held by any employee pursuant to any plan program or arrangement or any plan for the benefit of employees of the Company or its Subsidiaries or by any such plan to such employees, such Capital Stock or other security shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Company or any of its Subsidiaries in order to satisfy applicable statutory or regulatory obligations or as a result of such employee's termination, death or disability. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified
Stock solely because the holders of such Capital Stock have the right to require the Company to repurchase such Capital Stock upon the occurrence of a change of control or an Asset Sale will not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 3.6.
"DTC" means The Depository Trust Company, its nominees and their respective successors and assigns, or such other depositary institution hereinafter appointed by the Company that is a clearing agency registered under the Exchange Act.
"Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).
"Event of Default" has the meaning assigned to it in Section 6.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Indebtedness" means Indebtedness of the Company and its Restricted Subsidiaries (other than Indebtedness under the Credit Agreements) in existence on the Issue Date or otherwise issued in accordance with the Plan of Reorganization.
"First Lien Letter of Credit Facility" means the Credit Agreement, dated as of March 10, 2004, by and among the Company, the guarantors party thereto, Deutsche Bank AG, Securities, Inc., as documentation agent, Bank of America, N.A., as administrative agent, and the lenders party thereto, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended (including any amendment and restatement thereof), modified, renewed, supplemented, refunded, replaced or refinanced in whole or in part from time to time, including any agreement, extending the maturity of, consolidating or otherwise restructuring (including adding subsidiaries of the Company as additional guarantors thereunder) all or any portion of the Indebtedness under such agreement or any successor or replacement agreement and whether by the same of any other agent, lender or group; provided, however, that in no case shall any such amendment, modification, renewal, supplementation, refunding, replacement or refinancing cause the First Lien Letter of Credit Facility to fail to comply with clause 3(b) of the definition of Senior Indebtedness, without regards to the duration of letters of credit issued thereunder.
"Fiscal Year" means the fiscal year of the Company and its subsidiaries ending on December 31st of each calendar year.
"Fresh Start Charges" means, for any period, the aggregate non-cash charges of the Company and its Restricted Subsidiaries arising from the application of fresh start accounting principles, determined on a consolidated basis in accordance with GAAP.
"GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards
Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, as in effect from time to time.
"Global Note" means any Note issued in fully-registered certificated form to DTC (or its nominee), as depositary for the beneficial owners thereof, which shall be substantially in the form of Exhibit A, with appropriate legends as specified in Exhibit A.
"Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person:
(1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or
(2) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include
(i) endorsements of negotiable instruments for collection or deposit in the
ordinary course of business or (ii) Performance Guarantees. The term "guarantee"
used as a verb has a corresponding meaning.
"Hedging Obligations" means, with respect to any specified Person, the obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements;
(2) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates or interest rates; and
(3) forward agreements or arrangements designed to hedge against fluctuation in electricity rates pertaining to electricity produced by a Project, so long as the contractual arrangements relating to such Project contemplate that the Company or its Subsidiaries shall deliver such electricity to third parties.
"High Yield Notes Documents" means those 8.25% Senior Secured Notes due 2011 (the "High Yield Notes") issued by the Company pursuant to the indenture between the Company, the subsidiary guarantors named therein and U.S. Bank National Association, as trustee, dated March 10, 2004 (the "High Yield Notes Indenture"), and all related documents, as such notes, indenture and such other documents and the obligations thereunder may be amended, extended, restated, supplemented or otherwise modified from time to time.
"Holder" means the Person in whose name a Note is registered in the Note Register.
"Indebtedness" means, with respect to any Person on any date of determination (without duplication) the following items if and to the extent that any of them (other than items specified under clauses (3), (8) and (9) below) would appear as a liability or, in the case of clause (6) only, Preferred Stock on the balance sheet of such Person, prepared in accordance with GAAP:
(1) the principal amount of and premium, if any, in respect of indebtedness of such Person for borrowed money;
(2) the principal amount of and premium, if any, in respect of obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;
(3) all obligations of such Person in respect of letters of credit, bankers' acceptances, or other similar instruments (including reimbursement obligations with respect thereto, but excluding obligations in respect of letters of credit issued in respect of Trade Payables);
(4) all obligations of such Person to pay the deferred and unpaid purchase price of property or services (except Trade Payables), which purchase price is due more than twelve months after the date of placing such property in service or taking delivery and title thereto or the completion of such services;
(5) all Capital Lease Obligations and all Attributable Debt of such Person;
(6) the amount of all obligations of such Person with respect to the redemption, repayment or repurchase of any Disqualified Stock or, with respect to any Subsidiary of such Person, any Preferred Stock (but excluding, in each case, any accrued dividends);
(7) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided, however, that the amount of Indebtedness of such Person shall be the lesser of:
(A) the fair market value of such asset at such date of determination and
(B) the amount of such Indebtedness of such other Persons;
(8) Hedging Obligations of such Person;
(9) all obligations of such Person in respect of Insurance Premium Financing Arrangements; and
(10) all obligations of the type referred to in clauses
(1) through (9) of other Persons and all dividends or distributions of
other Persons for the payment of which, in either case, such Person is
responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise, including by means of any Guarantee.
The amount of Indebtedness of any Person at any date will be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations described above, at such date; provided, however, that the amount outstanding at any time of any Indebtedness issued with original issue discount will be deemed to be the face amount of such Indebtedness less the remaining unaccreted portion of the original issue discount of such Indebtedness at such time, as determined in accordance with GAAP.
"Indenture" means this Indenture as amended or supplemented from time to time, including the Exhibits hereto.
"Insurance Premium Financers" means Persons who are not Affiliates of the Company who advance insurance premiums for the Company and its Subsidiaries pursuant to Insurance Premium Financing Arrangements.
"Insurance Premium Financing Arrangements" means, with respect to any Person, agreements with Insurance Premium Financers pursuant to which such Insurance Premium Financers advance insurance premiums for or on behalf of such Person. Insurance Premium Financing Arrangements (i) shall not provide, for the benefit of such Insurance Premium Financers, any security interest in any property of the Company or any of its Subsidiaries other than gross unearned premiums for the insurance policies that are the subject of such arrangements, and (ii) shall not contain any provision or contemplate any transaction prohibited by the Indenture.
"Intercreditor Agreement" means that certain intercreditor agreement, dated as of March 10, 2004, by and among the Company, the Company's subsidiaries listed on the signature pages thereto, the financial institutions listed on the signature pages thereto, Bank of America, N.A., as administration agent, Deutsche Bank Securities, Inc., as documentation agent, DHC and the trustee of the High Yield Notes Indenture, as amended (including any amendment and restatement thereof), supplemented or otherwise modified from time to time.
"Interest Payment Date" means the stated due date of an installment of principal and interest on the Notes as specified in the Form of Face of Note contained in Exhibit A.
"Investments" means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the form of loans (including Guarantees or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary of the Company, the Company will be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Company's Investments in such Restricted Subsidiary that were not sold or disposed of in an amount determined as provided in the final paragraph of Section 3.6. Any deemed investment in
any Person not involving a transfer of cash or other assets to such Person and resulting solely from the application of pushdown accounting rules will not constitute an Investment.
"Investor Parties" means (i) D.E. Shaw Laminar Portfolios, L.L.C., (ii) SZ Investments, LLC, and (iii) Third Avenue Value Fund, Inc.
"Issue Date" means March 10, 2004.
"Legal Holiday" has the meaning assigned to it in Section 11.7.
"Limited Recourse Debt" means, with respect to any Subsidiary of the Company, Indebtedness of such Subsidiary with respect to which the recourse of the holder or obligee of such Indebtedness is limited to (i) assets associated with a Project (which in any event shall not include assets held by the Company or any Subsidiary other than a Subsidiary whose sole business is the ownership and/or operation of such Project and substantially all of whose assets are associated with such Project) in respect of which such Indebtedness was incurred or (ii) the Equity Interests in such Subsidiary, but in the case of clause (ii) only if such Subsidiary's sole business is the ownership and/or operation of such Project and substantially all of such Subsidiary's assets are associated with such Project. Indebtedness of a Subsidiary of the Company shall not fail to be Limited Recourse Debt solely by virtue of the fact that the holders of such Limited Recourse Debt have recourse to the Company or another Subsidiary of the Company pursuant to a Performance Guaranty.
"Management Investors" means the officers and employees of the Company or a Subsidiary of the Company who acquire Voting Stock of DHC or the Company on or after the Issue Date.
"Maturity Date" means March 15, 2012.
"Net Proceeds" means the aggregate Cash proceeds received by the Company in respect of any Asset Sale (including, without limitation, any Cash received upon the sale or other disposition of any non-Cash consideration received in any Asset Sale), net of (i) the costs directly related to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, sales commissions and consent fees, (ii) taxes paid or payable as a result of such Asset Sale, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, (iii) amounts required to be applied to the repayment of indebtedness secured by a lien on the asset or assets that were the subject of such Asset Sale, and (iv) any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither the Company, any Guarantor, nor any Restricted Subsidiary (i) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (ii) is directly liable as a guarantor or otherwise, or (iii) constitutes the lender; and
(2) no default with respect to which (including any rights that the holders of the Indebtedness may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness (other than the Notes) of the Company, any Guarantor, or any Restricted Subsidiary to declare a default on such other Indebtedness or cause the payment of such other Indebtedness to be accelerated or payable prior to its stated maturity;
provided that Performance Guarantees not prohibited under the High Yield Note Indenture will not cause any such Indebtedness not to be Non-Recourse Debt.
"Note Custodian" means the custodian with respect to any Global Note appointed by DTC, or any successor Person thereto, and shall initially be the Trustee.
"Note Register" has the meaning assigned to it in Section 2.3(a).
"Notes" means any of the Company's 7.5% Subordinated Unsecured Notes due 2012 issued and authenticated pursuant to this Indenture.
"Obligations" means, with respect to any Indebtedness, any principal, interest (including, without limitation, Post-Petition Interest), penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing such Indebtedness.
"Officer" means, when used in connection with any action to be taken by the Company, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Financial Officer, any Vice President, the Treasurer, the Controller or the Secretary of the Company.
"Officers' Certificate" means, when used in connection with any action to be taken by the Company, a certificate signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who, unless otherwise indicated in this Indenture, may be an employee of counsel for the Company and who shall be reasonably acceptable to the Trustee.
"Outstanding Notes" means, as of the date of determination, all Notes theretofore authenticated and delivered under this Indenture, except:
(A) Notes theretofore canceled by the Trustee or delivered to the Trustee for cancellation;
(B) Notes, or portions thereof, for the payment or redemption of which money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company or an Affiliate of the Company) in trust or set aside and segregated in trust by the Company or an Affiliate of the Company (if the Company or such Affiliate of the Company is acting as Paying Agent) for the Holders of such Notes; provided that, if Notes (or portions thereof) are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and
(C) Notes which have been surrendered pursuant to Section 2.8 or in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to this Indenture, other than any such Notes in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Notes are held by a bona fide purchaser in whose hands such Notes are valid obligations of the Company,
provided, however, that in determining whether the Holders of the requisite aggregate principal amount of the Outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Notes owned by the Company, any other obligor of the Notes or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes which a Trust Officer of the Trustee actually knows to be so owned shall be so disregarded. Notes so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Notes and that the pledgee is not the Company, any other obligor of the Notes or any Affiliate of the Company or of such other obligor.
"Paying Agent" has the meaning assigned to it in Section 2.3(a).
"Payment Blockage Notice" has the meaning assigned to it in
Section 10.3(a)(B).
"Performance Guaranty" means any agreement entered into by the Company or any Restricted Subsidiary of the Company under which the Company or such Restricted Subsidiary (i) guarantees the performance of a Subsidiary of the Company under a lease or sublease or under a service, management or operating agreement relating to a Project or (ii) guarantees the performance of CPIH or any of its Subsidiaries under a lease or sublease or under a service, management or operating agreement in existence on the Issue Date, as amended or modified on terms not materially less advantageous to the Company or such Restricted Subsidiary.
"Permitted Business" means any business of the type engaged in by the Company or any of its Restricted Subsidiaries as of the Issue Date or any business reasonably related, ancillary or complementary thereto.
"Permitted Holders" means (i) DHC and the Management Investors and (ii) any Related Party of a Person referred to in the immediately preceding clause (i).
"Permitted Investment" means an Investment by the Company or any Restricted Subsidiary of the Company:
(1) in the Company, a Restricted Subsidiary of the Company (other than a Bankrupt Subsidiary) or a Person that will, upon the making of such Investment, become a Restricted Subsidiary of the Company;
(2) consisting of intercompany loans to Bankrupt Subsidiaries, so long as (a) the proceeds of such loans are applied to working capital, maintenance, operation, payroll and other liquidity requirements in the ordinary course of business of such Bankrupt Subsidiaries, and (b) the aggregate amount of such intercompany loans outstanding to all Bankrupt Subsidiaries at any time does not exceed $3.0 million;
(3) in another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary of the Company;
(4) in Cash Equivalents;
(5) in receivables owing to the Company or any Restricted Subsidiary of the Company if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances;
(6) in payroll, travel and similar advances to employees to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business;
(7) in loans or advances to employees made in the ordinary course of business and not exceeding $4.0 million in the aggregate outstanding at any one time, of which not more than $2.0 million shall be for purposes other than employee relocation expenses;
(8) received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments;
(9) in any Person to the extent such Investment represents the non-cash portion of the consideration received for an Asset Sale that was made pursuant to and in compliance with Section 3.7 or a transaction not constituting an Asset Sale by reason of the $10.0 million threshold contained in the definition thereof;
(10) that constitutes a Hedging Obligation or commodity hedging arrangement entered into for bona fide hedging purposes of the Company in the ordinary course of business and otherwise in accordance with this Indenture;
(11) in securities of any trade creditor, supplier or customer received in settlement of obligations or pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditor, supplier or customer;
(12) acquired as a result of a foreclosure with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;
(13) consisting of purchases and acquisitions of inventory, supplies, materials, equipment or contract rights or licenses or leases of intellectual property, in any case, in the ordinary course of business;
(14) consisting of intercompany Indebtedness not prohibited under the High Yield Note Indenture;
(15) consisting of a Guarantee not prohibited under the High Yield Note Indenture;
(16) the consideration for which consists solely of shares of Capital Stock (other than Disqualified Stock) of the Company;
(17) required to be made by the Company and its Restricted Subsidiaries under Performance Guarantees not prohibited under the High Yield Note Indenture;
(18) deemed to have been made as a result of the acquisition of a Person that at the time of such acquisition held instruments constituting Investments that were not made or acquired in contemplation of such acquisition;
(19) in prepaid expenses and leases, and in utility and workers' compensation performance and other similar deposits made in ordinary course of business;
(20) in CPIH and its Subsidiaries and in Unrestricted Subsidiaries of the Company to fund administrative services including, but not limited to, payroll, cash management, administration, billing, procurement, and equity investments the Company is required to make in CPIH and its Subsidiaries in a net amount not to exceed $20.0 million in the aggregate outstanding at any one time;
(21) under the CPIH Reimbursement Agreement or Tax Sharing Agreement;
(22) advances by the Company or a Restricted Subsidiary of the Company to fund expansion, replacements or improvements in respect of a publicly-owned Project, which advances are reimbursable by the owner of the Project;
(23) made pursuant to the Plan of Reorganization; and
(24) other Investments having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value) not exceeding $70.0 million in the aggregate outstanding at any one time.
"Permitted Junior Securities" means any securities of the Company or any other Person that are:
(A) common equity securities without special covenants; or
(B) unsecured debt securities expressly subordinated in right of payment to all Senior Indebtedness (as modified or issued in exchange for Senior Indebtedness by the Plan of Reorganization or other court order pursuant to which such securities are issued) that may at the time be outstanding, to the same extent as, or to a greater extent than, the Notes are subordinated as provided in the Indenture, and that have a final maturity date
and a Weighted Average Life to Maturity which is at least one year after than the final maturity of all such Senior Indebtedness.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries incurred or issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund (A) other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness extended, refinanced, renewed, replaced, defeased (whether legally or as to covenants only) or refunded (plus all accrued interest on such Indebtedness and the amount of all fees, expenses and premiums incurred in connection therewith); provided, however, that, notwithstanding the foregoing, Permitted Refinancing Indebtedness with respect to the Company and its Restricted Subsidiaries of the Existing Indebtedness, may be incurred in an amount not in excess of 110% of the principal amount of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest on such Indebtedness and the amount of all fees, expenses and premiums incurred in connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by the Company or by the Restricted Subsidiary of the Company which is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded;
or (B) Limited Recourse Debt or Non-Recourse Debt of municipally-sponsored privately-owned Projects so long as the terms of such Permitted Refinancing Indebtedness, taken as a whole, are not materially more restrictive to the Company and its Subsidiaries.
"Person" means an individual, partnership, limited partnership, corporation, company, limited liability company, unincorporated organization, trust, joint venture, or governmental agency or political subdivision thereof.
"Plan of Reorganization" means the Debtors' Second Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code, filed with the United States Bankruptcy Court for the
Southern District of New York on January 14, 2004, as amended pursuant to the confirmation order thereof dated March 5, 2004.
"Post-Petition Interest" means all interest accrued or accruing after the commencement of any insolvency or liquidation proceeding (and interest that would accrue but for the commencement of any insolvency or liquidation proceeding) in accordance with an at the contract rate (including, without limitation, any rate applicable upon default) specified in the agreement or instrument creating, evidencing or governing any Indebtedness, whether or not, pursuant to applicable law or otherwise, the claim for such interest is allowed as a claim in such insolvency or liquidation proceeding.
"Preferred Stock" as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person.
"Project" means any waste-to-energy facility, electrical generation plant, cogeneration plant, water treatment facility or other facility for the generation of electricity or engaged in another line of business in which the Company and its Subsidiaries are permitted to be engaged hereunder for which a Subsidiary or Subsidiaries of the Company was, is or will be (as the case may be) an owner, operator, manager or builder, and shall also mean any two or more of such plants or facilities in which an interest has been acquired in a single transaction, so long as such interest constitutes an existing Investment on the Issue Date permitted hereunder; provided however, that a Project shall cease to be a Project at such time that the Company or any of its Subsidiaries ceases to have any existing or future rights or obligations (whether direct or indirect, contingent or matured) associated therewith.
"Record Date" has the meaning assigned to it in the Form of Face of Note contained in Exhibit A.
"Redemption Date" means, with respect to any redemption of Notes, the date fixed for such redemption pursuant to this Indenture and the Notes.
"Registrar" has the meaning assigned to it in Section 2.3(a).
"Related Party" means (a) with respect to DHC, (i) any direct or indirect wholly-owned Subsidiary of DHC, any Approved DHC Investor and any officer, director or employee of DHC or any wholly-owned Subsidiary of DHC, (ii) any spouse or lineal descendant (including by adoption and stepchildren) of the officers, directors and employees referred to in clause (a)(i) of this definition or (iii) any trust, corporation or partnership 100%-in-interest of the beneficiaries, stockholders or partners of which consists of one or more of the persons described in clauses (a)(i) or (a)(ii) of this definition; or (b) with respect to any Management Investor (i) any spouse or lineal descendant (including by adoption and stepchildren) of such officer or employee or (ii) any trust, corporation or partnership 100%-in-interest of the beneficiaries, stockholders or partners of which consists of such officer or employee, any of the persons described in clause (b)(i) of this definition or any combination thereof.
"Representative" means any trustee or other authorized agent or other Representative in any issue of Senior Indebtedness.
"Restricted Investment" means an Investment other than a Permitted Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now owned or hereafter acquired by the Company whereby the Company transfers such property to a Person and the Company leases it from such Person.
"Second Lien Letter of Credit Facility" means the Credit Agreement, dated as of 10, 2004, by and among the Company, each of its subsidiaries listed on the signature pages thereof, the financial institutions listed on the signature pages thereof and Bank One, N.A., as administrative agent, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended (including any amendment and restatement thereof), modified, renewed, supplemented, refunded, replaced or refinanced in whole or in part from time to time, including any agreement extending the maturity of, consolidating or otherwise restructuring (including adding Subsidiaries of the Company as additional guarantors thereunder) all or any portion of the Indebtedness under such agreement or any successor or replacement agreement and whether by the same or any other agent, lender or group; provided, however, that in no case shall any such amendment, modification, renewal, supplementation, refunding, replacement or refinancing cause the Second Lien Letter of Credit Facility to fail to comply with clause 3(b) of the definition of Senior Indebtedness, without regards to the duration of letters of credit issued thereunder.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means, at any date, all Obligations of
the Company under: (1) the Credit Agreements as set forth in the Plan of
Reorganization, (2) the High Yield Notes Documents as set forth in the Plan of
Reorganization, (3) Indebtedness of the Company incurred or issued in exchange
for, or the net proceeds of which are used to extend, refinance, renew, replace,
defease or refund the Credit Agreements and the High Yield Notes Documents,
provided, that (a) if the principal amount of such Indebtedness exceeds the
principal amount of such Indebtedness as set forth in the Plan of Reorganization
(plus all accrued interest on such Indebtedness and the amount of all fees,
expenses and premiums incurred in connection therewith) extended, refinanced,
renewed, replaced, defeased (whether legally or as to covenants only) or
refunded, such excess must fall within the limits set forth under (4) below, and
(b) such Indebtedness has a final Stated Maturity later than the final Stated
Maturity of and has a Weighed Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed replaced, defeased or refunded, and (4) any other
Indebtedness of the Company with a principal amount of up to $50,000,000, that
is designated by its express terms to be senior to the Notes.
"Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the Issue Date.
"Special Record Date" has the meaning assigned to it in
Section 2.11(b).
"Stated Maturity" means, with respect to any installment of interest or principal on any Indebtedness, the fixed date on which the payment of interest or principal is scheduled to be paid in the documentation governing such Indebtedness, but does not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the fixed date scheduled for the payment thereof.
"Subsidiary" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (i) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (ii) the only general partners of which are that Person or one or more Subsidiaries of such Person (or any combination thereof);
provided, however, that, except to the extent expressly indicated, the term "Subsidiary," when used with respect to the Company or its Restricted Subsidiaries, shall not include CPIH or any of its Subsidiaries.
"Tax Sharing Agreement" means the Tax Sharing Agreement among DHC, the Company and CPIH and any amendments, modifications or extensions thereof on terms not materially less favorable to the Company and its Restricted Subsidiaries, taken as a whole, than the terms of such agreement as in effect on the Issue Date.
"TIA" or "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, as in effect on the date of this Indenture (except as otherwise provided in this Indenture).
"Trade Payables" means, with respect to any Person, any accounts payable or any indebtedness or monetary obligation to trade creditors created, assumed or guaranteed by such Person arising in the ordinary course of business in connection with the acquisition of goods or services.
"Trustee" means the party named as such in the introductory paragraph of this Indenture until a successor replaces it in accordance with the terms of this Indenture and, thereafter, means the successor.
"Trust Officer" means, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.
"Unrestricted Subsidiary" means any Subsidiary of the Company that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a resolution of the Board of Directors, but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are not materially less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company;
(3) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (i) to subscribe for additional Equity Interests or (ii) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; and
(4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries.
Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary will be evidenced by filing with the Trustee a certified copy of the resolution of the Board of Directors giving effect to such designation and an Officer's Certificate certifying that such designation complied with the preceding conditions and was permitted by Section 3.10. If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements to be an Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary will be deemed to be incurred by a Restricted Subsidiary of the Company as of such date. The Board of Directors may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation will be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation will only be permitted if no Default or Event of Default would be in existence following such designation.
"U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer's option.
"U.S. Legal Tender" means such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts.
"Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the board of directors or comparable governing body of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by
(2) the then outstanding principal amount of such Indebtedness.
1.2 Incorporation by Reference of Trust Indenture Act. If any
provision of this Indenture limits, qualifies or conflicts with the duties that
would be imposed by any of Sections 310 to 317 of the TIA through operation of
Section 318(c) thereof on any person if this Indenture were qualified under the
TIA, such imposed duties shall control.
"obligor" on the indenture securities means the Company and any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA, defined in the TIA by reference to another statute or defined by Rules or Regulations of the Commission have the meanings assigned to them by such definitions.
1.3 Rules of Construction. Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation; and
(v) words in the singular include the plural and words in the plural include the singular.
ARTICLE II
THE NOTES
2.1 Form and Dating.
(a) The Notes will be issued in fully-registered certificated form without coupons, and only in denominations of $500 and any integral multiple thereof, and will be issued initially solely in global form. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A.
(b) The terms and provisions of the Notes, the form of which is in Exhibit A, shall constitute, and are hereby expressly made, a part of this Indenture, and, to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture expressly agree to such terms and provisions and to be bound thereby. Except as otherwise expressly permitted in this Indenture, all Notes shall be identical in all respects. Notwithstanding any differences among them, all Notes issued under this Indenture shall vote and consent together on all matters as one class.
(c) The Notes may have notations, legends or endorsements as specified in Exhibit A or as otherwise required by law, stock exchange rule or DTC rule or usage. The Company and the Trustee shall approve the form of the Notes and any notation, legend or endorsement on them. Each Note shall be dated the date of its authentication.
2.2 Execution and Authentication.
(a) Two Officers shall sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time the Trustee authenticates the Note, the Note shall be valid nevertheless.
(b) A Note shall not be valid until an authorized signatory of the Trustee manually authenticates the Note. The signature of the Trustee on a Note shall be conclusive evidence that such Note has been duly and validly authenticated and issued under this Indenture.
At any time and from time to time after the execution and delivery of this Indenture, the Trustee shall authenticate and make available for delivery Notes upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company (the "Company Order"). A Company Order shall specify the amount of the Notes to be authenticated and the date on which the original issue of Notes is to be authenticated. The aggregate principal amount that may be authenticated and delivered under this Indenture is limited up to $50 million, except for Notes authenticated and delivered in exchange for or in lieu of Notes pursuant to Sections 2.7, 2.8, 2.9 and 4.7. Other than Notes authenticated and delivered in exchange for or in lieu of Notes pursuant to Sections 2.7, 2.8, 2.9 and 4.7, Notes may only be authenticated and delivered to (i) creditors as provided for under the Plan of Reorganization, (ii) unsecured creditors under the plans of reorganization of the Bankrupt Subsidiaries or (iii) additional Holders, provided that, without increasing the maximum aggregate amount of Notes to be issued under this Indenture above $50 million (x) the Notes issued to any such additional Holders shall not exceed 20% of the sum of the aggregate amounts issued under (i) and (ii) above, and (y) in no event shall any such issuances be made prior to the completion of all issuances of Notes under (i) and (ii) above.
(c) The Trustee may appoint an agent (the "Authenticating Agent") reasonably acceptable to the Company to authenticate the Notes. Unless limited by the terms of such appointment, any such Authenticating Agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by the Authenticating Agent.
2.3 Registrar and Paying Agent.
(a) The Company shall maintain an office or agency in the Borough of Manhattan, City of New York, where Notes may be presented or surrendered for registration of transfer or for exchange (the "Registrar"), where Notes may be presented for payment (the "Paying Agent") and for the service of notices and demands to or upon the Company in respect of the Notes and this Indenture. The Registrar shall keep a register of the Notes and of their transfer and exchange (the "Note Register"). The Company may have one or more co-Registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent.
(b) The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-Registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of each such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.7. The Company may act as Paying Agent, Registrar, co-Registrar or transfer agent.
(c) The Company initially appoints the Trustee at its Corporate Trust Office as Registrar, Paying Agent and agent for service of demands and notices in connection with the Notes and this Indenture, until such time as another Person is appointed as such.
2.4 Paying Agent to Hold Money in Trust. The Company shall require
each Paying Agent (other than the Trustee) to agree in writing that such Paying
Agent shall hold in trust for the benefit of Holders or the Trustee all money
held by such Paying Agent for the payment of principal of or interest on the
Notes and shall notify the Trustee in writing of any Default by the Company in
making any such payment. If the Company or an Affiliate of the Company acts as
Paying Agent, it shall segregate the money held by it as Paying Agent and hold
it as a separate trust fund. The Company at any time may require a Paying Agent
(other than the Trustee) to pay all money held by it to the Trustee and to
account for any funds disbursed by such Paying Agent. Upon complying with this
Section 2.4, the Paying Agent (if other than the Company) shall have no further
liability for the money delivered to the Trustee. Upon any proceeding under any
Bankruptcy Law with respect to the Company or any Affiliate of the Company, if
the Company or such Affiliate is then acting as Paying Agent, the Trustee shall
replace the Company or such Affiliate as Paying Agent.
2.5 Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, or to the extent otherwise required under the TIA, the Company shall furnish to the Trustee, in writing at least seven Business Days before each Interest Payment Date
and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders.
2.6 Global Note Provisions.
(a) Each Global Note initially shall: (i) be registered in the
name of DTC or the nominee of DTC; (ii) be delivered to the Note Custodian; and
(iii) bear the appropriate legend, as set forth on Exhibit A. Any Global Note
may be represented by more than one certificate. The aggregate principal amount
of each Global Note may from time to time be increased or decreased by
adjustments made on the records of the Note Custodian, as provided in this
Indenture.
(b) Members of, or participants in, DTC ("Agent Members") shall have no rights under this Indenture with respect to any Global Note held on their behalf by DTC or by the Note Custodian under such Global Note, and DTC may be treated by the Company, the Trustee, the Paying Agent and the Registrar and any of their agents as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee, the Paying Agent or the Registrar or any of their agents from giving effect to any written certification, proxy or other authorization furnished by DTC or impair, as between DTC and its Agent Members, the operation of customary practices of DTC governing the exercise of the rights of an owner of a beneficial interest in any Global Note. The registered Holder of a Global Note may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action that a Holder is entitled to take under this Indenture or the Notes.
(c) Except as provided below, owners of beneficial interests in Global Notes will not be entitled to receive Certificated Notes. Certificated Notes shall be issued to all owners of beneficial interests in a Global Note in exchange for such interests only if:
(A) DTC notifies the Company that it is unwilling or unable to continue as depositary for such Global Note or DTC ceases to be a clearing agency registered under the Exchange Act, at a time when DTC is required to be so registered in order to act as depositary, and in each case a successor depositary is not appointed by the Company within 120 days of such notice,
(B) the Company executes and delivers to the Trustee and Registrar an Officers' Certificate stating that such Global Note shall be so exchangeable, or
(C) an Event of Default has occurred and is continuing and the Registrar has received a request from DTC.
In connection with the exchange of an entire Global Note for Certificated Notes pursuant to this paragraph (c), such Global Note shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and upon Company Order the Trustee shall authenticate and deliver, to each beneficial owner identified by DTC in exchange for its beneficial interest in such Global Note, an equal aggregate principal amount of Certificated Notes of authorized denominations.
2.7 Transfer and Exchange.
(a) Transfers. Transfers of a Global Note shall be limited to transfers of such Global Note in whole, but not in part, to nominees of DTC or to a successor of DTC or such successor's nominee.
(A) When Notes are presented to the Registrar or a co-Registrar with a request to register the transfer of such Notes or to exchange such Notes for an equal principal amount of Notes of other authorized denominations, the Registrar or co-Registrar shall register the transfer or make the exchange as requested if its requirements for such transaction are met; provided that any Notes presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Company and the Registrar or co-Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. To permit registrations of transfers and exchanges and subject to the other terms and conditions of this Article II, the Company will execute and upon Company Order the Trustee will authenticate Notes at the Registrar's or co-Registrar's written request.
(B) No service charge shall be made to a Holder for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charges payable upon exchange or transfer pursuant to Article IV or Section 9.5).
(C) The Registrar or co-Registrar shall not be required to register the transfer of or exchange of any Note for a period beginning: (1) 15 days before the mailing of a notice of an offer to repurchase or redeem Notes and ending at the close of business on the day of such mailing, or (2) 15 days before an Interest Payment Date and ending on such Interest Payment Date.
(D) Prior to the due presentation for registration of transfer of any Note, the Company, the Trustee, the Paying Agent, the Registrar or any co-Registrar may deem and treat the person in whose name a Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Note and for all other purposes whatsoever, whether or not such Note is overdue, and none of the Company, the Trustee, the Paying Agent, the Registrar or any co-Registrar shall be affected by notice to the contrary.
(E) All Notes issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Notes surrendered upon such transfer or exchange.
(b) No Obligation of the Trustee. The Trustee shall have no responsibility or obligation to any beneficial owner of an interest in a Global Note, an Agent Member or other
Person with respect to the accuracy of the records of DTC or its nominee or of any participant or member thereof, with respect to any ownership interest in the Notes or with respect to the delivery to any participant, member, beneficial owner or other Person (other than DTC) of any notice (including any notice of redemption) or the payment of any amount or delivery of any Notes (or other security or property) under or with respect to such Notes. All notices and communications to be given to the Holders and all payments to be made to Holders in respect of the Notes shall be given or made only to or upon the order of the registered Holders (which shall be DTC or its nominee in the case of a Global Note). The Trustee may rely and shall be fully protected in relying upon information furnished by DTC with respect to its Agent Members and any beneficial owners.
(c) Retention of Documents. The Registrar and co-Registrar shall retain copies of all letters, notices and other written communications received pursuant to this Article II. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar.
2.8 Mutilated, Destroyed, Lost or Stolen Notes.
(a) If a mutilated Note is surrendered to the Registrar or co-Registrar or if the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken, the Company shall execute and upon Company Order the Trustee shall authenticate a replacement Note if the requirements of Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies any other reasonable requirements of the Trustee and the Company. If required by the Trustee or the Company, such Holder shall furnish an affidavit of loss and indemnity bond sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co-Registrar from any loss that any of them may suffer if a Note is replaced, and, in the absence of notice to the Company or the Trustee that such Note has been acquired by a protected purchaser, the Company shall execute and upon Company Order the Trustee shall authenticate and make available for delivery, in exchange for any such mutilated Note or in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and principal amount, bearing a number not contemporaneously Outstanding.
(b) Upon the issuance of any new Note under this Section 2.8, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) in connection therewith.
(c) Every new Note issued pursuant to this Section 2.8 in exchange for any mutilated Note, or in lieu of any destroyed, lost or stolen Note, shall constitute an original additional contractual obligation of the Company and any other obligor upon the Notes, whether or not the mutilated, destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder.
2.9 Temporary Notes. Until definitive Notes are ready for delivery, the Company may execute and upon Company Order the Trustee will authenticate temporary Notes.
Temporary Notes will be substantially in the form of definitive Notes but may have variations that the Company considers appropriate for temporary Notes. Without unreasonable delay, the Company will prepare and execute and upon Company Order the Trustee will authenticate definitive Notes. After the preparation of definitive Notes, the temporary Notes will be exchangeable for definitive Notes upon surrender of the temporary Notes at any office or agency maintained by the Company for that purpose and such exchange shall be without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes, the Company will execute and upon Company Order the Trustee will authenticate and make available for delivery in exchange therefor one or more definitive Notes representing an equal principal amount of Notes. Until so exchanged, the Holder of temporary Notes shall in all respects be entitled to the same benefits under this Indenture as a Holder of definitive Notes.
2.10 Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar, co-Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel and dispose of cancelled Notes in accordance with its policy of disposal or return to the Company all Notes surrendered for registration of transfer, exchange, payment or cancellation. The Company may not issue new Notes to replace Notes it has paid or delivered to the Trustee for cancellation for any reason other than in connection with a transfer or exchange upon Company Order.
2.11 Defaulted Interest.
(a) When any installment of interest becomes Defaulted Interest, such installment shall forthwith cease to be payable to the Holders in whose names the Notes were registered on the Record Date applicable to such installment of interest. Defaulted Interest (including any interest on such Defaulted Interest) shall be paid by the Company, at its election, as provided in Sections 2.11(b) or (c).
(b) The Company may elect to make payment of any Defaulted Interest (including any interest on such Defaulted Interest) to the Holders in whose names the Notes are registered at the close of business on a special record date for the payment of such Defaulted Interest (a "Special Record Date"), which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest and interest payable on such Defaulted Interest, if any, proposed to be paid and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest and interest payable on such Defaulted Interest, if any, or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Holders entitled to such Defaulted Interest and interest payable on such Defaulted Interest, if any, as provided in this Section 2.11(b). Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest, and interest payable on such Defaulted Interest, if any, which shall be not more than 15 calendar days and not less than ten calendar days prior to the date of the proposed payment and not less than ten calendar days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and interest
payable on such Defaulted Interest, if any, and the Special Record Date therefor to be sent, first-class mail, postage prepaid, to each Holder at such Holder's address as it appears in the registration books of the Registrar, not less than ten calendar days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and interest payable on such Defaulted Interest, if any, and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest and interest payable on such Defaulted Interest, if any, shall be paid to the Holders in whose names the Notes are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to Section 2.11(c).
(c) Alternatively, the Company may make payment of any Defaulted Interest (including any interest on such Defaulted Interest) in any other lawful manner not inconsistent with the requirements of the securities exchange, if any, on which the Notes are listed if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Section 2.11(c), such manner of payment shall be deemed practicable by the Trustee.
ARTICLE III
COVENANTS
3.1 Payment of Notes.
(a) The Company shall pay the principal of and interest (including Defaulted Interest) on the Notes in U.S. Legal Tender on the dates and in the manner provided in the Notes and in this Indenture. Prior to 10:00 a.m. New York City time on each Interest Payment Date and the Maturity Date, the Company shall deposit with the Paying Agent in immediately available funds U.S. Legal Tender sufficient to make Cash payments of the principal and interest due on such Interest Payment Date or Maturity Date, as the case may be. If the Company or an Affiliate of the Company is acting as Paying Agent, the Company or such Affiliate shall, prior to 10:00 a.m. New York City time on each Interest Payment Date and the Maturity Date, segregate and hold in trust U.S. Legal Tender sufficient to make Cash payments of principal and interest due on such Interest Payment Date or Maturity Date, as the case may be. Principal and interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent (other than the Company or an Affiliate of the Company) holds in accordance with this Indenture U.S. Legal Tender designated for and sufficient to pay all principal and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the Holders on that date pursuant to the terms of this Indenture.
(b) Notwithstanding anything to the contrary contained in this Indenture, the Company may, to the extent it is required to do so by law, deduct or withhold income or other similar taxes imposed by the United States of America from principal or interest payments hereunder.
3.2 Maintenance of Office or Agency.
(a) The Company shall maintain each office or agency required under Section 2.3. The Company will give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Company shall fail to maintain any such required office
or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands.
(b) The Company may also from time to time designate one or more other offices or agencies (in or outside of The City of New York) where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind any such designation; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in The City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and any change in the location of any such other office or agency.
3.3 Corporate Existence. The Company will do or cause to be done all things necessary to preserve and keep in full force and effect
(1) its corporate existence and the corporate, partnership or other existence of each of its Restricted Subsidiaries, in accordance with the respective or organizational documents (as the same may be amended from time to time) of the Company or any such Restricted Subsidiary; and
(2) the material rights (charter and statutory), licenses and franchises of the Company and its Restricted Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, of the Company or any of its Restricted Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Restricted Subsidiaries, taken as a whole, and that the loss thereof is not materially adverse to the Holders of the Notes or such action as is otherwise permitted by this Indenture.
3.4 Compliance Certificate. The Company shall deliver to the Trustee within 105 days after the end of each Fiscal Year of the Company an Officers' Certificate that complies with TIA Section 314(a)(4) stating that in the course of the performance by the signers of their duties as Officers of the Company they would normally have knowledge of any Default or Event of Default and whether or not the signers know of any Default or Event of Default that occurred during such period. If they do, the certificate shall describe the Default or Event of Default, its status and what action the Company is taking or proposes to take with respect thereto. The Company also shall comply with any other applicable requirements of TIA Section 314(a)(4).
3.5 Further Instruments and Acts. The Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper or as the Trustee may reasonably request to carry out more effectively the purpose of this Indenture.
3.6 Restricted Payments
(a) The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company and other than dividends or distributions payable to the Company or any Restricted Subsidiary);
(2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company held by a Person other than the Company or a Restricted Subsidiary of the Company;
(3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value, any Indebtedness that is subordinated by its terms in right of payment to the Notes, except payments of interest or principal at the Stated Maturity thereof; or
(4) make any Restricted Investment (all such payments and other actions set forth in these clauses (1) through (4) being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(5) no Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment;
(6) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four quarter period, have been permitted to incur at least $1.00 of additional Indebtedness under the Consolidated Coverage Ratio Test; and
(7) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Company and its
Restricted Subsidiaries after the Issue Date (excluding Restricted
Payments permitted by clauses (2), (3), (4), (5), (6), (7), (8), (9),
(10), (11) (other than payments with respect to Equity Interests of the
Company or any of its Restricted Subsidiaries), (12) and (13) of
Section 3.6(b)), is less than the sum, without duplication, of:
(A) 50% of the aggregate Consolidated Net Income of the Company (or, in the event such Consolidated Net Income shall be a deficit, minus 100% of such deficit) accrued for the period beginning on the Issue Date and ending on the last day of the Company's most recent fiscal quarter for which financial information is available to the Company ending prior to the date of such proposed Restricted Payment, taken as one accounting period, plus
(B) 100% of the aggregate net cash proceeds
received by the Company since the Issue Date (x) from the
issue or sale of Equity Interests of the Company (other than
Disqualified Stock) or Disqualified Stock or debt or other
securities of the Company that have been converted into or
exchanged for such Equity Interests (other than (i) Equity
Interests (or Disqualified Stock or convertible or
exchangeable debt or other securities) sold to a Subsidiary of
the Company or any employee stock ownership plan or other
trust established by the Company or any of its Subsidiaries
for the benefit of its employees to the extent that the
purchase by such plan or trust is financed by Indebtedness of
such plan or trust owed to the Company or any of its
Subsidiaries or Indebtedness guaranteed by the Company or any
of its Subsidiaries, and (ii) Disqualified Stock or
convertible or exchangeable debt or other securities that have
been converted into or exchanged for Disqualified Stock), and
(y) as capital contributions from its shareholders, plus ----
(C) to the extent that any Unrestricted Subsidiary is redesignated as a Restricted Subsidiary after the Issue Date, the fair market value of such Subsidiary, as determined by the Board of Directors, as of the date of such redesignation, plus
(D) the sum of (i) the aggregate amount in cash returned to the Company or any of its Restricted Subsidiaries and (ii) the aggregate principal amount of Indebtedness of the Company or any of its Restricted Subsidiaries cancelled, in each case with respect to Restricted Investments made after the Issue Date whether through interest payments, principal payments, dividends, or other distributions or the forgiveness or cancellation of Indebtedness, plus
(E) the net cash proceeds received by the Company or any of its Restricted Subsidiaries from the disposition or sale (other than to a Restricted Subsidiary), or liquidation, retirement or redemption of all or any portion of Restricted Investments made after the Issue Date, plus
(F) the net reduction in Investments in Unrestricted Subsidiaries resulting from payments of dividends, repayments of the principal of loans or advances or other transfers of assets from Unrestricted Subsidiaries to the Company or any of its Restricted Subsidiaries, plus
(G) in the event that the Company or any of its Restricted Subsidiaries makes any Investment in a Person that, as a result of or in connection with such Restricted Investment, becomes a Restricted Subsidiary, an amount equal to such portion of the Company's or any of its Restricted Subsidiaries' existing Investments in such Person that was previously treated as a Restricted Payment.
(b) The provisions of Section 3.6(a) will not prohibit:
(1) the payment of any dividend within 60 days after the date of declaration of the dividend, if at the date of declaration the dividend payment would have complied with the provisions of this Indenture; provided, however, that any such dividend will be
included in the calculation of the amount of Restricted Payments (without duplication for declaration);
(2) the making of any Restricted Investment or the payment on or with respect to or, the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness of the Company or any of its Restricted Subsidiaries or of any Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale of, Equity Interests of the Company (other than (i) Disqualified Stock and (ii) Equity Interests issued or sold to a Restricted Subsidiary of the Company or to any employee stock ownership plan or other trust established by the Company or any of its Subsidiaries for the benefit of its employees to the extent that the purchase by such plan or trust is financed by Indebtedness of such plan or trust owed to the Company or any of its Subsidiaries or Indebtedness guaranteed by the Company or any of its Subsidiaries) or out of the net cash proceeds of substantially concurrent capital contributions made to the Company; provided that the amount of any such net cash proceeds that are utilized for any such Restricted Investment, redemption, repurchase, retirement, defeasance or other acquisition will be excluded from clause (7)(B) of Section 3.6(a);
(3) the defeasance (whether legally or as to covenants only), redemption, repurchase or other acquisition of subordinated Indebtedness of the Company or any of its Restricted Subsidiaries or Disqualified Stock of the Company with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness;
(4) the declaration and payment of any dividend by a Restricted Subsidiary of the Company to the holders of such Restricted Subsidiary's Equity Interests on a pro rata basis;
(5) the retirement of any shares of Disqualified Stock of the Company by conversion into, or by exchange for, shares of Disqualified Stock of the Company, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of other shares of Disqualified Stock of the Company; provided that the Disqualified Stock of the Company that replaces the retired shares of Disqualified Stock of the Company shall not require the direct or indirect payment of any liquidation preference earlier in time than the final Stated Maturity of the retired shares of Disqualified Stock of the Company;
(6) payments required to be made or otherwise contemplated pursuant to the Plan of Reorganization;
(7) payments required to be made pursuant to the CPIH Reimbursement Agreement, the Corporate Services Reimbursement Agreement or Tax Sharing Agreement;
(8) payments in respect of the limited partnership interests in Covanta Onondaga Limited Partnership and Covanta Huntington Limited Partnership pursuant to the limited partnership agreements of such entities as in effect on the Issue Date and as
amended, modified or extended on terms not materially less favorable to the Company and its Restricted Subsidiaries, taken as a whole;
(9) repurchases of Equity Interests deemed to occur upon the exercise of stock options if such Equity Interests represent a portion of the exercise price thereof;
(10) payments in satisfaction of earn-out and deferred purchase price obligations pursuant to agreements relating to the acquisition of any Person which, following such acquisition, would be a Restricted Subsidiary of the Company;
(11) any Restricted Payments made pursuant to any employee benefit plan, arrangement or perquisite (including plans, arrangements or perquisites for the benefit of directors) or employment agreements or other compensation arrangements, in each case as approved by the Board of Directors in its good faith judgment;
(12) the distribution, as a dividend or otherwise, of Equity Interests of, or Indebtedness owed to the Company or a Restricted Subsidiary of the Company by, any Unrestricted Subsidiary of the Company;
(13) payments or distributions to dissenting stockholders pursuant to applicable law or pursuant to or in connection with a consolidation, merger or transfer of assets that complies with Section 5.1;
(14) any purchase, redemption, retirement or other acquisition for value of any subordinated Indebtedness pursuant to the provisions of such Indebtedness relating to a change of control or sale of assets; provided that the Company shall have complied with any requirement to make a Change of Control Offer or Asset Sale Offer, as the case may be, in connection with such change of control or sale of assets; and
(15) other Restricted Payments in an aggregate amount not to exceed $10.0 million.
(c) The amount of all Restricted Payments (other than cash) will be the fair market value on the date of the Restricted Payment of the assets or securities proposed to be transferred or issued by the Company or any Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this covenant will be determined, in good faith, by the Board of Directors. The Board of Directors' determination must be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if the fair market value exceeds $15.0 million and if the Restricted Payment is to be made to an Affiliate of the Company or to the holders of or in respect of any Equity Interest. Not later than the date of making any Restricted Payment having a fair market value exceeding $15.0 million, the Company will deliver to the Trustee an Officer's Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 3.6 (c) were computed, together with a copy of the fairness opinion or appraisal required by this Indenture. In determining whether any Restricted Payment is permitted by the covenant described above, the Company may in its sole discretion allocate all or any portion of such Restricted Payment among the categories described in the immediately preceding paragraph or among such categories and
the types of Restricted Payments described in the first paragraph under the "Restricted Payments" heading above; provided that at the time of such allocation, all such Restricted Payments, or allocated portions thereof, would be permitted under the various provisions of the covenant described above.
3.7 Asset Sales.
(a) The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless:
(1) the Company (or such Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of;
(2) the fair market value is determined by the Board of Directors and evidenced by a resolution of the Board of Directors and, if such fair market value is in excess of $15.0 million, is set forth in an Officer's Certificate delivered to the Trustee; and
(3) at least 75% of the consideration received in the Asset Sale by the Company or such Restricted Subsidiary is in the form of Cash or Cash Equivalents. For purposes of this clause (3), each of the following will be deemed to be Cash:
(A) any liabilities, as shown on the Company's most recent consolidated balance sheet, of the Company or any of its Restricted Subsidiaries (other than contingent liabilities and liabilities that are by their terms subordinated in right of payment to the Notes) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability;
(B) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee converted by the Company or such Restricted Subsidiary within 90 days into cash or Cash Equivalents, to the extent of the cash and Cash Equivalents received in that conversion; and
(C) any Voting Stock or assets of the kind referred to in clause (2) or (4) of Section 3.7 (b).
(b) Within 425 days after the receipt of any Net Proceeds from an Asset Sale, the Company or such Restricted Subsidiary may, at its option and to the extent it elects, apply (i) 33% of all such Net Proceeds received after the Issue Date and until the aggregate Net Proceeds received by the Company and all of its Restricted Subsidiaries equal $7.5 million, and (ii) thereafter, 100% of such Net Proceeds:
(1) to repay or cash collateralize Bank Indebtedness and, to the extent the Bank Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto;
(2) to redeem the High Yield Notes in whole or in part;
(3) to repay any other Senior Indebtedness in whole or in part;
(4) to acquire all or substantially all of the assets of, or a majority of the Voting Stock of, a Permitted Business, or to make a Permitted Investment in another Person that is engaged in a Permitted Business;
(5) to make capital expenditures that are used or useful in a Permitted Business;
(6) to acquire other assets that are used or useful in a Permitted Business; or
(7) any combination of the foregoing;
provided that the Company and any such Restricted Subsidiary will be deemed to have applied such Net Proceeds in accordance with clause (2) or clause (4) of this Section 3.7(b) if, within 365 days after the date of such Asset Sale, the Company or such Restricted Subsidiary shall have entered into, and not abandoned or rejected, a binding agreement with respect to an acquisition, expenditure or Investment that would result in such application of such Net Proceeds and that acquisition, expenditure or Investment is thereafter completed within 455 days after the date of such Asset Sale.
(c) Pending the final application of any Net Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited by this Indenture.
(d) Any Net Proceeds from Asset Sales that are not applied or invested as provided in Section 3.7(b), other than Net Proceeds not required to be applied or invested in the manner specified in Section 3.7(b), will constitute "Excess Proceeds". When the aggregate amount of Excess Proceeds exceeds $15.0 million, the Company will, to the extent permitted under the High Yield Note Indenture and the Intercreditor Agreement, make an Asset Sale Offer to all Holders of Notes and to all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase or redeem the maximum principal amount of the Notes and such other pari passu Indebtedness that may be purchased or redeemed out of the Excess Proceeds. The offer price for the Notes in any Asset Sale Offer will be equal to 100% of the principal plus accrued and unpaid interest on the Notes to be purchased, to the date fixed for the closing of such Asset Sale Offer in accordance with the procedures set forth in this Indenture, and will be payable in cash. If the date of purchase is on or after an interest record date and on or before the related Interest Payment Date, accrued and unpaid interest, if any, will be paid to the Holder in whose name a Note is registered at the close of business on such record date, and no additional interest will be payable to Holders who tender pursuant to the Asset Sale Offer. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company and its Restricted Subsidiaries may use those Excess Proceeds for any purpose not otherwise prohibited by the High Yield Note Indenture. If the aggregate principal of Notes and the amount of other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee will select the Notes and such other pari passu Indebtedness to be
purchased or redeemed on a pro rata basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.
(e) The Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent those laws and regulations are applicable in connection with each
repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with Section 4.8 or
this Section 3.7, the Company will comply with the applicable securities laws
and regulations and will not be deemed to have breached its obligations under
Section 4.8 or this Section 3.7 by virtue of such conflict.
(f) Notwithstanding the foregoing, to the extent the Intercreditor Agreement is in effect, any Asset Sale shall be governed by the terms of the Intercreditor Agreement to the extent that the applicable terms of this Indenture are inconsistent therewith. Furthermore, the Company shall not be required to make any Asset Sale Offer to the extent such offer would be prohibited by the terms of any Senior Indebtedness.
3.8 Transactions with Affiliates.
(a) The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any of its Affiliates (each, an "Affiliate Transaction"), unless:
(1) the Affiliate Transaction is on terms that are no less favorable to the Company or such Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person; and
(2) the Company delivers to the Trustee:
(A) with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving aggregate
consideration in excess of $5.0 million, a resolution of the
Board of Directors set forth in an Officer's Certificate
certifying that such Affiliate Transaction complies with this
Section 3.8 and that such Affiliate Transaction has been
approved by a majority of the members of the Board of
Directors having no personal stake in such Affiliate
Transaction; and
(B) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $30.0 million, an opinion as to the fairness to the Company and its Restricted Subsidiaries of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing.
(b) The following transactions will not be deemed to be Affiliate Transactions and therefore will not be subject to the provisions of Section 3.8(a):
(1) any Restricted Payment permitted to be made pursuant to Section 3.6 and any Permitted Investment;
(2) payments made pursuant to the CPIH Reimbursement Agreement, the Corporate Services Reimbursement Agreement and the Tax Sharing Agreement;
(3) any employment, service or termination agreement entered into in the ordinary course of business;
(4) any issuance of Equity Interests (other than Disqualified Stock), or other payments, awards or grants in cash, Equity Interests (other than Disqualified Stock) or otherwise pursuant to, or the funding of, employment arrangements, employee stock options and employee stock ownership plans approved by the Board of Directors;
(5) loans or advances to employees of the Company or its Subsidiaries in the ordinary course of business permitted by clause (7) of the definition of Permitted Investments;
(6) the payment or provision of reasonable fees, compensation or employee benefit plans, arrangements or perquisites to, and any indemnity provided for the benefit of, directors, officers, consultants or employees of the Company or any Subsidiary in the ordinary course of business;
(7) any transaction between or among the Company and its Restricted Subsidiaries or between Restricted Subsidiaries of the Company;
(8) transactions with customers, suppliers, contractors, joint venture partners or purchasers or sellers of goods or services, in each case which are in the ordinary course of business (including, without limitation, pursuant to joint venture agreements) and otherwise in compliance with the terms of this Indenture, and which are fair to the Company and its Restricted Subsidiaries, as applicable, in the reasonable determination of the Board of Directors;
(9) transactions with the Investor Parties pursuant to the Indemnification Agreement, the Second Lien Letter of Credit Facility and any other agreement in existence on the Issue Date, between the Company, DHC or any Investor Party, as such agreement may thereafter be amended, modified, restated, renewed, extended, refinanced, refunded or replaced, as applicable, on terms not materially less favorable to the Company and its Restricted Subsidiaries, taken as a whole, than those terms in effect on the Issue Date, and any such amendment, modification, restatement, renewal, extension, refinancing, refunding or replacement;
(10) transactions with CPIH and its Subsidiaries pursuant to agreements in existence or entered into on the Issue Date, as such agreements may thereafter be amended, modified, restated, renewed, extended, refinanced, refunded or replaced, as applicable, on terms not materially less favorable to the Company and its Restricted Subsidiaries, taken as a whole, than the terms of such agreements as in effect on the Issue
Date, and any such amendment, modification, restatement, renewal, extension, refinancing, refunding or replacement;
(11) transactions pursuant to any other arrangement, contract or agreement in existence on the Issue Date, as such arrangement, contract or agreement may thereafter be amended, modified, restated, renewed, extended, refinanced, refunded or replaced from time to time; provided that any such amendment, modification, restatement, renewal, extension, refinancing, refunding or replacement is on terms not materially less favorable to the Company and its Restricted Subsidiaries, taken as a whole, than the arrangement, contract or agreement in existence on the Issue Date; and
(12) sales of Equity Interests, other than Disqualified Stock, of the Company to Affiliates of the Company.
3.9 Offer to Repurchase Upon Change of Control.
(a) Subject to the Company's right to redeem the Notes pursuant to
Section 4.1, upon the occurrence of a Change of Control, the Company will make
an offer (a "Change of Control Offer") to each Holder to repurchase all or any
part (in a minimum aggregate principal amount at Stated Maturity of $500 or an
integral multiple of $500) of such Holder's Notes at a purchase price in cash
equal to 101% of the principal of the Notes repurchased plus accrued and unpaid
interest on the Notes repurchased to the date of repurchase (the "Change of
Control Payment"). Within 10 days following any Change of Control, unless the
Company has sent a redemption notice pursuant to Section 4.3 for all of the
Notes, the Company will mail a notice to each Holder describing the transaction
or transactions that constitute the Change of Control and stating:
(1) that the Change of Control Offer is being made pursuant to this Section 3.9 and that all Notes tendered will be accepted for payment;
(2) the purchase price and the purchase date, which date shall be no earlier than 30 days and no later than 60 days after the date on which such notice is mailed (the "Change of Control Payment Date");
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest after the Change of Control Payment Date;
(5) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder; the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have the Notes purchased; and
(7) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $500 in principal amount or an integral multiple thereof.
(b) The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change in Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions of Section 4.8 or this Section 3.9, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under Section 4.8, or this Section 3.9 by virtue of such conflict.
(c) On the Change of Control Payment Date, the Company shall, to the extent lawful:
(1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and
(3) deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officer's Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company.
Any Note so accepted for payment shall cease to accrue interest on and after the Change of Control Payment Date.
(d) The Paying Agent will promptly mail to each Holder of Notes properly tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each new Note will be in a minimum aggregate principal amount of $500 or an integral multiple thereof. If the Change of Control Payment Date is on or after an interest record date and on or before the related Interest Payment Date, accrued and unpaid interest, if any, will be paid to the Holder in whose name a note is registered at the close of business on such record date, and no additional interest will be payable to the holders who tender pursuant to the Change of Control Offer. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.
(e) Notwithstanding anything to the contrary in this Section 3.9, the Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with
the requirements set forth in this Section 3.9 and purchases all Notes validly tendered and not withdrawn under the Change of Control Offer.
3.10 Designation of Restricted and Unrestricted Subsidiaries.
The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary, if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary properly so designated will be deemed to be an Investment made as of the time of the designation and will reduce the amount available for Restricted Payments under the first paragraph of Section 3.6 or Permitted Investments, as determined by the Company. Such a designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the criteria for being an Unrestricted Subsidiary. The Board of Directors may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation would not cause a Default.
ARTICLE IV
OPTIONAL REDEMPTION OF NOTES
4.1 Optional Redemption. The Company may redeem the Notes, as a whole or from time to time in part, subject to the conditions and at 100% of the outstanding principal amount thereof.
4.2 Election to Redeem. The Company shall evidence its election to redeem any Notes pursuant to Section 4.1 by a Board Resolution.
4.3 Notice of Redemption.
(a) The Company shall give or cause the Trustee to give notice of redemption, in the manner provided for in Section 11.2, not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Notes to be redeemed. If the Company itself gives the notice, it shall also deliver a copy to the Trustee.
(b) If either (i) the Company is not redeeming all Outstanding Notes, or (ii) the Company elects to have the Trustee give notice of redemption, then the Company shall deliver to the Trustee, at least 45 days prior to the Redemption Date (unless the Trustee is satisfied with a shorter period), an Officers' Certificate requesting that the Trustee select the Notes to be redeemed and/or give notice of redemption and setting forth the information required by paragraph (c) of this Section 4.3 (with the exception of the identification of the particular Notes, or portions of the particular Notes, to be redeemed in the case of a partial redemption). If the Company elects to have the Trustee give notice of redemption, the Trustee shall give the notice in the name of the Company and at the Company's expense.
(c) All notices of redemption shall state:
(A) the Redemption Date,
(B) the redemption price and the amount of any accrued interest payable as provided in Section 4.6,
(C) whether or not the Company is redeeming all Outstanding Notes,
(D) if the Company is not redeeming all Outstanding Notes, the aggregate principal amount of Notes that the Company is redeeming and the aggregate principal amount of Notes that will be Outstanding after the partial redemption, as well as the identification of the particular Notes, or portions of the particular Notes, that the Company is redeeming,
(E) if the Company is redeeming only part of a Note, the notice that relates to that Note shall state that on and after the Redemption Date, upon surrender of that Note, the Holder will receive, without charge, a new Note or Notes of authorized denominations for the principal amount of the Note remaining unredeemed,
(F) that on the Redemption Date the redemption price and any accrued interest payable to the Redemption Date as provided in Section 4.6 will become due and payable in respect of each Note, or the portion of each Note, to be redeemed, and, unless the Company defaults in making the redemption payment, that interest on each Note, or the portion of each Note, to be redeemed, will cease to accrue on and after the Redemption Date,
(G) the place or places where a Holder must surrender the Holder's Notes for payment of the redemption price, and
(H) the CUSIP or ISIN number, if any, listed in the notice or printed on the Notes, and that no representation is made as to the accuracy or correctness of such CUSIP or ISIN number.
4.4 Selection of Notes to Be Redeemed in Part.
(a) If there is more than one Holder of the Notes and if the Company is not redeeming all Outstanding Notes, the Trustee shall select the Notes to be redeemed in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not then listed on a national securities exchange, by lot. The Trustee shall make the selection from the Outstanding Notes not previously called for redemption. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Notes selected for partial redemption, the principal amount of the Notes to be redeemed. In the event of a partial redemption by lot, the Trustee shall select the particular Notes to be redeemed not less than 30 nor more than 60 days prior to the relevant Redemption Date from the Outstanding Notes not previously called for redemption. The Company may redeem Notes in denominations of $500 only in whole. The Trustee may select for redemption portions (equal to $500 or any integral multiple of $500) of the principal of Notes that have denominations larger than $500.
(b) For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Notes shall relate, in the case of any Note redeemed or to be redeemed only in part, to the portion of the principal amount of that Note which has been or is to be redeemed.
4.5 Deposit of Redemption Price. Prior to 10:00 a.m. New York City time on the relevant Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as Paying Agent, segregate and hold in trust as provided in Section 2.4) an amount of money in immediately available funds sufficient to pay the redemption price of, and accrued interest on, all the Notes that the Company is redeeming on that date.
4.6 Notes Payable on Redemption Date. If the Company, or the Trustee on behalf of the Company, gives notice of redemption in accordance with this Article IV, the Notes, or the portions of Notes, called for redemption, shall, on the Redemption Date, become due and payable at the redemption price specified in the notice (together with accrued interest, if any, to the Redemption Date), and from and after the Redemption Date (unless the Company shall default in the payment of the redemption price and accrued interest) the Notes or the portions of Notes called for redemption shall cease to bear interest. Upon surrender of any Note for redemption in accordance with the notice, the Company shall pay the Notes at the redemption price, together with accrued interest, if any, to the Redemption Date (subject to the rights of Holders of record on the relevant record date to receive interest due on the relevant Interest Payment Date). If the Company shall fail to pay any Note called for redemption upon its surrender for redemption, the principal shall, until paid, bear interest from the Redemption Date at the rate borne by the Notes.
4.7 Unredeemed Portions of Partially Redeemed Note. Upon surrender of a Note that is to be redeemed in part, the Company shall execute, and the Trustee shall authenticate and make available for delivery to the Holder of the Note at the expense of the Company, a new Note or Notes, of any authorized denomination as requested by the Holder, in an aggregate principal amount equal to, and in exchange for, the unredeemed portion of the principal of the Note surrendered, provided that each new Note will be in a principal amount of $500 or integral multiple of $500.
4.8 Offer to Purchase by Application of Excess Proceeds.
(a) In the event that, pursuant to Section 3.7, the Company is required to commence an offer to all Holders to purchase Notes (an "Asset Sale Offer"), it will follow the procedures specified below.
(b) Subject to the Intercreditor Agreement and the High Yield Notes Indenture, the Asset Sale Offer shall be made to all Holders and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets. The Asset Sale Offer will remain open for a period of at least 20 Business Days following its commencement and not more than 30 Business Days, except to the extent that a longer period is required by applicable law (the "Offer Period"). No later than three Business Days after the termination of the Offer Period (the "Purchase Date"), the Company will apply all Excess Proceeds (the "Offer Amount")
to the purchase or redemption of Notes and such other pari passu Indebtedness containing provisions similar to this Section 4.8 (on a pro rata basis, if applicable) or, if less than the Offer Amount has been tendered, all Notes and other Indebtedness tendered in response to the Asset Sale Offer. Payment for any Notes so purchased will be made in the same manner as interest payments are made.
(c) If the Purchase Date is on or after an interest record date and on or before the related Interest Payment Date, any accrued and unpaid interest will be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest will be payable to Holders who tender Notes pursuant to the Asset Sale Offer.
(d) Upon the commencement of an Asset Sale Offer, the Company will send, by first class mail, a notice to the Trustee and each of the Holders, with a copy to the Trustee. The notice will contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The notice, which will govern the terms of the Asset Sale Offer, will state:
(1) that the Asset Sale Offer is being made pursuant to this Section 4.8 and Section 3.7 and the length of time the Asset Sale Offer will remain open;
(2) the Offer Amount, the offer price and the Purchase Date;
(3) that any Note not tendered or accepted for payment will continue to accrue interest;
(4) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer will cease to accrue interest after the Purchase Date;
(5) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may elect to have Notes purchased in integral multiples of $500 of principal at Stated Maturity only;
(6) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date;
(7) that Holders will be entitled to withdraw their election if the Company, the depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased;
(8) that, if the aggregate purchase or redemption price of Notes and other pari passu Indebtedness surrendered by Holders exceeds the Offer Amount, the Company will
select the Notes and other pari passu Indebtedness to be purchased or redeemed on a pro rata basis based on the principal amount of the Notes and principal of such other pari passu Indebtedness surrendered (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $500 of principal at Stated Maturity, or integral multiples thereof, will be purchased); and
(9) that Holders whose Notes were purchased only in part will be issued new Notes equal in principal amount at Stated Maturity to that of the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer).
(e) On or before the Purchase Date, the Company will, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and will deliver to the Trustee an Officer's Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 4.8. The Company, the depositary or the Paying Agent, as the case may be, will promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company will promptly issue a new Note, and the Trustee, upon written request from the Company will authenticate and mail or deliver such new Note to such Holder, in a principal amount at Stated Maturity equal to that of any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company will publicly announce the results of the Asset Sale Offer on the Purchase Date.
(f) Other than as specifically provided in this Section 4.8, any purchase pursuant to this Section 4.8 shall be made in accordance with the provisions of Sections 4.3 through 4.7.
(g) The Company shall not be required to make any Asset Sale Offer to the extent such offer would be prohibited by the terms of any Senior Indebtedness or the Intercreditor Agreement.
ARTICLE V
SUCCESSOR
5.1 Merger, Consolidation, or Sale of Assets.
(a) The Company shall not, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not the Company is the surviving corporation); or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole, in one or more related transactions, to another Person; unless:
(1) either: (a) the Company is the surviving corporation; or (b) the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition has been made
is a Person organized or existing under the laws of the United States, any state of the United States or the District of Columbia;
(2) the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, conveyance or other disposition has been made assumes all the obligations of the Company under the Notes and this Indenture, pursuant to a supplemental indenture or other agreements reasonably satisfactory to the Trustee;
(3) immediately after giving effect to such transaction no Default or Event of Default exists;
(4) the Company or the Person formed by or surviving any
such consolidation or merger (if other than the Company), or to which
such sale, assignment, transfer, conveyance or other disposition has
been made shall, on the date of such transaction after giving pro forma
effect thereto and any related financing transactions as if the same
had occurred at the beginning of the applicable four-quarter period,
(i) be permitted to incur at least $1.00 of additional Indebtedness
under the Consolidated Coverage Ratio Test or (ii) (A) would have a
Consolidated Coverage Ratio greater than the Consolidated Coverage
Ratio of the Company immediately prior to such transaction and without
taking into account such transaction and any related financing
transactions and (B) has received and delivered to the Trustee letters
from Moody's and S&P stating that the High Yield Notes (if any are
outstanding at that time), after giving effect to such transaction and
any related financing transactions, will be rated at least "Ba1" and
"BB" by such agencies, respectively; and
(5) the Company shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture, if any, comply with this Indenture.
(b) In addition, the Company shall not, directly or indirectly,
lease all or substantially all of its properties or assets, in one or more
related transactions, to any other Person. This Section 5.1 will not prohibit
(i) any sale, assignment, transfer, conveyance or other disposition of assets
between or among the Company and any Restricted Subsidiary, (ii) any Restricted
Subsidiary from consolidating with, merging into or transferring all or part of
its assets to the Company, or (iii) the Company from merging with an Affiliate
incorporated solely for the purpose of reincorporating the Company in another
jurisdiction to realize tax or other benefits.
(c) In the event of any transaction (other than a lease) described in and complying with the conditions listed in the immediately preceding paragraph in which the Company is not the surviving Person and the surviving Person is to assume all the obligations of the Company under the Notes and this Indenture pursuant to a supplemental indenture, such surviving Person shall succeed to, and be substituted for, and may exercise every right and power of, the Company, and the Company would be discharged from its obligations under this Indenture and the Notes.
5.2 Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in a transaction that is subject to, and that complies with the provisions of, Section 5.1, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor Company shall not be relieved from the obligation to pay the principal of, and interest and premium, if any, on, the Notes except in the case of a sale of all of the Company's assets in a transaction that is subject to, and that complies with the provisions of, Section 5.1.
ARTICLE VI
DEFAULTS AND REMEDIES
6.1 Events of Default.
(a) Each of the following is an "Event of Default":
(A) default in the payment when due of the principal of any Notes, including the failure to make a required payment to purchase Notes tendered pursuant to an optional redemption, except if the Company is prohibited from making such payment pursuant to Section 10.3 and for five Business Days after the relevant prohibition is terminated;
(B) default for 30 days or more in the payment when due of interest on any Notes, except if the Company is prohibited from making such payment pursuant to Section 10.3 and for five Business Days after the relevant prohibition is terminated;
(C) the failure to perform or comply with any other covenant or agreement contained in the Indenture or in the Notes for 60 days or more after written notice to the Company from the Trustee or the Holders of at least 25% in aggregate principal amount of the Outstanding Notes;
(D) a Bankruptcy Event of Default; and
(E) default by the Company under any Indebtedness which results in the acceleration of such Indebtedness prior to its Stated Maturity and the principal or accreted amount of Indebtedness at the relevant time aggregates $20 million or more.
The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body.
(b) The Company shall deliver to the Trustee upon becoming aware of any Default or Event of Default written notice in the form of an Officers' Certificate of any Default or Event of Default, their status and what action the Company proposes to take in respect thereof.
6.2 Acceleration.
(a) If an Event of Default (other than an Event of Default specified in Section 6.1(a)(D) above) shall occur and be continuing, the Trustee or the Holders of at least 25% in principal amount of Outstanding Notes may declare the unpaid principal of and accrued and unpaid interest on all the Notes to be immediately due and payable by notice in writing to the Company and the Trustee specifying the Event of Default and that it is a "notice of acceleration." If an Event of Default specified in Section 6.1(a)(D) above occurs with respect to the Company, then the unpaid principal of and accrued and unpaid interest on all the Notes will become immediately due and payable without any declaration or other act on the part of the Trustee or any Holder.
(b) At any time after a declaration of acceleration with respect to the Notes as described in Section 6.2(a), the Holders of a majority in aggregate principal amount of the Outstanding Notes may rescind and cancel such declaration and its consequences:
(A) if the rescission would not conflict with any judgment or decree;
(B) if all existing Events of Default have been cured or waived, except nonpayment of principal or interest that has become due solely because of the acceleration; and
(C) if the Company has paid the Trustee its reasonable compensation and reimbursed the Trustee for its reasonable expenses, disbursements and advances.
No rescission shall affect any subsequent Default or impair any rights relating thereto.
6.3 Other Remedies.
(a) If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture.
(b) The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law.
6.4 Waiver of Past Defaults. The Holders of not less than a majority in principal of the aggregate principal amount of the Outstanding Notes may waive any existing Default or Event of Default under the Indenture, and its consequences, except a default in the payment of the principal of or interest on any Notes.
6.5 Control by Majority. The Holders of a majority in aggregate principal amount of the Outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. Subject to Sections 7.1 and 7.2, however, the Trustee may refuse to follow any direction that conflicts with law or this Indenture unless the Holders have offered to the Trustee reasonable indemnity; provided, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction.
6.6 Limitation on Suits. No Holder of any Notes will have any right to institute any proceeding with respect to the Indenture or for any remedy thereunder, unless:
(a) such Holder gives to the Trustee written notice of a continuing Event of Default;
(b) Holders of at least 25% in aggregate principal amount of the then Outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holders of the Notes provide to the Trustee satisfactory indemnity;
(d) the Trustee does not comply with the request delivered in clause (b) within 60 days; and
(e) during such 60 day period the Holders of a majority in aggregate principal amount of the Outstanding Notes do not give the Trustee a written direction which, in the opinion of the Trustee, is inconsistent with the request.
6.7 Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture (including, without limitation, Section 6.6), the right of any Holder to receive payment of principal of or interest on the Notes held by such Holder, on or after the respective due dates, Redemption Dates or repurchase date expressed in this Indenture or the Notes, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.
6.8 Collection Suit by Trustee. If an Event of Default specified in Sections 6.1(a)(A) and 6.1(a)(B) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together with applicable interest on any overdue principal and, to the extent lawful, interest on overdue interest) and the amounts provided for in Section 7.7.
6.9 Trustee May File Proofs of Claim, etc.
(a) The Trustee may (irrespective of whether the principal of the Notes is then due):
(A) file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Holders under this Indenture and the Notes allowed in any bankruptcy, insolvency, liquidation or other judicial proceedings relative to the Company or its respective creditors or properties; and
(B) collect and receive any moneys or other property payable or deliverable in respect of any such claims and distribute them in accordance with this Indenture.
Any receiver, trustee, liquidator, sequestrator (or other similar official) in any such proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, taxes, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due to the Trustee pursuant to Section 7.7.
(b) Nothing in this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.
6.10 Priorities. If the Trustee collects any money or property pursuant to this Article VI, it shall pay out the money or property in the following order:
FIRST: to the Trustee for amounts due under Section 7.7;
SECOND: to Holders for amounts due and unpaid on the Notes for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal and interest, respectively; and
THIRD: to the Company or to such party as a court of competent jurisdiction shall direct.
The Trustee may, upon notice to the Company, fix a record date and payment date for any payment to Holders pursuant to this Section 6.10.
6.11 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by the Company, a suit by a Holder pursuant to Section 6.7 or a suit by Holders of more than 10% in principal amount of Outstanding Notes.
ARTICLE VII
TRUSTEE
7.1 Duties of Trustee.
(a) If a Default or an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of a Default or an Event of Default actually known to the Trustee:
(A) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and
(B) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions which by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall examine such certificates and opinions to determine whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:
(A) this paragraph (c) does not limit the effect of paragraph (b) of this Section 7.1;
(B) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and
(C) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Sections 6.2, 6.4 or 6.5.
(d) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company.
(e) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.
(f) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.
(g) Every provision of this Indenture that in any way relates to the Trustee is subject to the provisions of this Article VII and to the provisions of the TIA.
(h) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company.
(i) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee security or indemnity satisfactory to the Trustee against the costs, expenses (including reasonable attorneys' fees and expenses) and liabilities that might be incurred by it in compliance with such request or direction.
7.2 Rights of Trustee. Subject to Section 7.1:
(a) The Trustee may rely on any document reasonably believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting at the direction of the Company, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on an Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Trustee's conduct does not constitute willful misconduct or negligence.
(e) The Trustee may consult with counsel of its selection, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Notes shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel.
(f) If the Trustee shall determine, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney.
(g) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Trust Officer of the Trustee has actual knowledge thereof or unless written notice of any
event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture.
(h) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder.
(i) The Trustee may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any person authorized to sign an Officers' Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded.
7.3 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any of its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar or co-Registrar may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11.
7.4 Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or in any other document in connection with the sale of the Notes or pursuant to this Indenture other than the Trustee's certificate of authentication.
7.5 Notice of Defaults. If a Default or Event of Default occurs and is continuing and if the Trustee has actual knowledge thereof, the Trustee shall mail to each Holder as their names and addresses appear on the Holder list described in Section 2.5, notice of the Default or Event of Default within 90 days after the occurrence thereof. Except in the case of a Default or Event of Default in payment of principal of or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of the Holders.
7.6 Reports by Trustee to Holders. The Trustee shall comply with TIA Section 313. The Company agrees to notify promptly the Trustee whenever the Notes become listed on any stock exchange and of any delisting thereof.
7.7 Compensation and Indemnity.
(a) The Company shall pay to the Trustee, from time to time, reasonable compensation for its acceptance of this Indenture and services hereunder as the Company and the Trustee shall from time to time agree in writing. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made
by it, including costs of collection, costs of preparing and reviewing reports, certificates and other documents, costs of preparation and mailing of notices to Holders and reasonable costs of counsel retained by the Trustee in connection with the delivery of an Opinion of Counsel or otherwise, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts.
(b) The Company shall indemnify the Trustee, and hold it harmless, against any and all loss, liability or expense (including reasonable attorneys' fees and expenses) incurred by it without negligence, willful misconduct or bad faith on its part in connection with the acceptance and administration of this trust and the performance of its duties hereunder, including the costs and expenses of enforcing this Indenture (including this Section 7.7) and of defending itself against any claims (whether asserted by any Holder, the Company or otherwise). The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee's own negligence, willful misconduct or bad faith.
(c) To secure the Company's payment obligations in this Section 7.7, the Trustee shall have a lien prior to the Notes on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest on particular Notes. Such lien shall survive the satisfaction and discharge of this Indenture. The Trustee's right to receive payment of any amounts due under this Section 7.7 shall not be subordinate to any other liability or indebtedness of the Company.
(d) The Company's payment obligations pursuant to this Section 7.7 shall survive the discharge of this Indenture and the resignation or removal of the Trustee. When the Trustee incurs expenses (including the fees and expenses of its agents and counsel) after the occurrence of a Bankruptcy Event of Default, the expenses are intended to constitute expenses of administration under any Bankruptcy Law and shall be preferred over Holders in a proceeding under any Bankruptcy Law; provided, however, that this shall not affect the Trustee's rights as set forth in this Section 7.7 or Section 6.10.
7.8 Replacement of Trustee.
(a) The Trustee may resign at any time by so notifying the Company. The Holders of a majority in principal amount of the Outstanding Notes may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee reasonably acceptable to the Company. The Company shall remove the Trustee if:
(A) the Trustee fails to comply with Section 7.10;
(B) the Trustee is adjudged bankrupt or insolvent;
(C) a receiver or other public officer takes charge of the Trustee or its property; or
(D) the Trustee otherwise becomes incapable of acting.
(b) If the Trustee resigns or is removed by the Company or by the Holders of a majority in principal amount of the Outstanding Notes and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of the Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee.
(c) A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided that all sums owing to
the Trustee hereunder have been paid and subject to the lien provided for in
Section 7.7.
(d) If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in principal amount of the Outstanding Notes may petition, at the Company's expense, any court of competent jurisdiction for the appointment of a successor Trustee.
(e) If the Trustee fails to comply with Section 7.10, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.
(f) Notwithstanding the replacement of the Trustee pursuant to this Section 7.8, the Company's obligations under Section 7.7 shall continue for the benefit of the retiring Trustee.
7.9 Successor Trustee by Merger.
(a) If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee.
(b) In case at the time such successor or successors to the Trustee shall succeed to the trusts created by this Indenture, any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of the Trustee shall have.
7.10 Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA Section 310(a). The Trustee shall comply with TIA Section 310(b); provided, however, that there shall be excluded from the operation of TIA Section 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in TIA Section 310(b)(1) are met.
7.11 Preferential Collection of Claims Against Company. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated.
ARTICLE VIII
DISCHARGE OF INDENTURE
8.1 Satisfaction and Discharge. The Indenture will be discharged and will cease to be of further effect (except as to surviving rights or registration of transfer or exchange of the Notes, as expressly provided for in the Indenture) as to all Outstanding Notes when:
(a) either:
(A) all the Notes theretofore executed, authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust) have been delivered to the Trustee for cancellation, or
(B) all Notes not theretofore delivered to the Trustee for cancellation have become due and payable, and the Company has irrevocably deposited or caused to be deposited with the Trustee to be held in trust U.S. Legal Tender or U.S. Government Obligations sufficient, without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not theretofore delivered to the Trustee for cancellation, for principal of and interest on the Notes to the date of deposit, together with irrevocable instructions from the Company directing the Trustee to apply such funds to the payment;
(b) the Company has paid all other sums payable under this Indenture and the Notes by the Company; and
(c) the Company has delivered to the Trustee an Officers' Certificate stating that all conditions under this Indenture relating to the satisfaction and discharge of this Indenture have been complied with.
8.2 Survival of Obligations.Notwithstanding Section 8.1, the Company's obligations in Sections 6.7 and 7.8 and this Article VIII shall survive until the Notes are paid in full.
ARTICLE IX
AMENDMENTS
9.1 Without Consent of Holders.
(a) The Company and the Trustee may amend this Indenture or the Notes without notice to or consent of any Holder:
(A) to cure any ambiguity, defect or inconsistency;
(B) to provide for uncertificated Notes in addition to or in place of certificated Notes; provided, however, that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code;
(C) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company;
(D) to comply with any requirements of the Commission in connection with qualifying this Indenture under the TIA;
(E) to add a guarantor for the Notes; or
(F) to make any change that does not adversely affect the rights of any Holder in any material respect.
(b) After an amendment under this Section 9.1 becomes effective, the Company shall mail to Holders a notice briefly describing such amendment. The failure to give such notice to all Holders, or any defect therein, shall not impair or affect the validity of an amendment under this Section 9.1.
9.2 With Consent of Holders.
(a) The Company and the Trustee may amend this Indenture or the Notes without notice to any Holder but with the written consent of the Holders of at least a majority in principal amount of the Outstanding Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes). However, without the consent of each Holder affected, an amendment may not:
(A) reduce the amount of Notes whose Holders must consent to an amendment or waiver (including, without limitation, an amendment or waiver of this Section 9.2(a));
(B) reduce the rate of or change or have the effect of changing the time for payment of interest, including Defaulted Interest, on any Notes;
(C) reduce the principal of or change or have the effect of changing the fixed maturity of any Notes, or change the date on which any Notes may be subject to redemption, or reduce the redemption price therefor;
(D) make any Notes payable in money other than that stated in the Notes; or
(E) make any change in the provisions of this Indenture entitling each Holder to receive payment of principal of and interest on such Notes on or after the due date thereof or to bring suit to enforce such payment, or permitting Holders of a majority in principal amount of Outstanding Notes to waive Defaults or Events of Default.
(b) It shall not be necessary for the consent of the Holders under this Section 9.2 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof.
(c) After an amendment, supplement or waiver under this Section 9.2 becomes effective, the Company shall mail to Holders a notice briefly describing such amendment, supplement or waiver. The failure to give such notice to all Holders, or any defect therein, shall not impair or affect the validity of an amendment, supplement or waiver under this Section 9.2.
(d) An amendment, supplement or waiver under Section 8.1 and this
Section 9.2 may not make any change that adversely affects the rights under
Article X of any holder of Senior Indebtedness then outstanding unless the
holders of all such Senior Indebtedness (or any Representative thereof
authorized to give a consent) consent to such change.
9.3 Compliance with Trust Indenture Act. Every amendment to this Indenture or the Notes shall comply with the TIA as then in effect.
9.4 Revocation and Effect of Consents and Waivers.
(a) A consent to an amendment, supplement or waiver by a Holder of a Note shall bind the Holder and every subsequent Holder of that Note or portion of the Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent or waiver is not made on the Note. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Note or portion of the Note if the Trustee receives the notice of revocation before the date the amendment, supplement or waiver becomes effective. After an amendment, supplement or waiver becomes effective, it shall bind every Holder, except as otherwise provided in this Article IX. An amendment, supplement or waiver shall become effective upon receipt by the Trustee of the requisite number of written consents under Section 9.2.
(b) The Company may, but shall not be obligated to, fix a record date, which need not be the date provided in TIA Section 316(c) to the extent it would otherwise be applicable, for the purpose of determining the Holders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were
Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date.
9.5 Notation on or Exchange of Notes. If an amendment or supplement changes the terms of a Note, the Trustee may require the Holder of the Note to deliver it to the Trustee. The Trustee may place an appropriate notation on the Note regarding the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Note will execute and upon Company Order the Trustee will authenticate a new Note that reflects the changed terms. Failure to make the appropriate notation or to issue a new Note shall not affect the validity of such amendment or supplement.
9.6 Trustee to Sign Amendments and Supplements. The Trustee shall sign any amendment or supplement authorized pursuant to this Article IX if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment or supplement the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Sections 7.1 and 7.2) shall be fully protected in relying upon, such evidence as it deems appropriate, including, without limitation, solely on an Opinion of Counsel stating that such amendment or supplement is authorized or permitted by this Indenture.
ARTICLE X
SUBORDINATION OF THE NOTES
10.1 Agreement to Subordinate. The Company agrees, and each Holder by accepting a Note agrees, that Obligations under the Indenture and the Notes are subordinated in right of payment, to the extent and in the manner provided in this Article X, to the prior payment in full, in Cash or Cash Equivalents, of all Senior Indebtedness of the Company and that the subordination is for the benefit of the holders of such Senior Indebtedness (and their successors and assigns) and shall be enforceable by them directly against the Holders (and their successors and assigns). Only Senior Indebtedness of the Company shall rank senior to the Notes in accordance with the provisions set forth herein. The Notes shall in all respects rank pari passu with, or be senior to, all other indebtedness of the Company.
10.2 Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution of the assets of the Company to creditors upon a total or partial liquidation or dissolution of the Company, in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, an assignment by the Company for the benefit of its creditors or the marshaling of the assets and liabilities of the Company:
(a) holders of Senior Indebtedness of the Company shall be entitled to receive payment in full in Cash or Cash Equivalents of all Obligations due in respect thereof before Holders shall be entitled to receive any payment of principal of or interest on the Notes; and
(b) until such Senior Indebtedness is paid in full in Cash or Cash Equivalents, any distribution to which Holders would be entitled but for this Article X shall be made to holders of such Senior Indebtedness as their interests may appear;
except that Holders, with the consent of each Holder affected thereby, may receive Permitted Junior Securities.
10.3 Default on Senior Indebtedness of the Company.
(a) The Company may not pay the principal of or interest on the Notes or make any deposit pursuant to Section 8.1 and may not repurchase, redeem or otherwise retire any Notes (collectively, "pay the Notes"), other than, with the consent of each Holder affected thereby, payments and other distributions in the form of Permitted Junior Securities if:
(A) a payment default on Senior Indebtedness of the Company occurs and is continuing beyond any applicable grace period; or
(B) any other default occurs and is continuing on Senior Indebtedness of the Company that permits the holders thereof to accelerate its maturity and the Trustee receives a notice of that default (a "Payment Blockage Notice") from the Company or the holders of such Senior Indebtedness.
(b) Payments on the Notes may and shall be resumed:
(A) in the case of a payment default, upon the date on which it is cured or waived by holders of Senior Indebtedness; and
(B) in case of a Payment Blockage Notice relating to a nonpayment default, the earlier of the date on which it is cured or waived by holders of Senior Indebtedness or 179 days after the date on which such Payment Blockage Notice is received, unless the maturity of the relevant Senior Indebtedness of the Company has been accelerated.
(c) No new Payment Blockage Notice may be delivered unless and until 180 days have elapsed since the termination of the prohibition of payments on the Notes pursuant to the immediately prior Payment Blockage Notice.
(d) No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless that default shall have been cured or waived for a period of not less than 90 days.
10.4 Acceleration of Payment of Notes. If payment of the Notes is accelerated because of an Event of Default, the Company or the Trustee shall promptly notify the holders of the Senior Indebtedness (if any is outstanding) of the Company (or their Representative) of the acceleration. If Senior Indebtedness of the Company is outstanding, the Company may not make payments under the Notes in respect of such acceleration until five Business Days after such notice, subject to Section 10.2 and Section 10.3.
10.5 When Distribution Must Be Paid Over. If a distribution is made to the Trustee or the Holders that because of this Article X should not have been made to them, the Trustee or the Holders who receive the distribution shall hold it in trust for holders of Senior Indebtedness of the Company and pay it over to them as their interests may appear.
10.6 Subrogation. After all Senior Indebtedness of the Company is paid in full in Cash or Cash Equivalents and until the Notes are paid in full in Cash or Cash Equivalents, Holders shall be subrogated to the rights of holders of such Senior Indebtedness to receive distributions applicable to such Senior Indebtedness. A distribution made under this Article X to holders of such Senior Indebtedness which otherwise would have been made to Holders is not, as between the Company and Holders, a payment by the Company on such Senior Indebtedness.
10.7 Relative Rights. This Article X defines the relative rights of Holders and holders of Senior Indebtedness of the Company. Nothing in this Indenture shall:
(a) impair, as between the Company and Holders, the obligation of the Company, which is absolute and unconditional, to pay its Obligations in respect of this Indenture and the Notes in accordance with their terms; or
(b) prevent the Trustee or any Holder from exercising its available remedies upon a Default, subject to the rights of holders of Senior Indebtedness of the Company to receive distributions otherwise payable to Holders as provided in this Article X.
10.8 Subordination May Not Be Impaired by Company. No right of any holder of Senior Indebtedness of the Company to enforce the subordination of the indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company or by its failure to comply with this Indenture.
10.9 Rights of Trustee and Paying Agent.
(a) Notwithstanding Section 10.3, the Trustee or Paying Agent may continue to make payments on the Notes and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than one Business Day prior to the date of such payment, the Trustee receives notice that payments may not be made under this Article X. The Company, the Registrar or co-Registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness may give the notice; provided, however, that, if the holders of an issue of Senior Indebtedness of the Company have a Representative, only the Representative may give the notice.
(b) The Trustee in its individual or any other capacity may hold Senior Indebtedness of the Company with the same rights it would have if it were not Trustee. The Registrar and co-Registrar and the Paying Agent may do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article X with respect to any Senior Indebtedness of the Company which may at any time be held by it, to the same extent as any other holder of such Senior Indebtedness, and nothing in Article VI shall deprive the Trustee of any of its rights as such holder. Nothing in this Article X shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.7.
10.10 Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of the Company, the distribution may be made and the notice given to their Representative (if any).
10.11 Trust Moneys Not Subordinated. Notwithstanding anything contained herein to the contrary, payments from money or the proceeds of U.S. Government Obligations held in trust under Section 7.1 by the Trustee for the payment of principal of and interest on the Notes shall not be subordinated to the prior payment of any Senior Indebtedness or subject to the restrictions set forth in this Article X, and none of the Holders shall be obligated to pay over any such amount to the Company or any holder of Senior Indebtedness of the Company or any other creditor of the Company.
10.12 Trustee Entitled to Rely. Upon any payment or distribution pursuant to this Article X, the Trustee and the Holders shall be entitled to rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 10.2 are pending, (ii) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Holders or (iii) upon the Representative for the holders of Senior Indebtedness of the Company for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of such Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article X. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of the Company to participate in any payment or distribution pursuant to this Article X, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article X, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.1 and 7.2 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article X.
10.13 Trustee to Effectuate Subordination. Each Holder by accepting a Note irrevocably authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Holders and the holders of Senior Indebtedness of the Company as provided in this Article X and appoints the Trustee as attorney-in-fact for any and all such purposes, including in the event of any insolvency, bankruptcy or receivership case or proceeding or any dissolution, winding-up, liquidation, reorganization or other similar proceedings relative to the Company (whether voluntary or involuntary and whether in bankruptcy, insolvency or receivership proceedings or otherwise), the timely filing of a claim for the unpaid balance of the Holders in the form required in such proceedings and the causing of such claim to be approved. If the Trustee does not file a proper claim of proof of debt in the form required in such proceedings prior to 30 days before the expiration of the time to file such claims or proofs, then the holders of Senior Indebtedness are hereby authorized and shall have the right (without any duty) to demand, sue for, collect, receive and receipt for the payments and distributions in respect of the Senior Indebtedness, and to file and prove all claims therefor and to take all other actions in the name of the Holders or
otherwise, as any such holder of Senior Indebtedness or Representative of the holders of Senior Indebtedness may determine to be necessary or appropriate for the enforcement of the provisions of this Article X. In no event shall any Holder waive, forgive or cancel any claim relating to the Note such Holder may now or hereafter have against the Company.
10.14 Trustee Not Fiduciary for Holders of Senior Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Holders or the Company or any other Person, money or assets to which any holders of Senior Indebtedness of the Company shall be entitled by virtue of this Article X or otherwise. If, however, a payment or distribution is made to the Holders or the Trustee or the Company or any other Person that because of this Article X should not have been made to them, those who receive such payment or distribution shall hold it in trust for holders of Senior Indebtedness and pay it over to them as their interests may appear.
10.15 Reliance by Holders of Senior Indebtedness on Subordination Provisions. Each Holder by accepting a Note acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of the Company, whether such Senior Indebtedness was created or acquired before or after the issuance of the Notes, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of such Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness.
10.16 Changes in Senior Indebtedness. At any time and from time to time without the consent of or notice to any Holder or the Trustee: (a) Senior Indebtedness may be extended, renewed, modified, waived or terms of Senior Indebtedness may be amended; (b) any property pledged, mortgaged or otherwise securing Senior Indebtedness may be sold, exchanged, released or otherwise dealt with; and (c) any guarantor or any other Person (except the Company) liable in any manner for the Senior Indebtedness may be released or the terms of any guarantee of the Senior Indebtedness may be amended or waived. Holders of Senior Indebtedness may at any time and from time to time without the consent of or notice to any Holder or the Trustee: (a) exercise or refrain from exercising any rights against the Company or any other Person; (b) apply any sums by whomever paid or however realized to Senior Indebtedness; and (c) take any other action which otherwise might be deemed to impair the rights of the holders of Senior Indebtedness. Any and all of such actions may be taken by holders of Senior Indebtedness without incurring any responsibility to any Holder or the Trustee and without impairing or releasing the obligations of any Holder or the trustee to the holders of Senior Indebtedness.
ARTICLE XI
MISCELLANEOUS
11.1 Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the provision required by the TIA shall control.
11.2 Notices.
(a) Any notice or communication shall be in writing and delivered in person or mailed by first-class mail, postage prepaid, addressed as follows:
if to the Company:
COVANTA ENERGY CORPORATION
40 Lane Road
Fairfield, NJ 07007
ATTN: General Counsel's Office
if to the Trustee:
U.S. Bank Trust National Association
225 Asylum Street, 23rd Floor
Hartford, CT 06013
ATTN: Corporate Trust Services
The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications.
(b) Any notice or communication mailed to a registered Holder shall be mailed to the Holder at the Holder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed.
(c) Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it.
11.3 Communication by Holders with Other Holders. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c).
11.4 Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all conditions precedent have been complied with.
11.5 Statements Required in Certificate or Opinion. Each certificate or opinion, including each Officers' Certificate with respect to compliance with a covenant or condition provided for in this Indenture shall include:
(a) a statement that the individual making such certificate has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate are based;
(c) a statement that, in the opinion of such individual, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with.
11.6 Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by, or a meeting of, Holders. The Registrar and the Paying Agent may make reasonable rules for their functions.
11.7 Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or other day on which commercial banking institutions are authorized or required to be closed in New York City, or at a place of payment of the Notes. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected.
11.8 Governing Law, etc.
(a) THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. THE PARTIES HERETO EACH HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW.
(b) The Company hereby:
(A) agrees that any suit, action or proceeding against it arising out of or relating to this Indenture or the Notes, as the case may be, may be instituted in any Federal or state court sitting in The City of New York,
(B) waives to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding, and any claim that any suit, action or proceeding in such a court has been brought in an inconvenient forum,
(C) irrevocably submits to the non-exclusive jurisdiction of such courts in any suit, action or proceeding,
(D) agrees that final judgment in any such suit, action or proceeding brought in such a court shall be conclusive and binding may be enforced in the courts of the jurisdiction of which it is subject by a suit upon judgment, and
(E) agrees that service of process by mail to the addressed specified herein shall constitute personal service of such process on it in any such suit, action or proceeding.
(c) Nothing in this Section 11.8 shall affect the right of the Trustee or any Holder of the Notes to serve process in any other manner permitted by law.
11.9 No Recourse Against Others. An incorporator, director, officer, employee, stockholder or controlling person, as such, of the Company shall not have any liability for any obligations of the Company under the Notes, this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Holder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Notes.
11.10 Successors. All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors.
11.11 Duplicate and Counterpart Originals. The parties may sign any number of copies of this Indenture. One signed copy is enough to prove this Indenture. This Indenture may be executed in any number of counterparts, each of which so executed shall be an original, but all of them together represent the same agreement.
11.12 Severability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
11.13 Table of Contents; Headings. The table of contents and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof.
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above.
COVANTA ENERGY CORPORATION
By: _________________________________
Name: Anthony Orlando
Title: CEO and President
U.S.BANK TRUST NATIONAL
ASSOCIATION,
as Trustee
By: _________________________________
Name:
Title:
EXHIBIT A
FORM OF NOTE
[FOR GLOBAL NOTES:
"THIS IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE REFERRED TO HEREINAFTER.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF."
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR SUCH OPINIONS OF COUNSEL, CERTIFICATES AND/OR OTHER INFORMATION AS IT MAY REASONABLY REQUIRE IN FORM REASONABLY SATISFACTORY TO IT AS PROVIDED FOR IN THE INDENTURE TO CONFIRM THAT THE TRANSFER COMPLIED WITH THE FOREGOING RESTRICTIONS AS PROVIDED FOR IN THE INDENTURE."]
FORM OF FACE OF NOTE
No. [___] Principal Amount $[________________]
[For Global Notes: as revised by the Schedule of Increases and
Decreases in Global Note attached hereto]
CUSIP NO. 22281N AB9
ISIN NO. US22281NA B91
Covanta Energy Corporation, a Delaware corporation, promises to pay to
[___________], or registered assigns, the principal sum of [__________________]
Dollars as revised by the Schedule of Increases and Decreases in Global Note
attached hereto, the dates provided for herein.
Interest Payment Dates: March 15 and September 15
Record Dates: March 1 and September 1
Additional provisions of this Note are set forth on the other side of this Note.
COVANTA ENERGY CORPORATION
By: _______________________________
Name: Anthony Orlando
Title: CEO and President
By: _______________________________
Name: Timothy Simpson, Esq.
Title: Vice-President
CERTIFICATE OF AUTHENTICATION
This is one of
the Notes referred
to in the Indenture.
U.S. Bank Trust National Association,
as Trustee
By: _____________________
Authorized Signatory Date: ___________________
FORM OF REVERSE SIDE OF NOTE
7.5% SUBORDINATED UNSECURED NOTES DUE 2012
1. Interest
Covanta Energy Corporation, a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, the "Company"), promises to pay interest on the principal amount of this Note at the rate per annum shown above. The Company will pay interest semiannually in arrears on each Interest Payment Date of each year commencing September 15, 2004. Interest on the Notes will accrue from the most recent date to which interest has been paid on the Notes or, if no interest has been paid, from the Issue Date. The Company will repay an amount of outstanding principal on this Note equal to the product of $3.9 million multiplied by the ratio of:
on March 15 of each of 2006, 2007, 2008, 2009, 2010 and 2011, to be distributed pro rata to the holders of the Notes. The Company will repay the remaining outstanding principal amount of the Notes, together with accrued and unpaid interest thereon, on March 15, 2012.
Any Note issued after Issue Date shall be accompanied by (i)
the right to receive on the next Interest Payment Date accrued interest from
Issue Date (or, in the case of a Note which is issued after one or more Interest
Payment Dates, the most recent Interest Payment Date) to the date of issuance
(whether or not such Note is outstanding on the Record Date applicable to such
Interest Payment Date) and (ii) in the case of any Note which is issued after
one or more Interest Payment Dates, cash equal to the amount of interest which
would have been payable on such Notes if it had been outstanding on such
Interest Payment Date(s). Notwithstanding clause (i) of the previous sentence,
(x) any Note issued in the interval between a Record Date and the applicable
Interest Payment Date shall be accompanied by a cash payment equal to the amount
of interest which would have been payable on such Note on the applicable
Interest Payment Date had such Note been outstanding on such Record Date and (y)
the Holder of such Note shall not be entitled to receive any interest payment on
such Interest Payment Date.
Interest will be computed on the basis of a 360-day year of twelve 30-day months. To the extent lawful, the Company shall pay interest on overdue principal and on overdue installments of interest at the rate borne by the Notes plus 1.0%.
2. Method of Payment
Prior to 10:00 a.m. New York City time on the date on which any principal of or interest on any Note is due and payable, the Company shall irrevocably deposit with the Trustee or the Paying Agent money sufficient to pay such principal and/or interest. The Company will pay interest (except Defaulted Interest) to the Persons who are registered Holders of Notes at the close of business on the Record Date preceding the Interest Payment Date even if Notes are canceled, repurchased or redeemed after the Record Date and on or before the relevant Interest
Payment Date. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company will pay principal and interest in U.S. Legal Tender.
Payments in respect of Notes represented by a Global Note (including principal and interest) will be made by the transfer of immediately available funds to the accounts specified by DTC. The Company will make all payments in respect of a Certificated Note (including principal and interest) by mailing a check to the registered address of each Holder thereof; provided, however, that payments on the Notes may also be made, in the case of a Holder of at least $5,000,000 aggregate principal amount of Notes, by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 15 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).
3. Paying Agent and Registrar
Initially, U.S. Bank Trust National Association (the "Trustee"), will act as Trustee, Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-Registrar without notice to any Holder. The Company may act as Paying Agent, Registrar or co-Registrar.
4. Indenture
The Company issued the Notes under an Indenture, dated as of March 10, 2004 (as it may be amended or supplemented from time to time in accordance with the terms thereof, the "Indenture"), between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the TIA. Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture. The Notes are subject to all such terms, and Holders are referred to the Indenture and the TIA for a statement of those terms. Each Holder by accepting a Note, agrees to be bound by all of the terms and provisions of the Indenture, as amended or supplemented from time to time.
The Notes are general unsecured obligations of the Company subordinated to Senior Indebtedness of the Company as provided in the Indenture. All Notes will be treated as a single class of securities under the Indenture.
5. Redemption
The Company may redeem the Notes, at its option, in whole at any time or in part from time to time, at 100% of the outstanding principal amount thereof.
In the case of any partial redemption, selection of the Notes for redemption will be made in accordance with Article IV of the Indenture. On and after the redemption date, interest will cease to accrue on Notes or portions thereof called for redemption as long as the Company has deposited with the Paying Agent funds in satisfaction of the applicable redemption price pursuant to the Indenture.
6. Repurchase at Option of Holders.
Subject to the Company's right to redeem the Notes pursuant to
Section 4.1 of the Indenture, upon the occurrence of a Change of Control, the
Company will be required to make an offer (a "Change of Control Offer") to each
Holder to repurchase all or any part (in a minimum aggregate principal amount at
Stated Maturity of $500 or an integral multiple of $500) of such Holder's Notes
at a purchase price in cash equal to 101% of principal amount of the Notes
repurchased plus accrued and unpaid interest on the Notes repurchased to the
date of repurchase (the "Change of Control Payment"). Within 10 days following
any Change of Control, if the Company has not sent a redemption notice pursuant
to Section 4.3 of the Indenture for all of the Notes, the Company will mail a
notice to each Holder setting forth the procedures governing the Change of
Control Offer as required by the Indenture.
If the Company or a Subsidiary consummates any Asset Sale, and the aggregate amount of Excess Proceeds exceeds $15.0 million, the Company will, subject to the Intercreditor Agreement, commence an offer to all Holders and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets (an "Asset Sale Offer") pursuant to Section 4.8 of the Indenture to purchase or redeem the maximum principal amount at Stated Maturity of Notes and such other pari passu Indebtedness that may be purchased or redeemed out of the Excess Proceeds. The offer price for the Notes in any Asset Sale Offer will be equal to 100% of the principal amount thereof plus accrued and unpaid interest on the Notes to be purchased to the date fixed for the closing of such Asset Sale Offer in accordance with the procedures set forth in the Indenture, and will be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company and its Restricted Subsidiaries may use those Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes and principal amount of other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and other pari passu Indebtedness to be purchased or redeemed on a pro rata basis. Upon the commencement of an Asset Sale Offer, the Company will send, by first class mail, a notice to each of the Holders containing all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. Holders electing to have a Note purchased pursuant to any Asset Sale Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date.
7. Subordination
This Note is subordinated in right of payment, as set forth in the Indenture, to the prior payment in full in Cash or Cash Equivalents of all existing and future Senior Indebtedness of the Company. This Note in all respects ranks pari passu with, or senior to, all other indebtedness of the Company. By accepting a Note, each Holder agrees to the subordination provisions set forth in the Indenture, authorizes the Trustee to acknowledge such subordination provisions and give them effect and appoints the Trustee as attorney-in-fact for such purpose.
8. Denominations; Transfer; Exchange
The Notes are in fully registered form without coupons, and only in denominations of principal amount of $500 and any integral multiple thereof. A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange (i) any Notes selected for redemption (except, in the case of a Note to be redeemed in part, the portion of the Note not to be redeemed) for a period beginning 15 days before the mailing of a notice of Notes to be redeemed and ending on the date of such mailing or (ii) any Notes for a period beginning 15 days before an interest payment date and ending on such interest payment date.
9. Persons Deemed Owners
The registered holder of this Note may be treated as the owner of it for all purposes.
10. Unclaimed Money
If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment.
11. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Notes may be amended or supplemented with the written consent of the Holders of at least a majority in principal amount of the then Outstanding Notes and (ii) any default (other than with respect to nonpayment or in respect of a provision that cannot be amended or supplemented without the written consent of each Holder affected) or noncompliance with any provision may be waived with the written consent of the Holders of a majority in aggregate principal amount of the then Outstanding Notes. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder, the Company and the Trustee may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, omission, defect or inconsistency, or to comply with Article IV of the Indenture, or to provide for uncertificated Notes in addition to or in place of certificated Notes, or to add guarantees with respect to the Notes or to secure the Notes, or to add additional covenants or surrender rights and powers conferred on the Company, or to comply with any request of the Commission in connection with qualifying the Indenture under the TIA, or to make any change that does not adversely affect the rights of any Holder.
12. Defaults and Remedies
If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Notes may declare all the Notes to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Notes being due and payable immediately upon the occurrence of such Events of Default.
Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Notes unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default or Event of Default (except a Default or Event of Default in payment of principal or interest) if it determines that withholding notice is in their interest.
13. Trustee Dealings with the Company
Subject to certain limitations set forth in the Indenture, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.
14. No Recourse Against Others
An incorporator, director, officer, employee, stockholder or controlling person, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes.
15. Authentication
This Note shall not be valid until an authorized signatory of the Trustee (or an authenticating agent acting on its behalf) manually signs the certificate of authentication on the other side of this Note.
16. Abbreviations
Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
17. CUSIP or ISIN Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP or ISIN numbers to be printed on the Notes and has directed the Trustee to use CUSIP or ISIN numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.
18. Governing Law
This Note shall be governed by, and construed in accordance with, the laws of the State of New York.
The Company will furnish to any Holder upon written request and without charge to the Holder a copy of the Indenture that has in it the text of this Note in larger type. Requests may be made to: Covanta Energy Corporation, 40 Lane Road, Fairfield, NJ 07007, Attn: General Counsel's Office.
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's Social Security or Tax I.D. Number)
and irrevocably appoint agent to transfer this Note on the books of the Company. The agent may substitute another to act for him.
Date:____________________ Your Signature:___________________
Signature Guarantee:______________________________
(Signature must be guaranteed)
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The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to Exchange Act Rule 17Ad-15.
[For Global Note:
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The following increases or decreases in this Global Note have been made:
Amount of increase or
decrease in Principal Principal Amount of this Signature of authorized
Amount of this Global Global Note following signatory of Trustee or
Date of Exchange Note such increase or decrease Note Custodian
____________ __________________ ______________________ ________________________]
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OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to Sections 3.9 or 4.8 of the Indenture, check the appropriate box below:
[ ] Section 3.9 [ ] Section 4.8
If you want to elect to have only part of the principal amount at Stated Maturity of the Note purchased by the Company pursuant to Section 3.9 or 4.8 of the Indenture, state the principal amount at Stated Maturity you elect to have purchased:
$____________________
Date: _________________
Your Signature:________________________________________________
(Sign exactly as your name appears on the face of this Note)
Tax Identification No.: ______________________________________
Signature Guarantee*: ____________________________
* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).
EXHIBIT 4.24
EXHIBIT XI
[FORM OF DHC STOCK PLEDGE AGREEMENT]
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "AGREEMENT") is dated as of March __, 2004 and entered into by and between DANIELSON HOLDING CORPORATION, a Delaware corporation (the "PLEDGOR") and BANK OF AMERICA, N.A., in its capacity as collateral agent for and representative of the Secured Parties (as defined in the Intercreditor Agreement referred to below) (the "COLLATERAL AGENT"). All capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed thereto in the Intercreditor Agreement.
PRELIMINARY STATEMENTS
A. As of the date hereof, Pledgor is the legal and beneficial owner of the shares of Capital Stock issued by Covanta Energy Corporation, a Delaware corporation ("COMPANY") listed on Schedule I hereto.
B. Pursuant to the Credit Agreement dated as of March __, 2004 (said Credit Agreement or any credit agreement entered into by Detroit L/C Borrowers (as defined below) to refinance, replace, renew or extend, in whole or in part, said Credit Agreement and the indebtedness and letters of credit issued thereunder to the extent permitted pursuant to the New L/C Facility Agreement (as defined below) and the High Yield Indenture (as defined below), as said Credit Agreement or any replacement to said Credit Agreement may be amended, restated, supplemented or otherwise modified from time to time, being the "DETROIT L/C FACILITY AGREEMENT"), by and among Company as a borrower the Subsidiaries of Company party thereto from time to time as additional borrowers (collectively, Company and such Subsidiaries being the "DETROIT L/C BORROWERS" and each a "DETROIT L/C BORROWER"), the financial institutions from time to time party thereto as lenders (the "DETROIT L/C LENDERS"), Bank of America, N.A., as administrative agent (the "DETROIT L/C FACILITY AGENT"), and Deutsche Bank Securities, Inc., as documentation agent for the Detroit L/C Lenders (in such capacity "DETROIT L/C DOCUMENTATION AGENT," and together with the Detroit L/C Facility Agent, the "DETROIT L/C AGENTS"), the Detroit L/C Lenders have made certain commitments (each, a "DETROIT L/C COMMITMENT"), subject to the terms and conditions set forth in the Detroit L/C Facility Agreement, to extend certain letter of credit facilities to Detroit L/C Borrowers.
C. Pursuant to the Credit Agreement dated as of March __, 2004 (said Credit Agreement or any credit agreement entered into by New L/C Borrowers (as defined below) to refinance, replace, renew or extend, in whole or in part, said Credit Agreement and the indebtedness and letters of credit issued thereunder to the extent permitted pursuant to the Detroit L/C Facility Agreement and the High Yield Indenture, as said Credit Agreement or
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any replacement to said Credit Agreement may be amended, restated, supplemented or otherwise modified from time to time, being the "NEW L/C FACILITY AGREEMENT," and collectively with the Detroit L/C Facility Agreement, the "CREDIT AGREEMENTS"), by and among Company as a borrower, the Subsidiaries of Company party thereto from time to time as additional borrowers (collectively, Company and such Subsidiaries being the "NEW L/C BORROWERS" and each a "NEW L/C BORROWER," and collectively with the Detroit L/C Borrowers, the "BORROWERS"), the financial institutions listed therein as lenders (the "NEW L/C LENDERS") and Bank One, N.A., as administrative agent for the New L/C Lenders (in such capacity, the "NEW L/C AGENT," and collectively with the Detroit L/C Agents, the Detroit L/C Lenders, the High Yield Trustee, the High Yield Noteholders, the New L/C Lenders and the Cash Management Bank, the "BENEFITED PARTIES"), the New L/C Lenders have made certain commitments (each, a "NEW L/C COMMITMENT," and together with the Detroit L/C Commitments, collectively, the "COMMITMENTS"), subject to the terms and conditions set forth in the New L/C Facility Agreement, to extend certain letter of credit and revolving credit facilities to the New L/C Borrowers.
D. Pursuant to the indenture dated as of March __, 2004
(said indenture or any replacement to said indenture entered into in connection
with a refinancing, defeasance, renewal, replacement or extension of the High
Yield Notes (as defined below) permitted under the Detroit L/C Facility
Agreement and New L/C Facility Agreement (as defined below), as said indenture
or replacement to said indenture may be amended, supplemented or otherwise
modified from time to time, being the "HIGH YIELD INDENTURE") by and between
Company and U.S. Bank, in its capacity as trustee (the "HIGH YIELD TRUSTEE"),
Company has issued $205,000,000 in aggregate initial face principal amount
(accruing to $230,000,000 at stated maturity) of its 8.25% Senior Notes due 2011
(the "HIGH YIELD NOTES").
E. Borrowers other than the Company (the "HIGH YIELD GUARANTORS," and together with the Company and the Borrowers, each individually a "LOAN PARTY," and collectively the "LOAN PARTIES") have agreed, in favor of the holders of the High Yield Notes (the "HIGH YIELD NOTEHOLDERS"), to guarantee the prompt payment and performance when due of all obligations of Company under the High Yield Notes on the terms and conditions set forth in the High Yield Indenture.
F. In accordance with the terms of the Credit Agreements, Borrowers are required to maintain the Cash Management System with Bank of America (in such capacity, the "CASH MANAGEMENT BANK"), and it is desired that the Cash Management Obligations be secured hereunder.
G. The Detroit L/C Borrowers, the New L/C Borrowers, Pledgor, the Detroit L/C Agents, the Detroit L/C Lenders, the High Yield Trustee for the benefit of the High Yield Noteholders, the New L/C Agent, the New L/C Lenders, the Cash Management Bank and Collateral Agent have entered into that certain Intercreditor Agreement dated as of March __, 2004 (as it may hereafter be amended, restated, supplemented or otherwise modified from time to time, the "INTERCREDITOR AGREEMENT"), pursuant to which the Detroit L/C Agents, the Detroit L/C Lenders, the High Yield Trustee for the benefit of the High Yield Noteholders, the New L/C Agent, the New L/C Lenders and the Cash Management Bank have appointed Collateral Agent, and Collateral Agent has agreed to act, as collateral agent
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XI-2
for the Detroit L/C Agents, the Detroit L/C Lenders, the High Yield Noteholders, the New L/C Agent, the New L/C Lenders and the Cash Management Bank hereunder.
H. It is a condition precedent to (i) the extension of credit by the Detroit L/C Lenders under the Detroit L/C Facility Agreement, (ii) the effectiveness of the High Yield Indenture and (iii) the extension of credit by the New L/C Lenders under the New L/C Facility Agreement that the Pledgor shall have granted the security interest and undertaken the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce the Detroit L/C Lenders to make extensions of credit from time to time under the Detroit L/C Facility Agreement, the New L/C Lenders to make extensions of credit from time to time under the New L/C Facility Agreement, the High Yield Noteholders to accept the High Yield Notes issued under the High Yield Indenture, for the Cash Management Bank to provide cash management services to the Borrowers and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Pledgor hereby agrees with Collateral Agent as follows:
SECTION 1. PLEDGE OF SECURITY. Pledgor hereby pledges and collaterally assigns to Collateral Agent, and hereby grants to Collateral Agent a security interest in, all of Pledgor's right, title and interest in and to the following (the "PLEDGED COLLATERAL"):
(a) all Capital Stock in Company now or hereafter owned by Pledgor, whether such Capital Stock is classified as investment property or general intangibles under the Uniform Commercial Code as in effect in the State of New York ("UCC"), including all securities convertible into, and rights, warrants, options and other rights to purchase or otherwise acquire, any Capital Stock in Company, and including those owned on the date hereof and described in Schedule I for Pledgor, the certificates or other instruments representing any of the foregoing and any interest of Pledgor in the entries on the books of any securities intermediary pertaining thereto (the "PLEDGED EQUITY"), and all distributions, dividends, and other property received, receivable or otherwise distributed in respect of or in exchange therefor; and
(b) to the extent not covered by clause (a) above, all proceeds of any or all of the foregoing Pledged Collateral. For purposes of this Agreement, the term "PROCEEDS" includes whatever is receivable or received when Pledged Collateral or proceeds are sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary.
The security interest granted hereby is subject to the terms of the Intercreditor Agreement (including, without limitation, the provisions regarding lien priority).
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the Pledged Collateral assigned by Pledgor is collateral security for, the Secured Obligations.
SECTION 3. DELIVERY OF PLEDGED COLLATERAL. All certificates or instruments representing or evidencing the Pledged Collateral shall be delivered to and held by or on behalf of Collateral Agent pursuant hereto and shall be in suitable form for transfer by
DHC Stock Pledge Agreement
XI-3
delivery or, as applicable, shall be accompanied by Pledgor's endorsement, where necessary, or duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to Collateral Agent. Upon the occurrence and during the continuation of an Event of Default, Collateral Agent shall have the right, with notice to Pledgor, to transfer to or to register in the name of Collateral Agent or any of its nominees any or all of the Pledged Collateral, subject to the revocable rights specified in Section 7(a). In addition, upon the occurrence and during the continuation of an Event of Default, Collateral Agent shall have the right at any time to exchange certificates or instruments representing or evidencing Pledged Equity for certificates or instruments of smaller or larger denominations.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Pledgor represents and warrants as follows:
(a) Organization and Powers. Pledgor is duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and proposed to be conducted and to enter into this Agreement and carry out the transactions contemplated hereby.
(b) Good Standing. Pledgor is qualified to do business and in good standing wherever necessary to carry on its present business and operations, except in jurisdictions in which the failure to be so qualified or in good standing will not have a material adverse effect on the business, operations, properties, assets or condition (financial or otherwise) of Pledgor.
(c) Authorization. The execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action by Pledgor.
(d) No Conflict. The execution, delivery and performance by Pledgor of this Agreement will not (i) violate the Certificate of Incorporation or Bylaws of Pledgor, (ii) violate any provision of law applicable to Pledgor, or any order, judgment or decree of any court or other agency of government binding on Pledgor, (iii) be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any material Contractual Obligation of Pledgor, (iv) result in or require the creation or imposition of any Lien upon any of its properties or assets other than the Lien created by this Agreement, or (v) require the approval of stockholders or any approval or consent of any Person under any material Contractual Obligation of Pledgor, except to the extent any such consent has been obtained on or prior to the date hereof.
(e) Binding Obligation. This Agreement is the legally valid and binding obligation of Pledgor, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors' rights generally.
(f) Due Authorization, etc. of Pledged Equity. All of the Pledged Equity described on Schedule I has been duly authorized and validly issued and is fully paid and non-assessable.
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XI-4
(g) Description of Pledged Equity. As of the date hereof, the Pledged Equity constitutes all of the issued and outstanding Capital Stock in Company and there are no outstanding warrants, options or other rights to purchase, or other agreements outstanding with respect to, or property that is now or hereafter convertible into, or that requires the issuance or sale of, any Capital Stock of Company.
(h) Ownership of Pledged Collateral. Pledgor is the legal, record and beneficial owner of the Pledged Collateral and its interests in the Pledged Collateral are free and clear of any Lien.
(i) Governmental Authorizations. No authorization, approval or other action by, and no notice to or filing with, any Government Authority or regulatory body is required for either (i) the pledge by Pledgor of the Pledged Collateral pursuant to this Agreement and the grant by Pledgor of the security interests granted hereby, (ii) the execution, delivery or performance of this Agreement by Pledgor, or (iii) the exercise by Collateral Agent of the voting or other rights, or the remedies in respect of the Pledged Collateral, provided for in this Agreement (except (x) as may be required in connection with a disposition of Pledged Collateral by laws affecting the offering and sale of securities generally and (y) approval by the Federal Agency Regulatory Commission under Section 203 of the Federal Power Act).
(j) Perfection. The security interest in the Pledged Collateral granted to Collateral Agent in Section 2 hereof constitutes a valid security interest, to the extent the UCC is applicable thereto, securing the payment of the applicable Secured Obligations. Upon (i) the filing of UCC financing statements naming Pledgor as "debtor", naming Collateral Agent as "secured party" and describing the Pledged Collateral in the filing offices listed on Schedule II and (ii) in the case of Pledged Collateral consisting of certificated securities, in addition to filing such financing statements, delivery of the certificates representing such certificated securities to Collateral Agent, duly endorsed or accompanied by duly executed instruments of assignment or transfer in blank, the security interest in the Pledged Collateral referred to in the immediately preceding sentence will constitute a perfected security interest therein, to the extent the UCC is applicable thereto, prior to all other Liens, securing the payment of the Secured Obligations, and all filings and other actions in the United States necessary to perfect and protect such security interest have been duly made or taken.
(k) Office Location; Type and Jurisdiction of Organization. The chief executive office of Pledgor is, as of the date hereof, located at 2 North Riverside Plaza, Suite 600, Chicago, Illinois 60606; as of the date hereof, Pledgor's name as it appears in official filings in its jurisdiction of incorporation is "Danielson Holding Corporation."
(l) Names. Pledgor (or predecessor by merger or otherwise of Pledgor) has not, within the five year period preceding the date hereof, had a different name from the name of Pledgor listed on the signature pages hereof, except the names set forth on Schedule III annexed hereto.
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(m) Margin Regulations. The pledge of the Pledged Collateral pursuant to this Agreement does not violate Regulations T, U or X of the Board of Governors of the Federal Reserve System.
SECTION 5. COVENANTS. Pledgor shall:
(a) not (i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Pledged Collateral if such action would cause an Event of Default to occur, or (ii) create or suffer to exist any Lien upon or with respect to any of the Pledged Collateral;
(b) (i) cause Company not to, issue any Capital Stock in addition to or in substitution for the Pledged Equity issued by Company, except to Pledgor, if such action would cause an Event of Default to occur and (ii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all additional Capital Stock of Company issued to, or acquired by, the Pledgor;
(c) at its expense (i) perform and comply in all material respects with all terms and provisions of any agreement related to the Pledged Collateral required to be performed or complied with by it, (ii) maintain all such agreements in full force and effect (except where the failure to maintain such agreements will not materially adversely effect the Pledged Collateral), and (iii) enforce all such agreements in accordance with their terms (except where the failure to enforce such agreements will not materially adversely effect the Pledged Collateral);
(d) give Collateral Agent at least 30 days' prior written
notice of any (i) change in Pledgor's name, identity or corporate structure and
(ii) reincorporation, reorganization or other action that results in a change of
the jurisdiction or organization of Pledgor; and
(e) if any Pledged Collateral is not a security pursuant to Section 8-103 of the UCC, not take any action that, under such Section, converts such Pledged Collateral into a security without causing the issuer thereof to issue to it certificates or instruments evidencing such Pledged Collateral, which it shall promptly deliver to Collateral Agent as provided in this Section 5.
SECTION 6. FURTHER ASSURANCES; PLEDGE AMENDMENTS.
(a) Pledgor agrees that from time to time, at the expense of Pledgor, Pledgor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary, or that Collateral Agent may reasonably request, in order to perfect and protect the security interest granted or purported to be granted hereby or to enable Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Pledged Collateral. Without limiting the generality of the foregoing, Pledgor will: (i) execute (if necessary) and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary, or as Collateral Agent may reasonably request, in order to perfect and preserve the security interest granted or purported to be granted hereby and (ii) at Collateral Agent's reasonable request,
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appear in and defend any action or proceeding that may affect Pledgor's title to or Collateral Agent's security interests in all or any material part of the Pledged Collateral. Pledgor hereby authorizes Collateral Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Pledged Collateral, as may be appropriate, including without limitation, the financing statement to be filed with the Secretary of State of the State of Delaware and any other filing offices listed on Schedule II.
(b) Pledgor further agrees that it will, upon obtaining any additional Capital Stock in Company, promptly (and in any event within five Business Days) deliver to Collateral Agent a Pledge Amendment, duly executed by Pledgor, in substantially the form of Schedule IV annexed hereto (a "PLEDGE AMENDMENT") together with supplements to the Schedules annexed hereto, as applicable, to cause such Schedules to be complete and accurate at such time, in respect of the additional Pledged Equity to be pledged pursuant to this Agreement; provided that the failure of Pledgor to execute a Pledge Amendment with respect to any additional Pledged Equity shall not impair the security interest of Collateral Agent therein or otherwise adversely affect the rights and remedies of Collateral Agent hereunder with respect thereto. Upon each such acquisition, the representations and warranties contained in Section 4 hereof shall be deemed to have been made by Pledgor as to the Pledged Collateral described in such Pledge Amendment.
SECTION 7. VOTING RIGHTS; DIVIDENDS; ETC.
(a) So long as no Event of Default shall have occurred and be continuing:
(i) Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Collateral or any part thereof for any purpose not in violation of the terms of this Agreement or the Credit Documents; and
(ii) Pledgor shall be entitled to receive and retain, and to utilize free and clear of the lien of this Agreement, any and all dividends, other distributions and interest paid in respect of the Pledged Collateral; provided, however, that any and all
(A) dividends and other distributions paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Pledged Collateral,
(B) dividends and other distributions paid or payable in cash in respect of any Pledged Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in redemption of or in exchange for any Pledged Collateral,
in each case shall be, and shall forthwith be delivered to Collateral Agent to hold as, Pledged Collateral and shall, if received by Pledgor, be received in trust for the benefit of Collateral Agent, be segregated from the other property or funds of Pledgor
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and be forthwith delivered to Collateral Agent as Pledged Collateral in the same form as so received (with all necessary endorsements).
Notwithstanding the foregoing, the parties hereto acknowledge that the Credit Agreements contain restrictions on the payment of dividends and distributions on the Pledged Collateral, none of which restrictions are waived or otherwise prejudiced hereby.
(b) Upon the occurrence and during the continuation of an Event of Default:
(i) upon written notice from Collateral Agent to Pledgor, all rights of Pledgor to exercise the voting and other consensual rights that it would otherwise be entitled to exercise pursuant to Section 7(a)(i) shall cease, and all such rights shall thereupon become vested in Collateral Agent who shall thereupon have the sole right to exercise such voting and other consensual rights until such time as Collateral Agent shall notify Pledgor that Pledgor may exercise such rights again pursuant to Section 7(a)(i);
(ii) except as otherwise provided in the Credit Documents, upon written notice from Collateral Agent to Pledgor all rights of Pledgor to receive the dividends and other distributions that it would otherwise be authorized to receive and retain pursuant to Section 7(a)(ii) shall cease, and all such rights shall thereupon become vested in Collateral Agent who shall thereupon have the sole right to receive and hold as Pledged Collateral such dividends and other distributions until such time as Collateral Agent shall notify Pledgor that Pledgor may exercise such rights again pursuant to Section 7(a)(ii); and
(iii) all dividends and other distributions that are received by Pledgor contrary to the provisions of paragraph (ii) of this Section 7(b) shall be received in trust for the benefit of Collateral Agent, shall be segregated from other funds of Pledgor and shall forthwith be paid over to Collateral Agent as Pledged Collateral in the same form as so received (with any necessary endorsements).
(c) IRREVOCABLE PROXY. In order to permit Collateral
Agent to exercise the voting and other consensual rights that it may be entitled
to exercise pursuant to Section 7(b)(i) and to receive all dividends and other
distributions which it may be entitled to receive under Section 7(a)(ii) or
Section 7(b)(ii), (i) Pledgor shall promptly execute and deliver (or cause to be
executed and delivered) to Collateral Agent all such proxies, dividend payment
orders and other instruments as Collateral Agent may from time to time
reasonably request and (ii) without limiting the effect of the immediately
preceding clause (i), Pledgor hereby grants to Collateral Agent an IRREVOCABLE
PROXY to vote the Pledged Equity and to exercise all other rights, powers,
privileges and remedies to which a holder of the Pledged Equity would be
entitled (including, without limitation, giving or withholding written consents
of holders of the Pledge Equity, calling special meetings of holders of the
Pledged Equity and voting at such meetings), which proxy shall be effective,
automatically and without the necessity of any action (including any transfer of
any Pledged Equity on the record books of the issuer thereof) by any other
Person (including the issuer of the Pledged Equity or any officer or agent
thereof), only upon the occurrence and during the continuance
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of an Event of Default, only to the extent Collateral Agent is entitled to exercise such rights hereunder and which proxy shall only terminate upon the payment in full of all Secured Obligations (other than contingent indemnification Secured Obligations with respect to claims which have not yet arisen).
SECTION 8. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. Pledgor hereby irrevocably appoints Collateral Agent as Pledgor's attorney-in-fact, with full authority in the place and stead of Pledgor and in the name of Pledgor, Collateral Agent or otherwise, from time to time in Collateral Agent's discretion to take any action, subject to the Intercreditor Agreement, and to execute any instrument that Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including without limitation:
(a) upon the occurrence and during the continuance of an Event of Default, to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Pledged Collateral;
(b) upon the occurrence and during the continuance of an Event of Default, to receive, endorse and collect any instruments made payable to Pledgor representing any dividend or other distribution in respect of the Pledged Collateral or any part thereof and to give full discharge for the same;
(c) upon the occurrence and during the continuance of an Event of Default, to file any claims or take any action or institute any proceedings that Collateral Agent may deem necessary or desirable for the collection of any of the Pledged Collateral or otherwise to enforce the rights of Collateral Agent with respect to any of the Pledged Collateral;
(d) with notice to the Pledgor, to pay or discharge taxes or Liens levied or placed upon or threatened against the Pledged Collateral, the legality or validity thereof and the amounts necessary to discharge the same to be determined by Collateral Agent in its sole discretion, any such payments made by Collateral Agent to become Secured Obligations; and
(e) upon the occurrence and during the continuance of an Event of Default, generally to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Pledged Collateral as fully and completely as though Collateral Agent were the absolute owner thereof for all purposes, and to do, at Collateral Agent's option and Pledgor's expense, at any time or from time to time, all acts and things that Collateral Agent deems necessary to protect, preserve or realize upon the Pledged Collateral and Collateral Agent's security interest therein in order to effect the intent of this Agreement, all as fully and effectively as Pledgor might do.
SECTION 9. COLLATERAL AGENT MAY PERFORM; NO ASSUMPTION.
(a) If Pledgor fails to perform any agreement contained herein, Collateral Agent may itself perform, or cause performance of, such agreement, and the expenses of
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Collateral Agent incurred in connection therewith shall be payable by Pledgor pursuant to Section 13(b).
(b) Anything contained herein to the contrary notwithstanding, (i) Pledgor shall remain liable under any agreements included in or related to the Pledged Collateral, to the extent set forth therein, to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (ii) the exercise by Collateral Agent of any of its rights hereunder shall not release Pledgor from any of its duties or obligations under any such agreements, and (iii) Collateral Agent shall not have any obligation or liability under any such agreements by reason of this Agreement, nor shall Collateral Agent be obligated to perform any of the obligations or duties of Pledgor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.
SECTION 10. STANDARD OF CARE. The powers conferred on Collateral Agent hereunder are solely to protect its interest in the Pledged Collateral and shall not impose any duty upon it to exercise any such powers. Except for the exercise of reasonable care in the custody of any Pledged Collateral in its possession and the accounting for moneys actually received by it hereunder, Collateral Agent shall have no duty as to any Pledged Collateral, it being understood that Collateral Agent shall have no responsibility for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Pledged Collateral, whether or not Collateral Agent has or is deemed to have knowledge of such matters, (b) taking any necessary steps (other than steps taken in accordance with the standard of care set forth above to maintain possession of the Pledged Collateral) to preserve rights against any prior parties or any other rights pertaining to any Pledged Collateral, (c) taking any necessary steps to collect or realize upon the Secured Obligations or any guarantee therefor, or any part thereof, or any of the Pledged Collateral, or (d) initiating any action to protect the Pledged Collateral against the possibility of a decline in market value. Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of Pledged Collateral in its possession if such Pledged Collateral is accorded treatment substantially equal to that which Collateral Agent accords its own property consisting of Capital Stock.
SECTION 11. REMEDIES.
(a) Subject to the terms of the Intercreditor Agreement, if any Event of Default shall have occurred and be continuing, Collateral Agent may exercise in respect of the Pledged Collateral, in addition to all other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the UCC (whether or not the UCC applies to the affected Pledged Collateral), and Collateral Agent may also in its sole discretion, without notice except as specified below, sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange or broker's board or at any of Collateral Agent's offices or elsewhere, for cash, on credit or for future delivery, at such time or times and at such price or prices and upon such other terms as Collateral Agent may deem commercially reasonable, irrespective of the impact of any such sales on the market price of the Pledged Collateral. Collateral Agent or any Benefited Party (subject to the terms of the Intercreditor Agreement) may be the purchaser of any or all of the Pledged Collateral at any such sale, and Collateral Agent, as
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agent for and representative of Lenders (but not any Benefited Party in its individual capacity unless Requisite Obligees shall otherwise agree in writing), shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Pledged Collateral sold at any such public sale, to use and apply any of the Secured Obligations as a credit on account of the purchase price for any Pledged Collateral payable by Collateral Agent at such sale. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of Pledgor, and Pledgor hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. Collateral Agent shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Pledgor hereby waives (to the extent permitted by applicable law) any claims against Collateral Agent arising by reason of the fact that the price at which any Pledged Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if Collateral Agent accepts the first offer received and does not offer such Pledged Collateral to more than one offeree.
(b) Pledgor recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as from time to time amended (the "SECURITIES ACT"), and applicable state securities laws, Collateral Agent may be compelled, with respect to any sale of all or any part of the Pledged Collateral conducted without prior registration or qualification of such Pledged Collateral under the Securities Act and/or such state securities laws, to limit purchasers to those who will agree, among other things, to acquire the Pledged Collateral for their own account, for investment and not with a view to the distribution or resale thereof. Pledgor acknowledges that any such private placement may be at prices and on terms less favorable than those obtainable through a sale without such restrictions (including, without limitation, an offering made pursuant to a registration statement under the Securities Act) and, notwithstanding such circumstances, Pledgor agrees that any such private placement shall not be deemed, in and of itself, to be commercially unreasonable and that Collateral Agent shall have no obligation to delay the sale of any Pledged Collateral for the period of time necessary to permit the issuer thereof to register it for a form of sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would, or should, agree to so register it.
(c) If Collateral Agent determines to exercise its right to sell any or all of the Pledged Collateral, upon written request, Pledgor shall use commercially reasonable efforts to, and shall cause each issuer of any Pledged Equity to be sold hereunder from time to time to furnish to Collateral Agent all such information as Collateral Agent may request in order to, determine the amount of Pledged Collateral that may be sold by Collateral Agent in exempt transactions under the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder, as the same are from time to time in effect.
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(d) Pledgor agrees that a breach of any of the covenants contained in Section 11 will cause irreparable injury to Collateral Agent, that Collateral Agent has no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in Section 11 shall be specifically enforceable against Pledgor, and Pledgor hereby waives and agrees (to the extent permitted by applicable law) not to assert any defenses against an action for specific performance of such covenants except for a defense that no default has occurred giving rise to the Secured Obligations becoming due and payable prior to their stated maturities.
SECTION 12. APPLICATION OF PROCEEDS. Except as expressly provided elsewhere in this Agreement, all proceeds received by Collateral Agent in respect of any sale of, collection from, or other realization upon all or any part of the Pledged Collateral (whether pursuant to the preceding sentence or otherwise) shall be applied in accordance with the Intercreditor Agreement.
SECTION 13. INDEMNITY AND EXPENSES.
(a) Pledgor agrees to indemnify Collateral Agent and each Benefited Party from and against any and all claims, losses and liabilities in any way relating to, growing out of or resulting from this Agreement and the transactions contemplated hereby (including, without limitation, enforcement of this Agreement), except to the extent such claims, losses or liabilities result solely from Collateral Agent's or such Benefited Party's gross negligence or willful misconduct as finally determined by a court of competent jurisdiction.
(b) Pledgor agrees to pay to Collateral Agent the amount of any and all costs and expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, that Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Pledged Collateral, (iii) the exercise or enforcement of any of the rights of Collateral Agent hereunder, or (iv) the failure by Pledgor to perform or observe any of the provisions hereof.
(c) Anything contained in this Agreement to the contrary notwithstanding, the obligations of Pledgor set forth in this Section 13 are included herein solely for the purpose of including such obligations within the Secured Obligations, and such obligations shall in all respects be limited by the provisions of Section 27; accordingly, nothing in this Section 13 shall be construed in a manner which shall obligate Pledgor to make any payment, or provide any security, to Collateral Agent with respect to such obligations apart from the grant of the security interest in the Pledged Collateral as set forth in Section 1 hereof.
SECTION 14. CONTINUING SECURITY INTERESTS; TRANSFER OF LOANS.
(a) This Agreement shall create a continuing security interest in the Pledged Collateral and shall (i) remain in full force and effect until the payment in full of all Secured Obligations (other than contingent indemnification Secured Obligations with respect to claims which have not yet arisen), and the cancellation or termination of all commitments to extend credit under the Credit Documents (collectively, the "COMMITMENTS"), (ii) be
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binding upon Pledgor, its successors and assigns, and (iii) inure, together with the rights and remedies of Collateral Agent hereunder, to the benefit of Collateral Agent and its successors, transferees and assigns. Without limiting the generality of the foregoing clause (iii), but subject to the relevant assignment provisions set forth in each of the Credit Documents and the Intercreditor Agreement, (A) any Detroit L/C Agent or any Detroit L/C Lender may assign or otherwise transfer its rights under the Detroit L/C Facility Agreement to any other Person, and in each case such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Detroit L/C Agent or such Detroit L/C Lender, as applicable, herein or otherwise (subject to the terms of the Intercreditor Agreement) (B) the New L/C Agent and any New L/C Lender may assign or otherwise transfer its rights under the New L/C Facility Agreement to any other Person, and in each case such other Person shall thereupon become vested with all the benefits in respect thereof granted to the New L/C Agent or such New L/C Lender, as applicable, herein or otherwise (subject to the terms of the Intercreditor Agreement) and (C) any High Yield Noteholder may assign or otherwise transfer any High Yield Note to any other Person in accordance with the High Yield Indenture, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to High Yield Noteholders herein or otherwise (subject to the terms of the Intercreditor Agreement).
(b) Upon the payment in full of all Secured Obligations (other than contingent indemnification Secured Obligations with respect to claims which have not yet arisen), and the cancellation or termination of the Commitments, the security interest granted hereby shall terminate and all rights to the Pledged Collateral shall revert to Pledgor. Upon any such termination Collateral Agent will, at Pledgor's expense, execute and deliver to Pledgor such documents as Pledgor shall reasonably request to evidence such termination. In addition, upon the proposed sale, transfer or other disposition of any Pledged Collateral by Pledgor (to the extent any such sale, transfer or other disposition would not constitute an Event of Default) for which Pledgor desires to obtain a security interest release from Collateral Agent, Pledgor shall deliver an Officer's Certificate (x) stating that the sale, transfer or other disposition of such Pledged Collateral would not constitute an Event of Default and (y) specifying the Pledged Collateral being sold, transferred or otherwise disposed of in the proposed transaction. Upon the receipt of such Officer's Certificate and so long as no Event of Default would result from the proposed sale, transfer or other disposition of the Pledged Collateral, Collateral Agent shall, at Pledgor's expense, so long as Collateral Agent believes in good faith, that the Officer's Certificate delivered by Pledgor with respect to such sale is true, correct and complete, execute and deliver such releases of its security interest in such Pledged Collateral which is to be so sold, transferred or disposed of, as may be reasonably requested by Pledgor.
SECTION 15. COLLATERAL AGENT AS AGENT.
(a) Pursuant to the Intercreditor Agreement, Collateral Agent has been appointed to act as Collateral Agent hereunder by the Detroit L/C Agents, the Detroit L/C Lenders, the High Yield Trustee for the benefit of the High Yield Noteholders, the New L/C Agent, the New L/C Lenders and the Cash Management Bank. Collateral Agent shall be obligated, and shall have the right hereunder, to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking any action (including
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without limitation the release or substitution of Pledged Collateral), solely in accordance with this Agreement, the Intercreditor Agreement and the other Credit Documents; provided that Collateral Agent shall exercise, or refrain from exercising, any remedies provided for in Section 11 in accordance with the instructions of Requisite Obligees.
(b) Collateral Agent shall at all times be the same Person that is Collateral Agent under the Intercreditor Agreement. Written notice of resignation by Collateral Agent pursuant to subsections 6.1(h) or (i) of the Intercreditor Agreement shall also constitute notice of resignation as Collateral Agent under this Agreement; removal of Collateral Agent pursuant to subsections 6.1(h) or (i) of the Intercreditor Agreement shall also constitute removal as Collateral Agent under this Agreement; and appointment of a successor Collateral Agent pursuant to subsections 6.1(h) or (i) of the Intercreditor Agreement shall also constitute appointment of a successor Collateral Agent under this Agreement. Upon the acceptance of any appointment as Collateral Agent under subsections 6.1(h) or (i) of the Intercreditor Agreement by a successor Collateral Agent, that successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Collateral Agent under this Agreement, and the retiring or removed Collateral Agent under this Agreement shall promptly (i) transfer to such successor Collateral Agent all sums, securities and other items of Collateral held hereunder, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Collateral Agent under this Agreement, and (ii) execute and deliver to such successor Collateral Agent such amendments to financing statements, and take such other actions, as may be necessary or appropriate in connection with the assignment to such successor Collateral Agent of the security interest created hereunder, whereupon such retiring or removed Collateral Agent shall be discharged from its duties and obligations under this Agreement. After any retiring or removed Collateral Agent's resignation or removal hereunder as Collateral Agent, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was Collateral Agent hereunder.
SECTION 16. [INTENTIONALLY OMITTED]
SECTION 17. AMENDMENTS; ETC. No amendment, modification, termination or waiver of any provision of this Agreement, and no consent to any departure by Pledgor therefrom, shall in any event be effective unless the same shall be in writing and signed by Collateral Agent and, in the case of any such amendment or modification, by Pledgor. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given.
SECTION 18. NOTICES. Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served, or sent by telefacsimile or United States mail or courier service or electronic mail and shall be deemed to have been given (a) when delivered in person or by courier service, (b) upon receipt of telefacsimile in complete and legible form, or (c) three Business Days after depositing it in the United States mail with postage prepaid and properly addressed; provided that notices to Collateral Agent shall not be effective until received. For the purposes hereof, the address of each party hereto shall be as set forth under
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such party's name on the signature pages hereof or such other address as shall be designated by such Person in a written notice delivered to such other party hereto.
SECTION 19. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of Collateral Agent in the exercise of any power, right or privilege hereunder shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude any other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.
SECTION 20. SEVERABILITY. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 21. HEADINGS. Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect.
SECTION 22. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THAT WOULD REQUIRE APPLICATION OF ANOTHER LAW, EXCEPT TO THE EXTENT THAT THE UCC PROVIDES THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein or in the Credit Documents, terms used in Articles 8 and 9 of the UCC are used herein as therein defined. The rules of construction set forth in subsection 1.3 of each Credit Agreement shall be applicable to this Agreement mutatis mutandis.
SECTION 23. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST PLEDGOR ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, PLEDGOR, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR
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CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO PLEDGOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 18; (IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER PLEDGOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; (V) AGREES THAT COLLATERAL AGENT RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION; AND (VI) AGREES THAT THE PROVISIONS OF THIS SECTION 23 RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.
SECTION 24. WAIVER OF JURY TRIAL. PLEDGOR AND COLLATERAL AGENT HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including without limitation contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. Pledgor and Collateral Agent acknowledge that this waiver is a material inducement for Pledgor and Collateral Agent to enter into a business relationship, that Pledgor and Collateral Agent have already relied on this waiver in entering into this Agreement and that each will continue to rely on this waiver in their related future dealings. Pledgor and Collateral Agent further warrant and represent that each has reviewed this waiver with its legal counsel, and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 24 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.
SECTION 25. COUNTERPARTS. This Agreement may be executed in one or more counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. Delivery of an executed counterpart of a signature page to this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart thereof.
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SECTION 26. SURETYSHIP WAIVERS BY PLEDGOR, ETC.
(a) Pledgor agrees that its obligations hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than payment in full of all Secured Obligations (other than contingent indemnification Secured Obligations with respect to claims which have not yet arisen). In furtherance of the foregoing and without limiting the generality thereof, Pledgor agrees as follows: (i) Collateral Agent or any Benefited Party may from time to time, without notice or demand and without affecting the validity or enforceability of this Agreement or giving rise to any limitation, impairment or discharge of Pledgor's obligations hereunder, (A) renew, extend, accelerate or otherwise change the time, place, manner or terms of payment of the Secured Obligations, (B) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Secured Obligations or any agreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations, (C) request and accept guaranties of the Secured Obligations and take and hold other security for the payment of the Secured Obligations, (D) release, exchange, compromise, subordinate or modify, with or without consideration, any other security for payment of the Secured Obligations, any guaranties of the Secured Obligations, or any other obligation of any Person with respect to the Secured Obligations, (E) enforce and apply any other security now or hereafter held by or for the benefit of Collateral Agent or any Benefited Party in respect of the Secured Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that Collateral Agent or any Benefited Party, or any of them, may have against any such security, as Collateral Agent in its discretion may determine consistent with the Credit Documents and any applicable security agreement, including foreclosure on any such security pursuant to one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable, and (F) exercise any other rights available to Collateral Agent or any Benefited Party under the Credit Documents at law or in equity; and (ii) this Agreement and the obligations of Pledgor hereunder shall be valid and enforceable and shall not be subject to any limitation, impairment or discharge for any reason (other than payment in full of all Secured Obligations (other than contingent indemnification Secured Obligations with respect to claims which have not yet arisen)), including without limitation the occurrence of any of the following, whether or not Pledgor shall have had notice or knowledge of any of them: (A) any failure to assert or enforce or agreement not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy with respect to the Secured Obligations or any agreement relating thereto, or with respect to any guaranty of or other security for the payment of the Secured Obligations, (B) any waiver, amendment or modification of, or any consent to departure from, any of the terms or provisions of the Credit Documents (other than this Agreement), or any agreement or instrument executed pursuant thereto, or of any guaranty or other security for the Secured Obligations, (C) the Secured Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or unenforceable in any respect, (D) the application of payments received from any source to the payment of indebtedness other than the Secured Obligations, even though Collateral Agent or Benefited Parties, or any of them, might have elected to apply such payment to any part or all of the Secured Obligations, (E) any failure to perfect or continue perfection of a security interest in any other collateral which secures any of the Secured
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Obligations, (F) any defenses, set-offs or counterclaims which any Borrower may allege or assert against Collateral Agent or any Benefited Party in respect of the Secured Obligations, including but not limited to failure of consideration, breach of warranty, statute of frauds, statute of limitations, accord and satisfaction and usury, and (G) any other act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of Pledgor as an obligor in respect of the Secured Obligations.
(b) Pledgor hereby waives, for the benefit of Benefited Parties and Collateral Agent: (i) any right to require Collateral Agent or Benefited Parties as a condition of payment or performance by Pledgor, to (A) proceed against any Borrower, any guarantor of the Secured Obligations or any other Person, (B) proceed against or exhaust any other security held from any Borrower, any guarantor of the Secured Obligations or any other Person, (C) proceed against or have resort to any balance of any deposit account or credit on the books of Collateral Agent, any Benefited Party in favor of any Borrower or any other Person, or (D) pursue any other remedy in the power of Collateral Agent or any Benefited Party whatsoever; (ii) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of any Borrower including, without limitation, any defense based on or arising out of the lack of validity or the unenforceability of the Secured Obligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of any Borrower from any cause other than payment in full of all Secured Obligations; (iii) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (iv) any defense based upon Collateral Agent's or any Benefited Party's errors or omissions in the administration of the Secured Obligations, except behavior which amounts to gross negligence or willful misconduct; (v) (A) any principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms of this Agreement and any legal or equitable discharge of Pledgor's obligations hereunder, (B) the benefit of any statute of limitations affecting Pledgor's liability hereunder or the enforcement hereof, (C) any rights to set-offs, recoupments and counterclaims, and (D) promptness, diligence and any requirement that Collateral Agent or any Benefited Party protect, secure, perfect or insure any other security interest or lien or any property subject thereto; (vi) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, notices of default under the Credit Documents or any agreement or instrument related thereto, notices of any renewal, extension or modification of the Secured Obligations or any agreement related thereto, notices of any extension of credit to any Borrower and notices of any of the matters referred to in Section 26(a) and any right to consent to any thereof; and (vii) to the fullest extent permitted by law, any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms of this Agreement.
(c) Until the Secured Obligations shall have been paid in full and the Commitments shall have terminated, Pledgor shall withhold exercise of (i) any claim, right or remedy, direct or indirect, that Pledgor now has or may hereafter have against any Borrower or any assets of any Borrower in connection with this Agreement or the performance by Pledgor of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including without limitation (A) any right of subrogation, reimbursement or indemnification that Pledgor now
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has or may hereafter have against any Borrower, (B) any right to enforce, or to participate in, any claim, right or remedy that Collateral Agent or any Benefited Party now has or may hereafter have against any Borrower, and (C) any benefit of, and any right to participate in, any other collateral or security now or hereafter held by Collateral Agent or any Benefited Party, and (ii) any right of contribution Pledgor now has or may hereafter have against any guarantor of any of the Secured Obligations. Pledgor further agrees that, to the extent the agreement to withhold exercise of its rights of subrogation, reimbursement, indemnification and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification Pledgor may have against any Borrower or against any other collateral or security, and any rights of contribution Pledgor may have against any such guarantor, shall be junior and subordinate to any rights Collateral Agent or Benefited Parties may have against such Borrower, to all right, title and interest Collateral Agent or Benefited Parties may have in any such other collateral or security, and to any right Collateral Agent or Benefited Parties may have against any such guarantor.
(d) Benefited Parties and Collateral Agent shall have no obligation to disclose or discuss with Pledgor their respective assessments, or Pledgor's assessment, of the financial condition of Borrowers. Pledgor has adequate means to obtain information from Borrowers on a continuing basis concerning the financial condition of Borrowers and their ability to perform their obligations under the Credit Documents and Pledgor assumes the responsibility for being and keeping informed of the financial condition of Borrowers and of all circumstances bearing upon the risk of nonpayment of the Secured Obligations. Pledgor hereby waives and relinquishes any duty on the part of Collateral Agent or any Benefited Party to disclose any matter, fact or thing relating to the business, operations or condition of Borrowers now known or hereafter known by Collateral Agent or any Benefited Party.
SECTION 27. LIMITED RECOURSE. Notwithstanding anything to the contrary in this Agreement, no recourse shall be had, whether by levy or execution, or under any law, or by the enforcement of any assessment or penalty or otherwise, for the payment of any of the Secured Obligations, against Pledgor individually or personally, any successor or Affiliate of Pledgor, or any of the assets of the aforesaid persons, it being expressly understood that the sole remedies available to Collateral Agent and the Secured Parties pursuant to this Agreement with respect to the Secured Obligations shall be against the Pledged Collateral; provided that nothing in this Section 27 shall (i) constitute a waiver, release or discharge of any of the Secured Obligations, but the same shall continue until fully paid, discharged, observed or performed, or (ii) in any way limit or restrict any right of Collateral Agent or the Secured Parties to foreclose the Liens and the security interest granted pursuant to this Agreement or otherwise realize upon any of the Pledged Collateral.
[Remainder of page intentionally left blank.]
DHC Stock Pledge Agreement
XI-19
IN WITNESS WHEREOF, Pledgor and Collateral Agent have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.
DANIELSON HOLDING CORPORATION,
as Pledgor
By: ___________________________________
Name: Philip G. Tinkler
Title: Chief Financial Officer
Notice Address for Pledgor:
Danielson Holding Corporation
2 North Riverside Plaza
Suite 600
Chicago, Illinois 60606
Attention: Philip G. Tinkler
Telephone: (312) 466-3842
Facsimile: (312) 470-1126
with copies to:
Neal, Gerber & Eisenberg LLP
Two North LaSalle Street
Suite 2200
Chicago, Illinois 60602
Attention: David S. Stone
Telephone: (312) 269-8000
Facsimile: (312) 269-1747
and
Skadden, Arps, Slate, Meagher & Flom LLP
333 W. Wacker Drive, Suite 2100
Chicago, Illinois 60606
Attention: Peter C. Krupp
Telephone: (312) 407-0855
Facsimile: (312) 407-0411
DHC Stock Pledge Agreement
BANK OF AMERICA, N.A.,
as Collateral Agent
By: ___________________________
Name: _________________________
Title: ________________________
Notice Address for Collateral Agent:
Bank of America, N.A., as Collateral Agent
555 So. Flower Street, 17th Floor
CA9-706-17-54
Los Angeles, California 90071
Attention: David Price, Vice President
Voice: (213) 345-1300
Fax: (415) 503-5011
email: david.price@bankofamerica.com
DHC Stock Pledge Agreement
SCHEDULE I
Attached to and forming a part of the Pledge Agreement dated as of March __, 2004 between Danielson Holding Corporation, as Pledgor, and Bank of America, N.A., as Collateral Agent.
Part A
AMOUNT OF
CLASS CERTIFICATE EQUITY PERCENTAGE
ISSUER OF EQUITY INTEREST NOS. INTERESTS PLEDGED
Covanta Energy Corporation Common Stock 1 200 shares 100%
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DHC Stock Pledge Agreement
SCHEDULE I-1
SCHEDULE II
FILING OFFICE
Secretary of State of the State of Delaware
DHC Stock Pledge Agreement
SCHEDULE II-1
SCHEDULE III
NAMES OF PLEDGOR USED IN THE LAST FIVE YEARS
None.
DHC Stock Pledge Agreement
SCHEDULE III-1
SCHEDULE IV
PLEDGE AMENDMENT
This Pledge Amendment, dated ____________, ____, is delivered pursuant to Section 6(b) of the Pledge Agreement referred to below. The undersigned hereby agrees that this Pledge Amendment may be attached to the Pledge Agreement dated March __, 2004, between Danielson Holding Corporation, as Pledgor, and Bank of America, N.A., as Collateral Agent (the "PLEDGE AGREEMENT," capitalized terms defined therein being used herein as therein defined), and that the Capital Stock listed on this Pledge Amendment shall be deemed to be part of the Pledged Equity and shall become part of the Pledged Collateral and shall secure all Secured Obligations.
DANIELSON HOLDING CORPORATION,
as Pledgor
By: ___________________________
Title:
Class of Amount of Percentage
Equity Certificate Equity Ownership Pledged
Issuer Interests Nos. Interest Interest Percentage
------ --------- ---- -------- -------- ----------
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DHC Stock Pledge Agreement
XI-2
EXHIBIT 4.25
INTERCREDITOR AGREEMENT
This INTERCREDITOR AGREEMENT (as amended, restated, supplemented or otherwise modified from time to time in accordance with the terms hereof, herein called this "AGREEMENT") is dated as of March 10, 2004 and entered into by and among COVANTA ENERGY CORPORATION, a Delaware corporation ("COVANTA" or "COMPANY"), and THE SUBSIDIARIES OF COVANTA LISTED ON THE SIGNATURE PAGES HEREOF AS DETROIT L/C BORROWERS (together with Company and any Additional Detroit L/C Borrowers (as hereinafter defined; this and other capitalized terms used herein without definition being used as defined in subsection 1.1), collectively, "DETROIT L/C Borrowers" and each a "DETROIT L/C BORROWER") and THE SUBSIDIARIES OF COVANTA LISTED ON THE SIGNATURE PAGES HEREOF AS NEW L/C BORROWERS (together with Company and any Additional New L/C Borrowers, collectively, "NEW L/C BORROWERS" and each a "NEW L/C Borrower"; the Detroit L/C Borrowers together with the New L/C Borrowers, collectively, "BORROWERS" and each a "BORROWER"); THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF AS DETROIT L/C LENDERS (each, in its capacity as a Detroit L/C Lender, together with any other Person that become a party hereto as a Detroit L/C Lender pursuant to subsection 6.1(f), individually referred to herein as a "DETROIT L/C LENDER" and collectively as "DETROIT L/C LENDERS"); THE ENTITIES LISTED ON THE SIGNATURE PAGES HEREOF AS NEW L/C LENDERS (each, in its capacity as a New L/C Lender, together with any other Person that becomes a party hereto as a New L/C Lender pursuant to subsection 6.1(f), individually referred to herein as "NEW L/C LENDER" and collectively as "NEW L/C LENDERS"); BANK OF AMERICA, N.A. ("BANK OF AMERICA"), as administrative agent for Detroit L/C Lenders (and any successor administrative agent for Detroit L/C Lenders pursuant to the Detroit L/C Agreement, in such capacity "DETROIT L/C FACILITY AGENT"), as Collateral Agent and Cash Management Bank, BANK ONE, NA, as administrative agent for New L/C Lenders (and any successor administrative agent for New L/C Lenders pursuant to the New L/C Facility Agreement, in such capacity "NEW L/C AGENT"); DEUTSCHE BANK SECURITIES, INC. ("DEUTSCHE BANK"), as Documentation Agent for Detroit L/C Lenders (and any successor documentation agent for Detroit L/C Lenders pursuant to the Detroit L/C Agreement in such capacity "DETROIT L/C DOCUMENTATION AGENT"); DANIELSON HOLDING CORPORATION, a Delaware corporation ("DHC"); U.S. BANK NATIONAL ASSOCIATION, in its capacity as trustee under the High Yield Indenture (in such capacity, the "HIGH YIELD TRUSTEE"); THE COMPANIES LISTED ON THE SIGNATURE PAGES HEREOF AS MANAGEMENT SERVICES AND REIMBURSEMENT AGREEMENT BENEFICIARIES (the "MANAGEMENT SERVICES AND REIMBURSEMENT AGREEMENT BENEFICIARIES"); and the other Persons who may become parties to this Agreement from time to time pursuant to and in accordance with subsections 6.1(f) and 6.1(l) of this Agreement.
Domestic Intercreditor Agreement
R E C I T A L S
WHEREAS, the Borrowers have proposed, their creditors have approved, and the Bankruptcy Court has confirmed, the Plan of Reorganization;
WHEREAS, in connection with the Plan of Reorganization, simultaneously herewith the Borrowers have received financing pursuant to the Detroit L/C Facility Agreement, New L/C Facility Agreement and High Yield Indenture;
WHEREAS, it is a condition precedent to (i) the obligations of the Detroit L/C Lenders to enter into and extend credit under the Detroit L/C Facility Agreement, (ii) the obligations of the New L/C Lenders to enter into and extend credit under the New L/C Facility Agreement, (iii) the obligations of the holders of the High Yield Notes to accept the High Yield Notes in exchange for certain pre-existing claims against Loan Parties (other than DHC) and (iv) the effectiveness of the Plan of Reorganization, as applicable, that each Creditor Party, High Yield Trustee and each Borrower shall have executed and delivered this Agreement to the Collateral Agent;
WHEREAS, on the date hereof Loan Parties have executed and
delivered to Collateral Agent the Collateral Documents pursuant to which Loan
Parties granted a security interest in the Collateral as security for (i) in the
case of Detroit L/C Borrowers, all Obligations of Detroit L/C Borrowers under
and in respect of the Detroit L/C Facility Agreement and all other Detroit L/C
Facility Documents to which Detroit L/C Borrowers are a party to from time to
time, in each case as described therein, (ii) in the case of New L/C Borrowers,
all Obligations of New L/C Borrowers under and in respect of the New L/C
Facility Agreement and all other New L/C Facility Documents to which New L/C
Borrowers are party to from time to time, in each case as described therein, and
(iii) in the case of Company and High Yield Guarantors, all Obligations of
Company and High Yield Guarantors under and in respect of the High Yield Notes
and High Yield Indenture;
WHEREAS, Creditor Parties and High Yield Trustee desire to set forth certain provisions regarding the appointment, duties and responsibilities of Collateral Agent and to set forth certain other provisions concerning the obligations of Loan Parties to Creditor Parties and High Yield Noteholders under the agreements referred to in the foregoing recitals; and
WHEREAS, Creditor Parties and High Yield Trustee wish to set forth their mutual intentions as to certain matters relating to the exercise of remedies with respect to the Collateral and payments made by or for the account of the applicable Loan Parties under the Credit Documents as more fully set forth herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION I
1.1 DEFINITIONS. Terms used in the Agreement have the meanings set forth in the introduction and recitals hereto. In addition, the following terms shall have the following meanings:
"ADDITIONAL DETROIT L/C BORROWER" means any Person that becomes an "Additional Subsidiary Borrower" after the date hereof pursuant to and as such term is defined in the Detroit L/C Facility Agreement.
"ADDITIONAL NEW L/C BORROWER" means any Person that becomes an "Additional Subsidiary Borrower" after the date hereof pursuant to and as such term is defined in the New L/C Facility Agreement.
"AGENTS" means Collateral Agent, Detroit L/C Agents and New L/C Agent.
"AFFILIATE", as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person (other than exclusively as a result of such Person's role as a senior executive of that Person or Project manager or operator), whether through the ownership of voting securities or by contract or otherwise.
"ANNUAL FREE CASH FLOW" shall have the meaning assigned to that term in the each Facility Agreement as in effect on the Closing Date.
"BANK OF AMERICA" shall have the meaning assigned to that term in the introduction to this Agreement.
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled "Bankruptcy", as now and hereafter in effect, or any successor statute.
"BANKRUPTCY COURT" means the United States Bankruptcy Court for the Southern District of New York and any other court properly exercising jurisdiction over any relevant Chapter 11 Case.
"BANKRUPTCY EVENT" means any of one or more of the following events regardless of the reason therefor:
(a) (i) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of any Loan Party in an involuntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, which decree or order is not stayed; or any other similar relief shall be granted under any applicable federal, or state law; or (ii) an involuntary case shall be commenced against any Loan Party under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over any Loan Party, or over all or a substantial part of its property, shall have been entered; or the involuntary appointment of an interim receiver, trustee or other custodian of any Loan Party for all or a substantial part of its property; or the issuance of a warrant of attachment, execution or similar process against
Domestic Intercreditor Agreement
any substantial part of the property of any Loan Party, and the continuance of any such event in clause (ii) for 60 days unless dismissed, bonded or discharged; or
(b) (i) any Loan Party shall have an order for relief entered with respect to it or commence a voluntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property, or shall make any assignment for the benefit of creditors; or
(ii) the inability or failure of any Loan Party, or the
admission by any Loan Party in writing of its inability, to pay its
debts as such debts become due; or the Governing Body (or any committee
thereof) of any Loan Party adopts any resolution or otherwise
authorizes action to approve any of the actions referred to in clause
(i) or this clause (ii); or
(c) any order, judgment or decree shall be entered against any Loan Party decreeing the dissolution, winding up or split up of that Loan Party and such order shall remain undischarged or unstayed for a period in excess of 30 days.
"BANKRUPTCY PROCEEDING" means any case or proceeding of the type described in the definition of "Bankruptcy Event" with respect to any Loan Party.
"BORROWER" and BORROWERS" shall have the meaning assigned to such terms in the introduction to this Agreement.
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York, the State of Texas or the State of California or is a day on which banking institutions located in any such state are authorized or required by law or other governmental action to close.
"CAPITAL STOCK" means the capital stock or other equity interests of a Person.
"CASH COLLATERAL ACCOUNTS" means the Detroit L/C Cash Collateral Account and the New L/C Cash Collateral Account.
"CASH MANAGEMENT BANK" shall have the meaning assigned to that term in the definition of "Cash Management System".
"CASH MANAGEMENT OBLIGATIONS" means the obligations of Borrowers to the Cash Management Bank arising from or relating to the Cash Management System, including any liability of Borrower on any claim arising out of or relating to the Cash Management System, whether or not the right to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed or contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any bankruptcy, insolvency, reorganization or other similar proceeding.
Domestic Intercreditor Agreement
"CASH MANAGEMENT SYSTEM" means the cash management system of Company and its Subsidiaries in the United States maintained with Bank of America (in such capacity, "CASH MANAGEMENT BANK") as described in Schedule 4.1P annexed to the Detroit L/C Facility Agreement and the New L/C Facility Agreement, as such Cash Management System may be modified pursuant to subsection 6.10 of the Detroit L/C Facility Agreement and the New L/C Facility Agreement, and any other related services provided by Cash Management Bank to Company and its Subsidiaries, including treasury, depositary and cash management services or in connection with automated clearing house transfers of funds.
"CHAPTER 11 CASE" means the chapter 11 cases of Covanta Energy Corporation, a Delaware corporation, and certain of its Subsidiaries, including Borrowers, jointly administered under Case Nos. 02-40826 through 02-40949, 02-16322, 03-13679 through 03-13685, and 03-13687 through 03-13709.
"CLOSING DATE" means March 10, 2004.
"COLLATERAL" means, collectively, all of the real, personal and mixed property (including Capital Stock) and interests in property now owned or hereafter acquired by any Loan Party in or upon which a security interest, Lien or mortgage is granted or purported to be granted to Collateral Agent pursuant to the Collateral Documents, including all Proceeds thereof, but in no event shall Collateral include the Capital Stock of CPIH pledged pursuant to the CPIH Stock Pledge Agreement (as defined in the Facility Agreements). For the avoidance of doubt, "Collateral" shall not include any New Investor Assurances.
"COLLATERAL AGENT" shall have the meaning assigned to that term in subsection 2.1.
"COLLATERAL DOCUMENTS" means the Security Agreement, DHC Pledge Agreement, Control Agreements, Mortgages (as defined in the Facility Agreements) and all other instruments or documents (pursuant to which a Lien to secure all or any portion of the Obligations is purported or intended to be created, granted, evidenced or perfected) delivered from time to time by any Loan Party pursuant to the Detroit L/C Facility Documents, New L/C Facility Documents or the High Yield Indenture in each case in order to grant to Collateral Agent a Lien on any real, personal or mixed property as security for any or all of the Obligations, as such instruments and documents may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted pursuant to subsection 2.4.
"COMPANY" shall have the meaning assigned to that term in the introduction to this Agreement.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any provision of any Security issued by that Person or of any material indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject.
"CONTROL AGREEMENT" means an agreement, satisfactory in form and substance to Detroit L/C Facility Agent and New L/C Agent and executed by the financial institution or securities intermediary at which a Deposit Account or a Securities Account, as the case may be,
Domestic Intercreditor Agreement
is maintained, pursuant to which such financial institution or securities intermediary confirms and acknowledges Collateral Agent's security interest in such account, and agrees that the financial institution or securities intermediary, as the case may be, will comply with instructions originated by Collateral Agent as to disposition of funds in such account, without further consent by Company or any Subsidiary, as such agreement may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted pursuant to subsection 2.4.
"COUNTERPART" shall have the meaning assigned to that term in subsection 6.1(l).
"COVANTA" shall have the meaning assigned to that term in the introduction to this Agreement.
"CPIH" means Covanta Power International Holdings, Inc., a Delaware corporation, and its successors and assigns.
"CPIH SUBSIDIARIES" means, on and after the Closing Date, CPIH and its Subsidiaries.
"CREDIT DOCUMENTS" means, collectively, (i) the New L/C Facility Agreement and the other New L/C Facility Documents, (ii) the Detroit L/C Facility Agreement and the other Detroit L/C Facility Documents, and (iii) the High Yield Notes and the High Yield Indenture, in each case as they may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted thereunder and pursuant to subsection 2.5.
"CREDITOR PARTIES" means Detroit L/C Lenders, New L/C Lenders, Detroit L/C Agents, New L/C Agent, Cash Management Bank and Collateral Agent.
"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or similar account maintained with a Person engaged in the business of banking, including a savings bank, savings and loan association, credit union or trust company.
"DETROIT L/C" or "DETROIT L/CS" means letters of credit issued or to be issued from time to time under the Detroit L/C Facility Agreement, including amendments thereto.
"DETROIT L/C AGENTS" means the Detroit L/C Facility Agent and Detroit L/C Documentation Agent.
"DETROIT L/C BORROWER" shall have the meaning assigned to that term in the introduction to this Agreement.
"DETROIT L/C CASH COLLATERAL ACCOUNT" means the cash collateral account maintained with Collateral Agent pursuant to the Security Agreement to secure the obligations of Detroit L/C Borrowers with respect to Detroit L/C Exposure.
"DETROIT L/C COMMITMENT" means the commitment of a Detroit L/C Lender to purchase and fund participations in Detroit L/Cs pursuant to the Detroit L/C Facility Agreement.
Domestic Intercreditor Agreement
"DETROIT L/C DOCUMENTATION AGENT" shall have the meaning assigned to that term in the introduction to this Agreement.
"DETROIT L/C EVENT OF DEFAULT" means an "Event of Default" under and as defined in the Detroit L/C Facility Agreement.
"DETROIT L/C EXPOSURE" means, with respect to any Detroit L/C Lender as of any date of determination, the sum of (a) in the event that Detroit L/C Lender is a Detroit L/C Issuing Lender, the aggregate Detroit L/C Usage in respect of all Detroit L/Cs issued by that Detroit L/C Lender (in each case net of any participations purchased by other Detroit L/C Lenders in such Detroit L/Cs or in any drawings thereunder not theretofore reimbursed by Detroit L/C Borrowers) plus (b) the aggregate amount of all participations purchased by that Detroit L/C Lender in any other outstanding Detroit L/Cs or any drawings under any such other Detroit L/Cs not theretofore reimbursed by Detroit L/C Borrowers.
"DETROIT L/C FACILITY AGENT" shall have the meaning assigned to that term in the introduction to this Agreement.
"DETROIT L/C FACILITY AGREEMENT" means (i) that certain credit
agreement dated as of the date hereof by and among Covanta and the other Detroit
L/C Borrowers, as borrowers, the Detroit L/C Lenders and Detroit L/C Agents, and
(ii) any credit agreement entered into by Detroit L/C Borrowers to refinance,
replace, renew or extend, in whole or in part, the credit agreement referenced
in clause (i) and the indebtedness and letters of credit issued thereunder to
the extent permitted pursuant to the New L/C Facility Agreement and the High
Yield Indenture, in the case of clause (i) or (ii), as such credit agreement may
be amended, restated, supplemented or otherwise modified from time to time to
the extent permitted under subsection 2.5.
"DETROIT L/C FACILITY DOCUMENTS" means the "Credit Documents" as defined in the Detroit L/C Facility Agreement (or any comparable term with respect to any replacement Detroit L/C Facility Agreement not prohibited hereunder).
"DETROIT L/C ISSUING LENDER" means, with respect to any Detroit L/C, the Detroit L/C Lender that has issued such Detroit L/C pursuant to the Detroit L/C Facility Agreement.
"DETROIT L/C LENDER" shall have the meaning assigned to that term in the introduction to this Agreement.
"DETROIT L/C OBLIGATIONS" means any and all Obligations to the extent arising under or with respect to the Detroit L/C Commitments or the Detroit L/Cs, including fees and other amounts accruing or otherwise owed with respect to the Detroit L/C Exposure, and any drawings (and interest accrued thereon) under Detroit L/Cs not reimbursed by Detroit L/C Borrowers; provided, however, that Obligations of any Loan Party (other than DHC) for interest or letter of credit fees with respect to Detroit L/Cs and Detroit L/C Commitments that accrue or may be incurred under any Detroit L/C Facility Document after the commencement by or against any Loan Party of a Bankruptcy Proceeding shall be included in Detroit L/C Obligations solely to the extent recoverable from such Loan Party or its estate in such proceeding.
Domestic Intercreditor Agreement
"DETROIT L/C USAGE" means, as at any date of determination,
the sum of (i) the maximum aggregate amount which is or at any time thereafter
may become available for drawing under all Detroit L/Cs then outstanding plus
(ii) the aggregate amount of all drawings under Detroit L/Cs honored by the
applicable Detroit L/C Issuing Lender and not theretofore reimbursed by Detroit
L/C Borrowers.
"DEUTSCHE BANK" shall have the meaning assigned to that term in the introduction to this Agreement.
"DHC" shall have the meaning assigned to that term in the introduction to this Agreement.
"DHC PLEDGE AGREEMENT" means the pledge agreement executed and delivered by DHC on the Closing Date, substantially in the form of Exhibit XI annexed to the Detroit L/C Facility Agreement, as such pledge agreement may thereafter be amended, restated, supplemented or otherwise modified from time to time to the extent permitted pursuant to subsection 2.4.
"DISTRIBUTION" means, with respect to any Secured Obligation,
(a) any payment or distribution by Company or any of its Subsidiaries (including
CPIH Subsidiaries) of cash, securities or other assets and properties of any
kind whatsoever, real or personal, tangible or intangible, or mixed, whether now
owned or existing or hereafter acquired or arising and wheresoever located, by
set-off or otherwise, on account of such Secured Obligation, (b) any redemption,
purchase or other acquisition of such Secured Obligation by Company or any of
its Subsidiaries (including CPIH Subsidiaries) or (c) the granting of any Lien
to or for the benefit of the holders of such Secured Obligation in or upon any
or all assets and properties of any kind whatsoever, real or personal, tangible
or intangible, or mixed, whether now owned or existing or hereafter acquired or
arising and wheresoever located of Company or any of its Subsidiaries (including
CPIH Subsidiaries).
"ENFORCEMENT ACTION" shall mean the exercise by any Secured Party of any of the enforcement rights and remedies under, and subject to the provisions of, the Collateral Documents at any time on or after an Event of Default, including any or all of the following: any motion to vacate any stay on enforcement of the Liens on the Collateral, solicitation of bids from third parties to conduct the liquidation of Collateral, the engagement or retention of third parties for the purposes of marketing, promoting or selling all or any Collateral, the commencement of any action to foreclose on the Liens on any of the Collateral, notification of account debtors to make payments to any Secured Party or its agents, any action to take possession of any Collateral or the commencement of any legal proceedings or actions seeking payment of any Secured Obligations or otherwise in connection with the preservation or protection of any of the Collateral, its value or any rights or remedies therein or otherwise or as may be deemed necessary or appropriate to enhance the likelihood or maximize the repayment of the Secured Obligations.
"EVENT OF DEFAULT" means a Detroit L/C Event of Default and/or a New L/C Event of Default and/or a High Yield Event of Default.
Domestic Intercreditor Agreement
"FACILITY AGREEMENTS" means the New L/C Facility Agreement and Detroit L/C Facility Agreement.
"FISCAL YEAR" means the fiscal year of the Company and its Subsidiaries ending on December 31st of each calendar year.
"GOVERNING BODY" means the board of directors or other body having the power to direct or cause the direction of the management and policies of a Person that is a corporation, partnership, trust or limited liability company.
"HIGH YIELD EVENT OF DEFAULT" means an "Event of Default" under and as defined in the High Yield Indenture.
"HIGH YIELD GUARANTORS" means the Subsidiaries of Company party from time to time to the High Yield Indenture as guarantors thereunder.
"HIGH YIELD INDENTURE" means (i) the indenture pursuant to which the High Yield Notes are issued and (ii) any replacement indenture entered into in connection with a refinancing, defeasance, renewal, replacement or extension of the High Yield Notes permitted under the Facility Agreements, in the case of clause (i) or (ii), as such indenture or replacement indenture may be amended, supplemented or otherwise modified from time to time to the extent permitted under the Facility Agreements.
"HIGH YIELD NOTEHOLDERS" means the holders from time to time of the High Yield Notes.
"HIGH YIELD NOTES" means (i) the $230,000,000 in aggregate principal amount at maturity of 8.25% Senior Notes due 2010 of Company issued pursuant to the High Yield Indenture, and (ii) any indebtedness incurred to refinance, renew, replace or extend the High Yield Notes permitted to be incurred under the Facility Agreements; provided, that the initial principal amount (and issue price) of such High Yield Notes on the Closing Date shall be $205,000,000.
"HIGH YIELD OBLIGATIONS" means the obligations of Company and High Yield Guarantors under the High Yield Indenture and the High Yield Notes, as applicable.
"HIGH YIELD TRUSTEE" shall have the meaning assigned to that term in the introduction to this Agreement.
"IPP INTERNATIONAL SALES" means one or more sales or dispositions of (i) the assets and/or operations of CPIH and its Subsidiaries and/or (ii) the Capital Stock of CPIH or any of its Subsidiaries.
"JUNIOR CREDITOR" shall have the meaning assigned to that term in subsection 4.2(f).
"LENDERS" means New L/C Lenders and Detroit L/C Lenders.
Domestic Intercreditor Agreement
"LIEN" means any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing.
"LOAN PARTIES" means Company, the other Borrowers, DHC, and High Yield Guarantors.
"MANAGEMENT SERVICES AND REIMBURSEMENT AGREEMENT" means the management services and reimbursement agreement entered into by CPIH, Company and certain of their respective Subsidiaries on the Closing Date, in form and substance satisfactory to the Detroit L/C Agents and New L/C Agent as such agreement may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted thereunder and pursuant to subsection 2.5(c).
"MANAGEMENT SERVICES AND REIMBURSEMENT AGREEMENT
BENEFICIARIES" shall have the meaning assigned to that term in the introduction to this Agreement.
"MANAGEMENT SERVICES AND REIMBURSEMENT AGREEMENT OBLIGORS" means the "CPIH Entities" as such term is defined in the Management Services and Reimbursement Agreement.
"MANDATORY PAYMENTS" means any amount described in subsections 2.3A(i)(a)-(f) of the Detroit L/C Facility Agreement or 2.4A(iii)(a)-(g) of the New L/C Facility Agreement to be applied as a Mandatory Payment (as such term is defined in each Facility Agreement).
"NET INSURANCE/CONDEMNATION PROCEEDS" means any cash payments
or Proceeds received by Company or any of its Subsidiaries (i) under any
business interruption or casualty insurance policy in respect of a covered loss
thereunder or (ii) as a result of the taking of any assets of Company or any of
its Subsidiaries by any Person pursuant to the power of eminent domain,
condemnation or otherwise, or pursuant to a sale of any such assets to a
purchaser with such power under threat of such a taking, in each case net of (a)
income taxes reasonably estimated to be actually payable prior to the earlier of
(1) the date which is eighteen months from the date of such receipt and (2)
March 10, 2009 as a result of the receipt of such payments of proceeds and (b)
any actual, reasonable and documented out-of-pocket fees and expenses (including
reasonable legal fees, reasonable fees to advisors and severance costs that are
due (pursuant to a Contractual Obligation, or written employment policy
applicable to terminated employees generally, of Company or any of its
Subsidiaries in effect prior to the event causing or relating to the payment
referred to in clause (i) or (ii) hereof or pursuant to applicable law) and
payable on or prior to the receipt of such payment or proceeds to employees of
Company and its Subsidiaries that have been terminated as a result of the
relevant loss, taking or sale) paid to Persons other than Company and its
Subsidiaries and their respective Affiliates in connection with the relevant
loss, taking or sale or the adjustment or settlement of any claims of Company or
such Subsidiary in respect thereof; provided, however, that Net
Insurance/Condemnation Proceeds shall be reduced in an amount equal to the
amount of proceeds Subsidiaries of Company are legally bound or required,
pursuant to Contractual Obligations in effect on the
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Closing Date, or which were entered into after the Closing Date with respect to the financing or acquisition of a Project, to use for purposes other than a Mandatory Payment.
"NEW INVESTOR ASSURANCES" means any collateral, insurance policy, letter of credit or other financial assurances provided by any New Investor or any of its Affiliates (other than Company or any of its Subsidiaries (including CPIH Subsidiaries)) to New L/C Lenders in connection with the New L/C Facility Agreement.
"NEW INVESTORS" means D.E. Shaw Laminar Portfolios, L.L.C., a Delaware limited liability company, SZ Investments, L.L.C., a Delaware limited liability company, and Third Avenue Trust, on behalf of Third Avenue Value Fund Series.
"NEW L/C" or "NEW L/CS" means letters of credit issued or to be issued (or deemed issued) by New L/C Issuing Lender pursuant to the New L/C Facility Agreement, including amendments thereto.
"NEW L/C AGENT" shall have the meaning assigned to that term in the introduction to this Agreement.
"NEW L/C AGGREGATE COMMITMENT" means one or more of the New Revolving Loan Commitment or the New L/C Commitment or any combination thereof.
"NEW L/C AGGREGATE EXPOSURE" means, with respect to any New L/C Lender as of any date of determination, the sum of (i) that New L/C Lenders' New Revolving Loan Exposure and (ii) that New L/C Lender's New L/C Exposure.
"NEW L/C BORROWERS" shall have the meaning assigned to that term in the introduction to this Agreement.
"NEW L/C CASH COLLATERAL ACCOUNT" means the cash collateral account maintained with Collateral Agent pursuant to the Security Agreement to secure the obligations of New L/C Borrowers with respect to New L/C Exposure.
"NEW L/C COMMITMENT" means the commitment of a New L/C Lender to purchase and fund participations in New L/Cs pursuant to the New L/C Facility Agreement.
"NEW L/C EVENT OF DEFAULT" means an "Event of Default" under and as defined in the New L/C Facility Agreement.
"NEW L/C EXPOSURE" with respect to any New L/C Lender, means, as of any date of determination, the sum of (a) in the event that New L/C Lender is a New L/C Issuing Lender, the aggregate New L/C Usage in respect of all New L/Cs issued by that New L/C Lender (in each case net of any participations purchased by other New L/C Lenders in such New L/Cs or in any drawings thereunder not theretofore reimbursed by New L/C Borrowers) plus (b) the aggregate amount of all participations purchased by that New L/C Lender in any other outstanding New L/Cs or any drawings under any such other New L/Cs not theretofore reimbursed by New L/C Borrowers.
Domestic Intercreditor Agreement
"NEW L/C FACILITY AGREEMENT" means (i) that certain credit
agreement dated as of the date hereof by and among New L/C Borrowers, New L/C
Lenders and New L/C Agent, and (ii) any credit agreement entered into by New L/C
Borrowers to refinance, replace, renew or extend, in whole or in part, the
credit agreement referenced in clause (i) and the indebtedness and letters of
credit issued thereunder to the extent permitted pursuant to the Detroit L/C
Facility Agreement and the High Yield Indenture, in the case of clause (i) or
(ii), as such credit agreement may be amended, restated, supplemented or
otherwise modified from time to time to the extent permitted under subsection
2.5.
"NEW L/C FACILITY DOCUMENTS" means the "Credit Documents" as defined in the New L/C Facility Agreement (or any comparable term with respect to any replacement New L/C Facility Agreement not prohibited hereunder).
"NEW L/C ISSUING LENDER" means, with respect to any New L/C, the New L/C Lender that agrees or is otherwise obligated to issue such New L/C, determined as provided in the New L/C Facility Agreement.
"NEW L/C LENDER" shall have the meaning assigned to that term in the introduction to this Agreement.
"NEW L/C OBLIGATIONS" means any and all Obligations to the extent arising under or with respect to the New L/C Aggregate Commitments, New Revolving Loans or the New L/Cs, including principal and interest on any New Revolving Loans and the fees and other amounts accruing or otherwise owed with respect to the New L/C Aggregate Exposure, and any drawings (and interest accrued thereon) under New L/Cs not reimbursed by New L/C Borrowers; provided, however, that Obligations of any Loan Party (other than DHC) for interest, commitment fees or letter of credit fees with respect to the New L/Cs, New Revolving Loans or New L/C Aggregate Commitments and that accrue or may be incurred under any New L/C Facility Document after the commencement by or against any Loan Party (other than DHC) of a Bankruptcy Proceeding shall be included in New L/C Obligations solely to the extent recoverable from such Loan Party or its estate in such proceeding.
"NEW L/C USAGE" means, as at any date of determination, the sum of (i) the maximum aggregate amount which is or at any time thereafter may become available for drawing under all New L/Cs then outstanding plus (ii) the aggregate amount of all drawings under New L/Cs honored by Issuing Lenders and not theretofore reimbursed by New L/C Borrowers.
"NEW REVOLVING LOAN COMMITMENT" means the commitment of a New L/C Lender to make New Revolving Loans to the New L/C Borrowers pursuant to the New L/C Facility Agreement.
"NEW REVOLVING LOAN EXPOSURE" with respect to any New L/C Lender, means, as of any date of determination (i) prior to the termination of the New Revolving Loan Commitments, that New L/C Lender's Revolving Loan Commitment, and (ii) after the termination of the New Revolving Loan Commitments, the aggregate outstanding principal amount of the New Revolving Loans of that New L/C Lender.
Domestic Intercreditor Agreement
"NEW REVOLVING LOANS" means loans made from time to time by New L/C Lenders to New L/C Borrowers as "Revolving Loans" under and as defined in the New L/C Facility Agreement.
"OBLIGATIONS" means all obligations of every nature of Loan Parties under the Credit Documents, including any liability of such Loan Party on any claim arising out of or relating to the Credit Documents, whether or not the right to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed or contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any bankruptcy, insolvency, reorganization or other similar proceeding. Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Credit Documents include (a) the obligation to pay principal, interest (including all interest which accrues after the commencement of any case or proceeding in bankruptcy after the insolvency of, or for the reorganization of, any Loan Party, whether or not allowed in such case or proceeding), charges, expenses, fees, attorneys' fees and disbursements, indemnities and other amounts payable by any Borrower and any other Loan Party under any Credit Document and (b) the obligation to reimburse any amount in respect of any of the foregoing that any Agent or any Lender, in its sole discretion, may elect to pay or advance on behalf of such Borrower or other Loan Party; provided, that nothing in this definition shall be construed as creating any obligations of DHC under the Credit Documents that are not expressly set forth in such Credit Documents.
"OFFICER'S CERTIFICATE" means, as applied to any Person that is a corporation, partnership, trust or limited liability company, a certificate executed on behalf of such Person by one or more Officers of such Person or one or more Officers of a general partner or a managing member if such general partner or managing member is a corporation, partnership, trust or limited liability company.
"PAYMENT IN FULL" and "PAID IN FULL" means (a) as to the Detroit L/C Obligations, the payment and satisfaction in full in immediately available funds of all of such funded Detroit L/C Obligations and either (i) the termination of the Detroit L/C Commitments and the receipt by Collateral Agent of cash collateral in the Detroit L/C Cash Collateral Account in an amount equal to one hundred five (105%) percent of the aggregate Detroit L/C Usage then outstanding or (ii) if the Detroit L/C Commitments have not been terminated, the receipt by Collateral Agent of cash collateral in the Detroit L/C Cash Collateral Account in an amount equal to 105% of the Detroit L/C Commitments of all Detroit L/C Lenders, (b) as to the New L/C Obligations, the payment and satisfaction in full in immediately available funds of all of such funded New L/C Obligations and either (i) the termination of the New L/C Aggregate Commitments and the receipt by Collateral Agent of cash collateral in the New L/C Cash Collateral Account in an amount equal to one hundred five (105%) percent of the aggregate New L/C Usage then outstanding or (ii) if the New L/C Aggregate Commitments have not been terminated, the receipt by Collateral Agent of cash collateral in the New L/C Cash Collateral Account in an amount equal to 105% of the New L/C Commitments of all New L/C Lenders, (c) as to the High Yield Obligations, the payment and satisfaction in full in immediately available funds of all of such High Yield Obligations and the termination or defeasance (whether legally or as to covenants only) of the financing arrangements provided by any High Yield Noteholder to the Loan Parties (other than DHC) with respect thereto, and (d) as to any other Secured
Domestic Intercreditor Agreement
Obligations, the payment and satisfaction in full in immediately available funds of all such Secured Obligations then due and payable. If after receipt of any payment of, or Proceeds of Collateral applied to the payment of, any of the Secured Obligations, Collateral Agent or any other Secured Party, as applicable, is required to surrender or return such payment or Proceeds to any Person for any reason, then the Secured Obligations intended to be satisfied by such payment or Proceeds shall be reinstated and continue and this Agreement shall continue in full force and effect as if such payment or Proceeds had not been received by Collateral Agent or such other Secured Party, as the case may be.
"PARTIES" means the High Yield Trustee, Loan Parties, and the Creditor Parties from time to time party to this Agreement.
"PERSON" or "PERSONS" means and include natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, Joint Ventures (as defined in the Facility Agreements), associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments (whether federal, state or local, domestic or foreign, and including political subdivisions thereof) and agencies or other administrative or regulatory bodies thereof.
"PLAN OF REORGANIZATION" means the Debtors' Second Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code as filed with the Bankruptcy Court on January 14, 2004 (and as revised and amended through March 2, 2004), together with the Reorganization Plan Supplement to Debtors' Second Joint Plan of Reorganization filed with the Bankruptcy Court on February 18, 2004 in connection therewith.
"POTENTIAL EVENT OF DEFAULT" means a "Potential Event of Default" under and as defined in the Detroit L/C Facility Agreement, a "Potential Event of Default" under and as defined in the New L/C Facility Agreement or a "Default" under and as defined in the High Yield Indenture.
"PROCEEDS" means "proceeds", as such term is defined in the UCC and, in any event, shall include (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to any of the Loan Parties or Collateral Agent from time to time with respect to any of the Collateral, (ii) any and all payments (in any form whatsoever) made or due and payable to any of the Loan Parties from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral, by any governmental body, authority, bureau or agency (or any person acting under color of governmental authority), and (iii) any and all other consideration (in any form whatsoever) or other amounts from time to time paid or payable under or in connection with any of the Collateral upon disposition or otherwise.
"PROJECT" means any waste-to-energy facility, electrical generation plant, cogeneration plant, water treatment facility or other facility for the generation of electricity or engaged in another line of business in which Company and its Subsidiaries are permitted to be engaged hereunder for which a Subsidiary or Subsidiaries of Company (including CPIH Subsidiaries) was, is or will be (as the case may be) an owner, operator, manager or builder, and
Domestic Intercreditor Agreement
shall also mean any two or more of such plants or facilities in which an interest has been acquired in a single transaction, so long as such interest constitutes an existing Investment on the Closing Date permitted under this Agreement; provided, however, that a Project shall cease to be a Project of Company and its Subsidiaries at such time that Company or any of its Subsidiaries ceases to have any existing or future rights or obligations (whether direct or indirect, contingent or matured) associated therewith.
"REQUISITE DETROIT L/C LENDERS" means Detroit L/C Lenders having or holding more than 50% of the Detroit L/C Exposure of all Detroit L/C Lenders; provided, however, that prior to the Closing Date, for purposes of this definition the Detroit L/C Exposure of each Detroit L/C Lender shall equal the original Detroit L/C Commitment of such Detroit L/C Lender on the Closing Date.
"REQUISITE NEW L/C LENDERS" means New L/C Lenders having or holding more than 50% of the New L/C Aggregate Exposure of all New L/C Lenders; provided, however, that prior to the Closing Date, for purposes of this definition the New L/C Aggregate Exposure of each New L/C Lender shall equal the original New L/C Commitment of such New L/C Lender on the Closing Date.
"REQUISITE OBLIGEES" means,
(i) until such time as all Detroit L/C Obligations are Paid in Full under clause (a)(i) of the definition thereof and no Detroit L/Cs or other Detroit L/C Obligations are outstanding, for purposes of any exercise of any Enforcement Action or other rights with respect to the Detroit L/C Cash Collateral Account and any Collateral from time to time on deposit therein (including any application thereof), Requisite Detroit L/C Lenders;
(ii) until such time as all New L/C Obligations are Paid in Full and no New L/Cs or other New L/C Obligations are outstanding, for purposes of any exercise of any Enforcement Action or other rights with respect to the New L/C Cash Collateral Account and any Collateral from time to time on deposit therein (including any application thereof), Requisite New L/C Lenders;
(iii) subject to clauses (i) and (ii) above, until Payment in Full of all Detroit L/C Obligations, (a) for so long as no drawing has occurred under any Detroit L/C, no Event of Default has occurred and is continuing under subsection 8.1 of the Detroit L/C Facility Agreement and no Bankruptcy Proceeding has been commenced by or against any Loan Party, Lenders having or holding of more than 50% of the sum of (1) the aggregate Detroit L/C Exposure of all Detroit L/C Lenders and (2) the aggregate New L/C Aggregate Exposure of all New L/C Lenders, and (b) from and after the occurrence of any drawing under any Detroit L/C which is not reimbursed in full by Detroit L/C Borrowers, the occurrence and continuance of a Detroit L/C Event of Default under subsection 8.1 of the Detroit L/C Facility Agreement or the commencement of a Bankruptcy Proceeding by or against any Loan Party, Requisite Detroit L/C Lenders;
Domestic Intercreditor Agreement
(iv) subject to clauses (i) and (ii) above, from and after Payment in Full of all Detroit L/C Obligations and until Payment in Full of all New L/C Obligations, Requisite New L/C Lenders; and
(v) subject to clauses (i) and (ii) above, from and after Payment in Full of all Detroit L/C Obligations and New L/C Obligations, holders of more than 50% of the aggregate outstanding principal amount of the High Yield Notes.
"SECURED PARTIES" means the Creditor Parties, the High Yield Noteholders and the High Yield Trustee.
"SECURED OBLIGATIONS" means the collective reference to all Detroit L/C Obligations, all New L/C Obligations, all High Yield Obligations and all Obligations owing to Collateral Agent hereunder or under any Collateral Document, and all Cash Management Obligations.
"SECURITIES" means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated, certificated or uncertificated, or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing.
"SECURITIES ACCOUNT" means an account to which a financial asset is or may be credited in accordance with an agreement under which the Person maintaining the account undertakes to treat the Person for whom the account is maintained as entitled to exercise the rights that comprise the financial asset.
"SECURITY AGREEMENT" means the Security Agreement executed and delivered by Borrowers on the Closing Date pursuant to the Detroit L/C Facility Agreement, New L/C Facility Agreement and High Yield Indenture, as such agreement may from time to time hereafter be amended, restated, supplemented or otherwise modified to the extent permitted pursuant to subsection 2.4.
"SENIOR AGENT" means, (i) until Payment in Full of all Detroit L/C Obligations, Detroit L/C Facility Agent and (ii) from and after Payment in Full of all Detroit L/C Obligations and until Payment in Full of all New L/C Obligations, New L/C Agent, and (iii) after Payment in Full of all Detroit L/C Obligations and New L/C Obligations, High Yield Trustee.
"SENIOR CREDITOR" shall have the meaning assigned to that term in subsection 4.2(f).
"SUBJECT FISCAL YEAR" shall have the meaning assigned to that term in subsection 4.1(b).
"SUBSIDIARY" means, with respect to any Person, any corporation, partnership, trust, limited liability company, association, joint venture or other business entity of which more
Domestic Intercreditor Agreement
than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the members of the Governing Body is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof. Any reference contained herein to one or more Subsidiaries of Company shall, unless otherwise expressly indicated, not include CPIH or any of its Subsidiaries.
"SUPPLEMENTAL COLLATERAL AGENT" has the meaning assigned to that term in subsection 6.1(c).
"THIRD-PARTY GUARANTY" shall have the meaning assigned to that term in subsection 4.2(i).
"UCC" means the Uniform Commercial Code as the same may, from time to time, be in effect in the State of New York; provided, however, in the event that, by reason of mandatory provisions of law, the priority of any Secured Party's security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, the term "UCC" means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such priority and for purposes of definitions related to such provisions.
"UNITED STATES" means the United States of America.
1.2 OTHER DEFINITIONAL PROVISIONS AND RULES OF CONSTRUCTION.
(a) Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference.
(b) References to "Sections" and "subsections" shall be to Sections and subsections, respectively, of this Agreement unless otherwise specifically provided.
(c) The use of the word "include" or "including", when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation" or "but not limited to" or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter.
(d) In the event of any refinancing, replacement or extension of any Facility Agreement, references in this Agreement to sections or subsections of such Facility Agreement shall refer to the functionally equivalent sections or subsections in such refinanced, replaced or extended agreement as the context requires.
SECTION II
2.1 APPOINTMENT AS COLLATERAL AGENT. Each Creditor Party executing this Agreement, and High Yield Trustee and each High Yield Noteholder, by its acceptance of the
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benefits of the Collateral Documents and of this Agreement, (i) appoints Bank of America to serve as collateral agent and representative of each such Secured Party (to the extent applicable) under this Agreement and each of the Collateral Documents (in such capacity, together with its successors in such capacity, the "COLLATERAL AGENT") and (ii) irrevocably authorizes Collateral Agent to act as agent for the Secured Parties for the purpose of executing and delivering, on behalf of all such Secured Parties, the Collateral Documents and, subject to the provisions of this Agreement, for the purpose of exercising such powers, rights and remedies hereunder and under the other Collateral Documents as are specifically delegated or granted to Collateral Agent by the terms hereof and thereof, together with such powers, rights and remedies as are reasonably incidental thereto. For the avoidance of doubt, it is understood and agreed that the Collateral Agent is the "Secured Party" or, as the case may be, the "Mortgagee" referred to in the Collateral Documents. Each Creditor Party and Collateral Agent, and High Yield Trustee and each High Yield Noteholder, by its acceptance of the benefits of the Collateral Documents and this Agreement, hereby appoint each other Secured Party as agent for the purpose of perfecting Collateral Agent's security interest in Collateral that, in accordance with the UCC, can be perfected by possession or control.
2.2 DECISIONS RELATING TO ENFORCEMENT ACTIONS AND OTHER MATTERS VESTED IN REQUISITE OBLIGEES.
(a) Collateral Agent agrees to take such Enforcement Actions and all such actions with respect to Collateral which is perfected only by control of such Collateral, in each case as may be directed by Requisite Obligees (it being understood and agreed that if at any time Collateral Agent determines that the requisite percentages constituting Requisite Obligees shall have been obtained, the Collateral Agent may and shall be fully authorized, as of such time and without the need for further direction from any Secured Party, to take or not take such action as the Requisite Obligees direct); provided, however, that notwithstanding anything in this Agreement to the contrary, Collateral Agent shall not be required to take any action that is in its judgment contrary to law or to the terms of this Agreement or any or all of the Collateral Documents or which would in its opinion subject it or any of its officers, employees or directors to liability, and Collateral Agent shall not be required to take any action under this Agreement or any or all of the Collateral Documents unless and until Collateral Agent shall be indemnified to its satisfaction by the relevant Parties against any and all losses, costs, expenses or liabilities in connection therewith.
(b) Each Creditor Party executing this Agreement or an acknowledgment hereto, and the High Yield Trustee and each holder of a High Yield Note, by its acceptance of the benefits hereof and of the Collateral Documents, agree that Collateral Agent may act as Requisite Obligees may request (regardless of whether any individual Party or any other Secured Party (including the holders of the High Yield Notes) agrees, disagrees or abstains with respect to such request), that Collateral Agent shall have no liability for acting in accordance with such request (provided such action does not conflict with the express terms of this Agreement) and that no Secured Party shall have any liability to any other Secured Party for any such request, except, in each case, liability arising from the gross negligence or willful misconduct of such Person. Collateral Agent shall give prompt notice to all Creditor Parties and the High Yield
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Trustee of actions taken pursuant to the instructions of Requisite Obligees; provided, however, that the failure to give any such notice shall not impair the right of Collateral Agent to take any such action or the validity or enforceability under this Agreement and the applicable Collateral Documents of the action so taken.
(c) Collateral Agent may at any time request directions from the Requisite Obligees with respect to the Collateral Documents as to any course of action or other matter relating hereto or to the Collateral Documents. Except as otherwise provided in the Collateral Documents, directions given by Requisite Obligees to Collateral Agent with respect to the Collateral and Collateral Documents shall be binding on all Secured Parties for all purposes (provided such directions do not conflict with the express terms of this Agreement).
(d) Each Creditor Party, the High Yield Trustee, and each holder of a High Yield Note, by accepting the benefits hereof and of the Collateral Documents, agrees not to take any Enforcement Action whatsoever, in each case except through Collateral Agent in accordance with this Agreement; provided, however, that (i) Detroit L/C Agents and Detroit L/C Lenders may apply Collateral on deposit in the Detroit L/C Cash Collateral Account to the payment of the Detroit L/C Obligations and otherwise exercise rights of setoff with respect thereto, in each case in accordance with the terms of the Detroit L/C Facility Agreement and the Security Agreement and (ii) New L/C Agent and New L/C Lenders may apply Collateral on deposit in the New L/C Cash Collateral Account to the payment of the New L/C Obligations and otherwise exercise rights of setoff with respect thereto, in each case in accordance with the terms of the New L/C Facility Agreement and the Security Agreement.
2.3 NET INSURANCE/CONDEMNATION PROCEEDS.
(a) Unless prohibited by contractual or other legal requirement, all policies of insurance required to be maintained under any Credit Document shall (a) name Collateral Agent, for the benefit of Secured Parties, as an additional insured thereunder as its interests may appear and (b) in the case of each business interruption and casualty insurance policy, contain a loss payable clause or endorsement, satisfactory in form and substance to Detroit L/C Facility Agent and New L/C Agent, that names Collateral Agent for the benefit of Secured Parties as the loss payee thereunder for any covered loss in excess of $1,000,000 and provides for at least 30 days prior written notice to Collateral Agent of any modification or cancellation of such policy. As soon as practicable after the Closing Date, Company shall deliver to Agents a certificate from Borrowers' insurance broker(s) or other evidence satisfactory to it that all insurance required to be maintained pursuant to this subsection 2.3 is in full force and effect and that Collateral Agent on behalf of Secured Parties has been named as additional insured and/or loss payee thereunder to the extent required under this subsection 2.3.
(b) Upon receipt by Collateral Agent of any Net Insurance/Condemnation Proceeds as loss payee, (a) if and to the extent Company would have been required to apply such Net Insurance/Condemnation Proceeds (if it had received them directly) pursuant to the Detroit L/C Facility Agreement (or, if the Detroit L/C Obligations have
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been Paid in Full, the New L/C Facility Agreement), Collateral Agent
shall, and Company hereby authorizes Collateral Agent to, apply such
Net Insurance/Condemnation Proceeds as provided in subsection 4.1(a)
or, to the extent applicable, subsection 4.2 and (b) to the extent the
foregoing clause (a) does not apply, Collateral Agent shall deliver
such Net Insurance/Condemnation Proceeds to Company, and (1) Company
and its Subsidiaries may retain and apply any portion thereof that is
business interruption insurance proceeds for working capital purposes
or any other purposes not prohibited under the Facility Agreements and
(2) Company shall, or shall cause one or more of its Subsidiaries to,
promptly apply such Net Insurance/Condemnation Proceeds that are not
business interruption insurance proceeds to the costs of repairing,
restoring, or replacing the assets in respect of which such Net
Insurance/Condemnation Proceeds were received; provided, however that
if at any time Senior Agent reasonably determines (A) that Company or
such Subsidiary is not proceeding diligently with such repair,
restoration or replacement or that such repair, restoration or
replacement cannot be completed within 180 days after the receipt by
Collateral Agent of such Net Insurance/Condemnation Proceeds, Senior
Agent may direct Collateral Agent, and Company hereby authorizes Senior
Agent and Collateral Agent to apply such Net Insurance/Condemnation
Proceeds as provided in subsection 4.1(a).
2.4 AMENDMENTS, MODIFICATIONS, WAIVERS AND RELEASES. Notwithstanding anything in the Facility Agreements, High Yield Indenture, Collateral Documents and other Credit Documents to the contrary:
(a) except in connection with any Enforcement Action or the release of any cash on deposit in any Cash Collateral Account, the release of the Lien granted in favor of Collateral Agent on all or substantially all of the Collateral under the Collateral Documents shall require the prior written consent of, until Payment in Full of all Detroit L/C Obligations, each Detroit L/C Lender and, until Payment if Full of all New L/C Obligations, each New L/C Lender; provided that no such consent shall be required in connection with any IPP International Sale provided that the consideration received for the assets subject to such IPP International Sale shall be in an amount at least equal to the fair market value thereof; and
(b) except as set forth in subsection 2.4(a), any amendment,
modification, termination or waiver of, any Collateral Documents shall
require the prior written consent of (i) until Payment in Full of all
Detroit L/C Obligations, Requisite Detroit L/C Lenders, (ii) until
Payment in Full of all New L/C Obligations, Requisite New L/C Lenders,
and (iii) upon Payment in Full of all Detroit L/C Obligations and New
L/C Obligations, holders of more than 50% of the principal amount of
the High Yield Notes; provided, however, that (i) no such amendment,
modification, termination or waiver shall, without the consent of
Requisite Detroit L/C Lenders, amend, modify, terminate or waive, or
have the effect of amending, modifying, terminating or waiving, Section
12 (Detroit L/C Cash Collateral Account) of the Security Agreement or
the rights of Collateral Agent and Detroit L/C Lenders under such
Section or otherwise with respect to the Detroit L/C Cash Collateral
Account or the Collateral on deposit therein from time to time, and
(ii) no such amendment, modification, termination or waiver shall,
without the consent of Requisite New L/C Lenders, amend, modify,
terminate or waive, or have the effect of amending,
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modifying, terminating or waiving, Section 13 (New L/C Cash Collateral Account) of the Security Agreement or the rights of Collateral Agent and New L/C Lenders under such Section or otherwise with respect to the New L/C Cash Collateral Account or the Collateral on deposit therein from time to time.
2.5 AMENDMENTS, MODIFICATIONS AND WAIVERS WITH RESPECT TO CREDIT DOCUMENTS. Any amendment or modification of, or waiver of compliance with the terms of any Credit Document shall be subject to the following requirements:
(a) Subject to the provisions of subsection 2.4, and until the termination of the Detroit L/C Facility Agreement and the Payment in Full of all Detroit L/C Obligations, without the prior written consent of Requisite Detroit L/C Lenders, New L/C Lenders may not amend, restate, modify or waive (or receive any payment consistent with an amendment, restatement, modification or waiver of) any material provision of any of the New L/C Facility Documents, unless (i) the terms of the New L/C Facility Documents as so amended, restated, modified or waived are not more disadvantageous to Company and its Subsidiaries and the Detroit L/C Lenders (in a manner deemed material by Detroit L/C Agents) than the New L/C Facility Documents in effect on the Closing Date (it being understood and agreed that any amendment, restatement, modification or waiver having the effect of (1) increasing the maximum amount of any commitment to extend loans (as opposed to letters of credit) under the New L/C Facility Documents, or (2) reducing, delaying or waiving any otherwise required reduction in the amount of any commitment to extend loans or letters of credit under the New L/C Facility Documents, shall be deemed to be more disadvantageous for purposes of this clause (i) without further notice or other action by Detroit L/C Agents), (ii) the aggregate amount of indebtedness and letters of credit outstanding, and additional commitments to extend credit, if any, under the New L/C Facility Documents as so amended, restated, modified or waived, do not exceed the aggregate amount of the commitments to extend credit in effect under the New L/C Facility Documents on the Closing Date plus $5,000,000, (iii) the obligations under (and the Liens securing) such New L/C Facility Documents as so amended, restated, modified or waived are subject to this Agreement on terms substantively identical to the terms applicable to the obligations in effect under the New L/C Facility Documents on the Closing Date , and (iv) Company provides to Detroit L/C Agents reasonable prior advance written notice of such proposed amendment, restatement, modification or waiver and copies of all material contracts or other agreements being entered into in connection therewith.
(b) Subject to the provisions of subsection 2.4, and until the termination of the New L/C Facility Agreement and the Payment in Full of all New L/C Obligations, without the prior written consent of Requisite New L/C Lenders, Detroit L/C Lenders may not amend, restate, modify or waive (or receive any payment consistent with an amendment, restatement, modification or waiver of) any material provision of any of the Detroit L/C Facility Documents, unless (i) the terms of the Detroit L/C Facility Documents as so amended, restated, modified or waived are not more disadvantageous to Company and its Subsidiaries and the New L/C Lenders (in a manner deemed material by New L/C Agent) than the Detroit L/C Facility Documents in effect on the Closing Date (it being understood and agreed that any amendment, restatement, modification or waiver
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having the effect of (1) increasing the maximum amount of any commitment to extend loans (as opposed to letters of credit) under the Detroit L/C Facility Documents, or (2) reducing, delaying or waiving any otherwise required reduction in the amount of any commitment to extend loans or letters of credit under the Detroit L/C Facility Documents, shall be deemed to be more disadvantageous for purposes of this clause (i) without further notice or other action by New L/C Agent), (ii) the aggregate amount of indebtedness and letters of credit outstanding, and additional commitments to extend credit, if any, under the Detroit L/C Facility Documents as so amended, restated, modified or waived, do not exceed the aggregate amount of the commitments to extend credit in effect under the Detroit L/C Facility Documents on the Closing Date plus $5,000,000, (iii) the obligations under (and the Liens securing) such Detroit L/C Facility Documents as so amended, restated, modified or waived are subject to this Agreement on terms substantively identical to the terms applicable to the obligations in effect under the Detroit L/C Facility Documents on the Closing Date, and (iv) Company provides to New L/C Agent reasonable prior advance written notice of such proposed amendment, restatement, modification or waiver and copies of all material contracts or other agreements being entered into in connection therewith.
(c) Until (i) the termination of the Detroit L/C Facility
Agreement and the Payment in Full of all Detroit L/C Obligations,
without the prior written consent of Requisite Detroit L/C Lenders and
(ii) the termination of the New L/C Facility Agreement and the Payment
in Full of all New L/C Obligations, without the prior written consent
of Requisite New L/C Lenders, Company shall not, and shall not permit
any of its Subsidiaries (including CPIH Subsidiaries) to amend,
restate, modify or waive (or make any payment consistent with an
amendment, restatement, modification or waiver of) any material
provision of the Management Services and Reimbursement Agreement if the
effect of such amendment, restatement, modification or waiver, together
with all other amendments, restatements, modifications or waivers made,
(a) is to impose additional material obligations on, or confer material
additional rights to the holders thereof (or to other obligees with
respect thereto) against, Company or any of its Subsidiaries, (b) is
otherwise adverse to the interests of the Detroit L/C Lenders in a
manner deemed material in the judgment of Detroit L/C Agents or
Requisite Detroit L/C Lenders so notifying Detroit L/C Agents or
Company, or (c) is otherwise adverse to the interests of the New L/C
Lenders in a manner deemed material in the judgment of New L/C Agent or
Requisite New L/C Lenders so notifying New L/C Agents or Company.
(d) Each Lender acknowledges and agrees that Borrowers have agreed to and are bound by the provisions of subsection 6.13 (Most Favored Nations Payments) of each Facility Agreement.
SECTION III
3.1 PRIORITY OF LIENS.
(a) Notwithstanding the order or time of attachment, or the order, time or manner of perfection, or the order or time of filing or recordation of any document or instrument, or other method of perfecting a security interest in favor of Collateral Agent
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in any Collateral, and notwithstanding any conflicting terms or conditions which may be contained in any of the Credit Document, the Secured Parties agree that, as among the Secured Parties the following Lien priorities shall strictly apply in defining the respective Lien priorities of each Secured Party in the Collateral (provided, however that, in the case of the Collateral held as cash collateral in the Detroit L/C Cash Collateral Account for the Detroit L/C Obligations and in the New L/C Cash Collateral Account for New L/C Obligations, such cash collateral shall have the priorities set forth in subsection 3.1(b) and 3.1(c), respectively, until released pursuant to subsection 4.2(c), in which case the following priorities apply):
(1) first, the Liens upon the Collateral in favor of Collateral Agent to the extent securing the Secured Obligations owing from time to time to the Collateral Agent, in its capacity as Collateral Agent, to the full extent thereof;
(2) second: the Liens upon the Collateral in favor of Collateral Agent to the extent securing, on a pari passu basis, the Secured Obligations owing from time to time to the Detroit L/C Agents and New L/C Agent, in their capacities as Detroit L/C Agents and New L/C Agent, respectively, to the full extent thereof;
(3) third: the Liens upon the Collateral in favor of Collateral Agent to the extent securing, on a pari passu basis, (i) the remaining Detroit L/C Obligations, and (ii) the Cash Management Obligations, in each case to the full extent thereof;
(4) fourth: the Liens upon the Collateral in favor of Collateral Agent to the extent securing the remaining New L/C Obligations to the full extent thereof; and
(5) fifth: the Liens upon the Collateral in favor of Collateral Agent to the extent securing the High Yield Obligations to the full extent thereof.
(b) Notwithstanding the order or time of attachment, or the order, time or manner of perfection, or the order or time of filing or recordation of any document or instrument, or other method of perfecting a security interest in favor of Collateral Agent in any Collateral, and notwithstanding any conflicting terms or conditions which may be contained in any of the Credit Document, the Secured Parties agree that, as among the Secured Parties the following Lien priorities shall strictly apply in defining the respective Lien priorities of each Secured Party in cash collateral held in the Detroit L/C Cash Collateral Account:
(1) first, the Liens upon the Collateral in favor of Collateral Agent to the extent securing the Secured Obligations owing from time to time to the Collateral Agent, in its capacity as Collateral Agent, to the full extent thereof;
(2) second: the Liens upon the Collateral in favor of Collateral Agent to the extent securing the Secured Obligations owing from time to time to the Detroit L/C Agents, in their capacities as Detroit L/C Agents, to the full extent thereof;
(3) third: the Liens upon the Collateral in favor of Collateral Agent to the extent securing the remaining Detroit L/C Obligations to the full extent thereof; and
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(4) fourth: the Liens upon the Collateral in favor of Collateral Agent in the order of priority provided for in subsection 3.1(a).
(c) Notwithstanding the order or time of attachment, or the order, time or manner of perfection, or the order or time of filing or recordation of any document or instrument, or other method of perfecting a security interest in favor of Collateral Agent in any Collateral, and notwithstanding any conflicting terms or conditions which may be contained in any of the Credit Document, the Secured Parties agree that, as among the Secured Parties the following Lien priorities shall strictly apply in defining the respective Lien priorities of each Secured Party in cash collateral held in the New L/C Cash Collateral Account:
(1) first, the Liens upon the Collateral in favor of Collateral Agent to the extent securing the Secured Obligations owing from time to time to the Collateral Agent, in its capacity as Collateral Agent, to the full extent thereof;
(2) second: the Liens upon the Collateral in favor of Collateral Agent to the extent securing the Secured Obligations owing from time to time to the New L/C Agent, in their capacity as New L/C Agent, to the full extent thereof;
(3) third: the Liens upon the Collateral in favor of Collateral Agent to the extent securing the remaining New L/C Obligations to the full extent thereof; and
(4) fourth: the Liens upon the Collateral in favor of Collateral Agent in the order of priority provided for in subsection 3.1(a).
3.2 PRIORITIES UNAFFECTED BY ACTION OR INACTION. The Lien priorities in subsection 3.1 shall not be altered or otherwise affected by any amendment, modification, supplement, extension, renewal, restatement or refinancing of any of the Secured Obligations, nor by any action or inaction which Collateral Agent or any other Secured Party may take or fail to take in respect of the Collateral.
SECTION IV
4.1 APPLICATION OF MANDATORY PREPAYMENTS UNDER FACILITY AGREEMENTS. Notwithstanding anything in the Credit Documents to the contrary but subject in all respects to subsection 4.2, so long as any Detroit L/C Obligations and New L/C Obligations are outstanding any Mandatory Payments made pursuant to subsections 2.3A(i)(a) - (g) of the Detroit L/C Facility Agreement and subsections 2.4A(iii)(a) - (g) of the New L/C Facility Agreement shall be applied as follows:
(a) Any Mandatory Payments made pursuant to subsections 2.3A(i)(a) - (b) of the Detroit L/C Facility Agreement and subsections 2.4A(iii)(a) - (b) of the New L/C Facility Agreement shall be applied first, to repay funded amounts (if any) under the Detroit L/Cs and then to cash collateralize the Detroit L/Cs and the Detroit L/C Commitments under the Security Agreement in an amount, taken together with all then existing cash collateral on deposit in the Detroit L/C Cash Collateral Account for the
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Detroit L/C Commitments, equal to 105% of the Detroit L/C Commitments and second, to reduce the New L/C Aggregate Exposure in accordance with subsection 4.1(e).
(b) Any Mandatory Payments made pursuant to subsections 2.3A(i)(c) - (e) of the Detroit L/C Facility Agreement and subsections 2.4A(iii)(c) - (e) of the New L/C Facility Agreement shall be applied as follows: (i) an amount equal to 50% of such Mandatory Payment shall be applied to repay funded amounts (if any) under the Detroit L/Cs and then to cash collateralize the Detroit L/Cs and the Detroit L/C Commitments under the Security Agreement up to an amount, taken together with all then existing cash collateral on deposit in the Detroit L/C Cash Collateral Account for the Detroit L/C Commitments, equal to 105% of the Detroit L/C Commitments, (ii) an amount equal to 50% of such Mandatory Payment shall be applied to reduce the New L/C Aggregate Exposure in accordance with subsection 4.1(e) and (iii) if any proceeds of a Mandatory Prepayment remain after application as set forth in clause (i) or (ii), then such remaining proceeds shall be applied as if it were proceeds required to be applied pursuant to the other such clause.
(c) Any Mandatory Payments made pursuant to subsections
2.3A(i)(f) of the Detroit L/C Facility Agreement and subsections
2.4A(iii)(f) of the New L/C Facility Agreement shall be applied as
follows (i) an amount equal to 50% of such Mandatory Payment shall be
applied to repay funded amounts (if any) under the Detroit L/Cs and
then to cash collateralize the Detroit L/Cs and the Detroit L/C
Commitments under the Security Agreement up to an amount, taken
together with all then existing cash collateral on deposit in the
Detroit L/C Cash Collateral Account for the Detroit L/C Commitments,
equal to 105% of the Detroit L/C Commitments, (ii) an amount equal to
50% of such Mandatory Payment shall be applied to reduce the New L/C
Aggregate Exposure in the following manner: first, to New L/C Exposure,
with the amount applied to New L/C Exposure being applied to repay all
funded amounts, if any, under the New L/Cs and then to cash
collateralize the New L/C Exposure outstanding (after giving effect to
the foregoing repayment) in an amount, taken together with all then
existing cash collateral for such New L/C Exposure, equal to 105% of
such New L/C Exposure; and second, to repay outstanding New Revolving
Loans to the full extent thereof, and (iii) if any proceeds of a
Mandatory Prepayment remain after application as set forth in clause
(i) or (ii), then such remaining proceeds shall be applied as if it
were proceeds required to be applied pursuant to the other such clause.
Notwithstanding the foregoing, Borrowers and Lenders hereby agree that
any cash applied to cash collateralize Detroit L/C Exposure or New L/C
Exposure pursuant to this subsection 4.1(c) with respect to a cash
balance on June 30 or December 31 of any Fiscal Year (the "SUBJECT
FISCAL YEAR") shall, in the event that the amount of such cash applied
to cash collateralize Detroit L/C Exposure and New L/C Exposure exceeds
50% of the Annual Free Cash Flow for the Subject Fiscal Year, be
released to Borrowers to the extent of such excess, with the amount of
cash so released being released pro rata from the amounts on deposit in
the Detroit L/C Cash Collateral Account and New L/C Cash Collateral
Account based on the amount of such excess applied to cash
collateralize Detroit L/C Exposure and New L/C Exposure (but in no
event shall more cash be so released from any Collateral Account than
the aggregate amount applied pursuant to this subsection 4.1(c) with
respect to the Subject Fiscal Year and deposited to such Collateral
Account) after the 60th day of the following Fiscal Year,
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promptly following Borrowers' certification of such excess; provided, however, that such release shall not be required if, at the time such release would otherwise be required, a Detroit L/C Event of Default or New L/C Event of Default shall have occurred and be continuing.
(d) Any Mandatory Payments made pursuant to subsection 2.3A(i)(g) of the Detroit L/C Facility Agreement and subsection 2.4A(iii)(g) of the New L/C Facility Agreement shall be applied pursuant to subsection 4.2(a).
(e) All Mandatory Prepayments of the New L/C Aggregate Exposure referenced in subsections 4.1(a) and 4.1(b) shall be applied in the following manner: first, to New L/C Exposure, with the amount applied to New L/C Exposure being applied to repay all funded amounts, if any, under the New L/Cs and then to cash collateralize the New L/C Exposure outstanding (after giving effect to the foregoing repayment) in an amount, taken together with all then existing cash collateral for such New L/C Exposure, equal to 105% of such New L/C Exposure, and, concurrently with any such repayment or cash collateralization of New L/C Exposure, effecting a permanent reduction in the New L/C Commitment by the amount of such repayment or cash collateralization of New L/C Exposure; second, to repay outstanding New Revolving Loans to the full extent thereof and to concurrently permanently reduce (x) the New L/C Commitments and (y) to the extent that any such reduction in New L/C Commitments would cause the New L/C Commitments to be less than the Revolver Loan Commitments then in effect, the Revolver Commitments by the amount of such difference; and third, to permanently reduce the unutilized New L/C Commitments and, to the extent that any reduction in New L/C Commitments would cause the New L/C Commitments to be less than the Revolver Loan Commitments then in effect, to permanently and concurrently reduce the Revolver Commitments by the amount of such difference.
4.2 APPLICATION OF PROCEEDS OF COLLATERAL, ETC.
(a) Except as provided in subsection 4.2(c) and 4.2(d) below, upon the occurrence and during the continuation of an Event of Default or upon the termination of either the Detroit L/C Commitments or the New L/C Aggregate Commitments, if requested by Requisite Detroit L/C Lenders with respect to any Detroit L/C Event of Default or termination of Detroit L/C Commitments, or if requested by Requisite New L/C Lenders with respect to any New L/C Event of Default and termination of New L/C Aggregate Commitments, or holders of more than 50% of the High Yield Notes with respect to a High Yield Event of Default, (1) all Mandatory Payments or other payments received by any Agent or other Secured Party on account of the Obligations, whether from any Loan Party or otherwise, shall promptly be delivered to Collateral Agent and upon receipt by Collateral Agent, applied by Collateral Agent against the Secured Obligations and (2) all Proceeds received by Collateral Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral or other Enforcement Action may, in the discretion of Senior Agent upon written direction to Collateral Agent, be held by Collateral Agent as Collateral for, and/or (then or at any time thereafter) applied in full or in part by Collateral Agent against, the applicable
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Secured Obligations, in each case under clauses (1) and (2) in the following order of priority:
(i) First, to the payment of the costs and expenses of the exercise of rights and remedies and such sale, collection or other realization or Enforcement Action, including reimbursement of all expenses, liabilities and advances made or incurred by Collateral Agent in connection therewith (including, for reasonable cost, fees and expenses of counsel and other professionals and agents retained by the Collateral Agent) and all amounts for which Collateral Agent is entitled to compensation, reimbursement and indemnification under any Credit Document and any other amounts then owing to Collateral Agent, in its capacity as Collateral Agent, pursuant to the Collateral Documents;
(ii) Second, to the extent proceeds remain after application as described in clause (i) above, pro rata among the following, based on the amounts outstanding as of any date of determination: all Secured Obligations owing to Detroit L/C Agents and New L/C Agent, in their capacities as Detroit L/C Agents and New L/C Agent, respectively;
(iii) Third, to the extent proceeds remain after application as described in clauses (i) and (ii) above, pro rata among the following, based on the amounts outstanding as of any date of determination: (i) all remaining Detroit L/C Obligations, and (ii) all Cash Management Obligations until all Detroit L/C Obligations and Cash Management Obligations have been Paid in Full;
(iv) Fourth, to the extent proceeds remain after application as described in clauses (i) through (iii) above, to the payment of the remaining New L/C Obligations until all New L/C Obligations have been Paid in Full;
(v) Fifth, to the extent proceeds remain after application as described in clauses (i) through (iv) above, to the payment of the High Yield Note Obligations, until all such High Yield Note Obligations have been Paid in Full; and
(vi) Sixth, after Payment in Full of all Secured Obligations under clauses (i) through (v) above, to Loan Parties (other than DHC) or their successors or assigns, or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, of any surplus then remaining from such Proceeds.
(b) Notwithstanding anything in subsection 4.2(a) to the contrary, (i) in the event that no Detroit L/C Event of Default has occurred and is continuing under subsection 8.1 of the Detroit L/C Facility Agreement and no Bankruptcy Proceeding has been commenced by or against any Loan Party, the New L/C Lenders and New L/C Agent shall be entitled to receive payments of current interest and fees when due under the New L/C Facility Agreement; (ii) in the event that no Detroit L/C Event of Default has occurred and is continuing under subsection 8.1 of the Detroit L/C Facility Agreement and no New L/C Event of Default has occurred and is continuing under subsection 8.1 of the New L/C Facility Agreement and no Bankruptcy Proceeding has
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been commenced by or against any Loan Party and subsection 8.1 of the Detroit L/C Facility Agreement and New L/C Facility Agreement, the High Yield Trustee, on behalf of the High Yield Noteholders, shall be entitled to receive payments of current interest and fees when due under the High Yield Indenture and High Yield Note; and (iii) in the event any Management Services Reimbursement Agreement Beneficiary receives any payment from any Management Services Agreement Obligors pursuant to subsection 4(b) of the Management Services Reimbursement Agreement with respect to any drawing of any New L/C that is honored by the New L/C Issuing Lender, then such Management Services Agreement Beneficiaries shall apply such payment to reimburse New L/C Issuing Lender (and any New L/C Lender that has funded its participation therein) for such honored drawing.
(c) Cash collateral held by Collateral Agent pursuant to the Security Agreement shall be held for the purposes set forth therein. Notwithstanding anything in the other Credit Documents to the Company, if during any period in which the provisions of subsection 4.2(a) are applicable, (i) the Detroit L/C Commitments and the obligation of the Detroit L/C Lenders to issue and maintain Detroit L/Cs have terminated and all Detroit L/C Obligations have been fully satisfied in cash and no Detroit L/Cs are then outstanding, then any cash collateral held by Collateral Agent to cash collateralize Detroit L/C Obligations shall be applied in accordance with subsection 4.2(a); and (ii) the New L/C Aggregate Commitments and the obligation of the Issuing Lenders to issue or maintain New L/Cs have terminated and all New L/C Obligations have been fully satisfied in cash and no New L/Cs are then outstanding, then any cash collateral held by Collateral Agent to cash collateralize New L/C Obligations shall be applied in accordance with subsection 4.2(a).
(d) Until Proceeds are applied as set forth in this subsection 4.2, Collateral Agent shall hold such Proceeds in its custody in accordance with its regular procedures for handling deposited funds.
(e) Payments by Collateral Agent to the Detroit L/C Lenders in respect of the Detroit L/C Obligations shall be made to the Detroit L/C Facility Agent for distribution to the Detroit L/C Lenders in accordance with the Detroit L/C Facility Agreement and this Agreement; payments by Collateral Agent to the New L/C Lenders in respect of the New L/C Obligations shall be made to the New L/C Agent for distribution to the New L/C Lenders in accordance with the New L/C Facility Agreement and this Agreement; payments in respect of any High Yield Obligations shall be paid to the High Yield Trustee for the benefit of the holders of such High Yield Obligations; and payments in respect of the Cash Management Obligations shall be made to Cash Management Bank for the benefit of Cash Management Bank.
(f) In the event that any Secured Party shall receive any Distribution that such Secured Party is not entitled to receive or retain under the provisions of this Agreement (in such capacity, each, a "JUNIOR CREDITOR"), such Junior Creditor shall hold any such Distribution so received in trust for the benefit of the holders of other Secured Obligations with the right to receive such Distribution under the provisions of this Agreement (in such capacity, each, a "SENIOR CREDITOR") and shall segregate such
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Distribution from other assets held by such Junior Creditor; and shall forthwith turn over such Distribution (without liability for interest thereon, but with any appropriate endorsements or assignments, if necessary) to the holders of, or to Collateral Agent for the benefit of the holders of, such Secured Obligations in the form received (with any appropriate endorsement or assignment, if necessary) to be distributed in accordance with subsection 4.1 or 4.2, as applicable, and applied to such Secured Obligations. In the event of a failure of any Junior Creditor to make any such endorsement or assignment to Collateral Agent or Senior Creditors, as the case may be, Collateral Agent and such Senior Creditors are hereby irrevocably authorized on behalf of such Junior Creditor to make such endorsement or assignment, as applicable.
(g) No payment or distribution to any Senior Creditor pursuant to the provisions of this Agreement shall entitle the applicable Junior Creditor or Junior Creditors to exercise any right of subrogation in respect thereof until (i) all Secured Obligations of such Senior Creditors (including with respect to any outstanding letters of credit) shall have been indefeasibly Paid in Full, or (ii) all of such Senior Creditors have consented in writing to the taking of such action. With respect to any subrogation claims, each Junior Creditor hereby (to the extent permitted by applicable law) waives, releases and discharges any and all rights, claims, causes of action, liabilities, claims and demands, in law or equity, which such Junior Creditor has had, now has, or may in the future have, arising out of or relating directly or indirectly to the taking or not taking of any act or proceeding or not proceeding with any action which the Senior Creditors (or that representatives) may take in an effort to collect in respect of the Secured Obligations owed to such Senior Creditors.
(h) In furtherance of, and without limiting, the priority provisions set forth in this subsection 4.2, but subject to the applicable voting provisions set forth in subsection 2.2, each Creditor Party and High Yield Trustee (and, by their acceptance of the benefits hereof and of the Collateral Documents, each High Yield Noteholder) agrees that, in order to enable Collateral Agent to enforce its rights hereunder in any Bankruptcy Proceeding, Collateral Agent is hereby irrevocably authorized and empowered in its sole and absolute discretion to receive and collect any and all dividends or other payments or disbursements made on account of Collateral Agent's Lien on the Collateral in whatever form the same may be paid or issued and to apply the same on account of any such Secured Obligations in accordance with the provisions of the Credit Documents and this Agreement. At any time, including but not limited to during any Bankruptcy Proceeding, Collateral Agent and each other Secured Party will refrain from taking any action which would contest or challenge in any administrative, legal or equitable action or otherwise the validity or enforceability of the terms of this Agreement, including the priority provisions contained in this subsection 4.2 and the Lien priority provisions contained in subsection 3.1.
(i) Each Secured Party hereby covenants and agrees that (i) except for the guaranty of the High Yield Obligations by High Yield Guarantors pursuant to the High Yield Indenture and any New Investor Assurances, such Secured Party will not accept from any Person on behalf of the Borrowers any guarantee (a "THIRD-PARTY GUARANTY") of any Secured Obligations unless such guarantor simultaneously guarantees the payment
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all Secured Obligations owed to each of the other Secured Parties (or, if such Third-Party Guaranty guarantees only a portion of the Obligations owing to such Secured Party, such Secured Party will not accept such Third-Party Guaranty unless such guarantor simultaneously guarantees the same proportion of Secured Obligations owing to the other Secured Parties), and (ii) such Secured Party will not take, accept or obtain any security interest in, or lien or encumbrance upon, any assets of any of the Borrowers or any Subsidiary (including any CPIH Subsidiary) or Affiliate thereof or any other Person to secure the payment and performance of the Obligations unless the Collateral Agent, for the benefit of all Secured Parties, is granted a pari passu security interest in, or lien upon, such assets, in either case, pursuant to documents in form and substance satisfactory to Detroit L/C Facility Agent and New L/C Agent.
(j) Each Junior Creditor hereby waives any rights it may have under applicable law to assert the doctrine of marshalling or to otherwise require Collateral Agent or any Senior Creditors to marshal any property of the Loan Parties or any of their respective Affiliates for the benefit of such Junior Creditors.
SECTION V
5.1 INFORMATION. From time to time, upon the request of Collateral Agent, each of the following Parties agrees to promptly provide to Collateral Agent the information described below:
(a) Detroit L/C Facility Agent agrees promptly from time to time to (i) deliver to Collateral Agent a true, correct and complete copy of any amendment, waiver or modification of or supplement to any Detroit L/C Facility Documents upon execution and delivery to Detroit L/C Facility Agent thereof by the relevant parties thereto and (ii) notify Collateral Agent of: (A) the aggregate amount of principal of and interest on the relevant Detroit L/C Obligations (including the aggregate Detroit L/C Usage) as at such date as Collateral Agent may specify, (B) the current Detroit L/C Commitment under the Detroit L/C Facility Agreement, and (C) any payment received by Detroit L/C Facility Agent to be applied to the principal of or interest on the Obligations and (iv) the amount of any other fees or expenses outstanding under the Detroit L/C Facility Agreement (including fees and expenses of Detroit L/C Agents) and, in each case, Collateral Agent shall be entitled to rely conclusively upon such information.
(b) New L/C Agent agrees promptly from time to time to (i) deliver to Collateral Agent a true, correct and complete copy of any amendment, waiver or modification of or supplement to any New L/C Facility Documents upon execution and delivery to New L/C Facility Agent thereof by the relevant parties thereto and (ii) notify Collateral Agent of: (A) the aggregate amount of principal of and interest on the New L/C Obligations (including the aggregate New L/C Usage) as at such date as Collateral Agent may specify, (B) the current New L/C Commitment under the New L/C Facility Agreement, (C) any payment received by New L/C Agent to be applied to the principal of or interest on the Obligations, and (D) the amount of any other fees or expenses outstanding under the New L/C Facility Agreement (including fees and expenses of New
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L/C Agent) and, in each case, Collateral Agent shall be entitled to rely conclusively upon such information.
(c) The High Yield Trustee agrees promptly from time to time to (i) deliver to Collateral Agent a true, correct and complete copy of any amendment, waiver or modification of or supplement to any High Yield Note or the High Yield Indenture upon execution thereof and (ii) notify Collateral Agent of: (A) the outstanding principal amount of the High Yield Notes and the amount of accrued but unpaid interest thereon, and (B) the amount of any other fees or expenses outstanding under the High Yield Indenture (including fees and expenses of High Yield Trustee) at such date as Collateral Agent may specify. The High Yield Trustee shall, or shall cause the registrar for the High Yield Notes to, provide a statement of such amount as reflected in the register maintained for such purpose by the High Yield Trustee or such registrar, as the case may be, and Collateral Agent shall be entitled to rely conclusively upon such statement.
SECTION VI
6.1 DISCLAIMERS, SUPPLEMENTAL COLLATERAL AGENT, INDEMNITY, ETC.
(a) Collateral Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and the Collateral Documents and Collateral Agent shall not by reason of this Agreement or the Collateral Documents be a trustee for any Secured Party or have any other fiduciary obligation to any Secured Party (including any obligation under the Trust Indenture Act of 1939, as amended). Collateral Agent shall not be responsible to any Secured Party for any recitals, statements, representations or warranties contained in this Agreement or any other Credit Document or in any certificate or other document referred to or provided for in, or received by any of them under, this Agreement or any Credit Document, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Credit Document or any other document referred to or provided for therein or any Lien under the Collateral Documents or the perfection or priority of any such Lien or for any failure by any Loan Party to perform any of its respective obligations under this Agreement or any other Credit Document. Collateral Agent may exercise such powers, rights and remedies and perform such duties by or through its Affiliates, agents or employees.
(b) Neither Collateral Agent nor any of its officers, directors, employees or agents shall be liable to any Secured Parties for any action taken or omitted by Collateral Agent under or in connection with this Agreement or any of the Collateral Documents or other Credit Documents except to the extent caused by Collateral Agent's gross negligence or willful misconduct. Collateral Agent shall be entitled to refrain from any act or the taking of any action (including the failure to take an action) in connection with this Agreement or any of the Collateral Documents or other Credit Documents or from the exercise of any power, discretion or authority vested in it hereunder or thereunder unless and until Collateral Agent shall have received instructions in respect thereof from Requisite Obligees (or such other Secured Parties as may be required to give such instructions under subsection 2.4(a)) and, upon receipt of such instructions from Requisite Obligees (or such other Secured Parties, as the case may be), Collateral Agent
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shall be entitled to act or (where so instructed) refrain from acting, or to exercise such power, discretion or authority, in accordance with such instructions. Without prejudice to the generality of the foregoing, (i) Collateral Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for Company and its Subsidiaries), accountants, experts and other professional advisors selected by it; and (ii) no Secured Party shall have any right of action whatsoever against an Agent as a result of Collateral Agent acting or (where so instructed) refraining from acting under this Agreement or any of the other Collateral Documents or other Credit Documents in accordance with the instructions of Requisite Obligees (or such other Secured Parties as may be required to give such instructions under subsection 2.4(a)).
(c) It is the purpose of this Agreement and the Collateral Documents and other Credit Documents that there shall be no violation of any law of any jurisdiction denying or restricting the right of banking corporations or associations to transact business as agent or trustee in such jurisdiction. It is recognized that in case of litigation under this Agreement or any of the other Collateral Documents, and in particular in case of the enforcement of any of the Collateral Documents, or in case Collateral Agent deems that by reason of any present or future law of any jurisdiction it may not exercise any of the rights, powers or remedies granted herein or in any of the Collateral Documents or other Credit Documents or take any other action which may be desirable or necessary in connection therewith, it may be necessary that Collateral Agent appoint an additional individual or institution as a separate trustee, co-trustee, collateral agent or collateral co-agent (any such additional individual or institution being referred to herein individually as a "SUPPLEMENTAL COLLATERAL AGENT" and collectively as "SUPPLEMENTAL COLLATERAL AGENTS").
In the event that Collateral Agent appoints a Supplemental Collateral Agent with respect to any Collateral, (i) each and every right, power, privilege or duty expressed or intended by this Agreement or any of the other Collateral Documents to be exercised by or vested in or conveyed to Collateral Agent with respect to such Collateral shall be exercisable by and vest in such Supplemental Collateral Agent to the extent, and only to the extent, necessary to enable such Supplemental Collateral Agent to exercise such rights, powers and privileges with respect to such Collateral and to perform such duties with respect to such Collateral, and every covenant and obligation contained in the Collateral Documents and necessary to the exercise or performance thereof by such Supplemental Collateral Agent shall run to and be enforceable by either Collateral Agent or such Supplemental Collateral Agent, and (ii) the provisions of this Agreement that refer to Collateral Agent shall inure to the benefit of such Supplemental Collateral Agent and all references herein to Collateral Agent shall be deemed to be references to Collateral Agent and/or such Supplemental Collateral Agent, as the context may require.
Should any instrument in writing from any Loan Party be required by any Supplemental Collateral Agent so appointed by Collateral Agent for more fully and certainly vesting in and confirming to him or it such rights, powers, privileges and duties,
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such Loan Party shall execute, acknowledge and deliver any and all such instruments promptly upon request by Collateral Agent. In case any Supplemental Collateral Agent, or a successor thereto, shall die, become incapable of acting, resign or be removed, all the rights, powers, privileges and duties of such Supplemental Collateral Agent, to the extent permitted by law, shall vest in and be exercised by Collateral Agent until the appointment of a new Supplemental Collateral Agent.
(d) Each Detroit L/C Lender and New L/C Lender (other than New L/C Issuing Lender for so long as New L/C Issuing Lender does not have any New L/C Aggregate Commitments), ratably in accordance with the amount of the Secured Obligations of such Detroit L/C Lenders and all New L/C Lenders, secured by the Collateral Documents, severally agrees that it shall indemnify Collateral Agent and the officers, directors, employees, agents, attorneys, professional advisors and affiliates of Collateral Agent to the extent that any such Person is neither reimbursed by any Loan Party under any Loan Document nor reimbursed out of any Proceeds pursuant to clause First of subsection 4.2(a), for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements and fees and fees and disbursements of any advisor engaged by Collateral Agent) or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against Collateral Agent or any such Person exercising the powers, rights and remedies of a Collateral Agent or performing duties of a Collateral Agent hereunder or under the other Collateral Documents or in any way relating to or arising out of this Agreement, any Collateral Document or any other Credit Document or any other documents contemplated hereby or thereby or referred to therein or the transactions contemplated hereby or thereby or the enforcement of any of the terms of any thereof; provided, however, that no Detroit L/C Lender nor New L/C Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of Collateral Agent as determined by a final judgment of a court of competent jurisdiction. If for any reason a New L/C Lender shall fail to make any payment to Collateral Agent when due hereunder, then, without in anyway limiting any right or remedy Collateral Agent may have against such New L/C Lender with respect thereto, such New L/C Lender agrees that, as provided in subsection 4.2, deductions from distributions otherwise due with respect to the New L/C Obligations will be made so that all New L/C Lenders shall share with the Detroit L/C Lenders, ratably in accordance with the amount (without duplication) of such New L/C Obligations secured by the Collateral Documents, the payment of the amounts due under the preceding sentence. The High Yield Trustee, on behalf of the holders of the High Yield Obligations, agrees, by its acceptance of the benefits hereof, that, as provided in subsection 4.2, deductions from distributions otherwise due such holders of High Yield Obligations will be made so that such holders of High Yield Obligations shall share with the Detroit L/C Lenders and New L/C Lenders, ratably in accordance with the amount (without duplication) of such High Yield Obligations secured by the Collateral Documents, the payment of the amounts due under the first sentence of this subsection 6.1(d). No Detroit L/C Agent nor New L/C Agent, in their respective capacities as Detroit L/C Agents and New L/C Agent, shall have any liability to any Party under this subsection 6.1(d).
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(e) The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, Collateral Agent in its individual capacity as a Detroit L/C Agent, Detroit L/C Lender, New L/C Lender or High Yield Noteholder, as the case may be, hereunder or under any Credit Document. With respect to its participation in the Detroit L/C Obligations, New L/C Obligations and High Yield Obligations, Collateral Agent shall have the same rights and powers hereunder as any other Secured Party and may exercise the same as though it were not performing the duties and functions delegated to it hereunder. Collateral Agent and its Affiliates may accept deposits from, lend money to, acquire equity interests in and generally engage in any kind of commercial banking, investment banking, trust, financial advisory or other business with Company or any of its Affiliates as if it were not performing the duties specified herein, and may accept fees and other consideration from any Loan Party for services in connection with this Agreement and otherwise without having to account for the same to Secured Parties.
(f) Collateral Agent may deem and treat the payee of any promissory note or other evidence of indebtedness relating to the Secured Obligations as the owner thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof, signed by such payee and in form satisfactory to Collateral Agent, shall have been filed with Collateral Agent. Any request, authority or consent of any Person who at the time of making such request or giving such authority or consent is the holder of any such note or other evidence of indebtedness shall be conclusive and binding on any subsequent holder, transferee or assignee of such note or other evidence of indebtedness and of any note or notes or other evidences of indebtedness issued in exchange therefor. Notwithstanding anything to the contrary contained in the Detroit L/C Facility Documents or the New L/C Facility Documents, (i) no assignment or transfer of any interest of any (A) Detroit L/C Lender in the Detroit L/C Exposure or Detroit L/Cs (including pursuant to any refinancing, restatement, replacement or extension of the Detroit L/C Facility Agreement not prohibited hereunder), and (B) no transfer of any interest of any New L/C Lender in the New L/C Aggregate Exposure or the New L/Cs (including pursuant to any refinancing, restatement, replacement or extension of the New L/C Facility Agreement not prohibited hereunder) and (ii) no appointment (A) of any successor Detroit L/C Facility Agent or Detroit L/C Document Agent under the Detroit L/C Facility Agreement (including pursuant to any refinancing, restatement, replacement or extension of the Detroit L/C Facility Agreement not prohibited hereunder), (B) any successor New L/C Agent under the New L/C Facility Agreement (including pursuant to any refinancing, restatement, replacement or extension of the New L/C Facility Agreement not prohibited hereunder); or (C) any successor High Yield Trustee pursuant to the High Yield Indenture may in any case be made unless such successor, transferee, assignee or any Person who became a lender pursuant to a refinancing, restatement, replacement or extension of the Detroit L/C Facility Agreement, New L/C Facility Agreement, or High Yield Indenture, as the case may be, executes an Assumption Agreement in the form of Annex 1 hereto shall be made unless the transferee executes an Assumption Agreement in the form of Annex 1 hereto.
(g) Except as expressly provided herein and in the Collateral Documents, Collateral Agent shall have no duty to take any affirmative steps with respect to the
Domestic Intercreditor Agreement
collection of amounts payable in respect of the Collateral. Collateral Agent shall incur no liability to any Secured Party as a result of any sale of any Collateral at any private sale.
(h) Collateral Agent may resign at any time by giving at least 30 days' notice thereof to the Parties and Collateral Agent may be removed as Collateral Agent at any time by Requisite Obligees. In the event of such resignation or removal of Collateral Agent, Requisite Obligees shall thereupon have the right to appoint a successor Collateral Agent. If no successor Collateral Agent shall have been so appointed by Requisite Obligees within 30 days after the resigning Collateral Agent's giving notice of its intention to resign, then the resigning Collateral Agent may appoint, on behalf of Secured Parties, a successor Collateral Agent and Company hereby agrees to pay to such successor Collateral Agent, in addition to any other amounts payable to Collateral Agent hereunder and under the Collateral Documents, such reasonable annual fees in such amounts and at such times as may be requested by such successor Collateral Agent.
(i) Upon the acceptance of any appointment as Collateral Agent hereunder by a successor Collateral Agent, such successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Collateral Agent under this Agreement and under the Collateral Documents. After any retiring or removed Collateral Agent's resignation or removal hereunder as Collateral Agent, the provisions of this subsection 6.1 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Collateral Agent.
(j) In no event shall Collateral Agent or any Secured Party be liable or responsible for any funds or investments of funds held by any Loan Party.
(k) Upon the proposed sale or other disposition of any Collateral that is permitted by the Facility Agreements and not prohibited by subsection 2.4(a) or to which Requisite Obligees have otherwise consented pursuant to an Enforcement Action, for which a Loan Party desires to obtain a security interest release from Collateral Agent, such Loan Party shall deliver an Officer's Certificate to Collateral Agent, Detroit L/C Agent and New L/C Agent (i) stating that the Collateral or the Capital Stock subject to such disposition is being sold or otherwise disposed of in compliance with the terms hereof and of the Facility Agreements and (ii) specifying the Collateral or Capital Stock being sold or otherwise disposed of in the proposed transaction. Upon the receipt of such Officer's Certificate, Collateral Agent shall, at Loan Parties' (other than DHC's), joint and several expense, so long as Senior Agent has not informed Collateral Agent that it (a) has reason to believe that the facts stated in such Officer's Certificate are not true and correct and (b) if the sale or other disposition of such item of Collateral or Capital Stock constitutes an Asset Sale (as defined in each Facility Agreement), has not received evidence satisfactory to it that arrangements satisfactory to it have been made for delivery of the Net Asset Sale Proceeds (as defined in each Facility Agreement) if and as required by subsection 2.3 of the respective Facility Agreement, execute and deliver such releases of its security interest in such Collateral as may be reasonably requested by such Loan Party. In the event of any conflict or inconsistency between this subsection 6.1(k) and the terms of any other Credit Document, the terms of this Agreement shall prevail.
Domestic Intercreditor Agreement
(l) Concurrently with any Subsidiary of Company becoming Additional Detroit L/C Borrower or Additional New L/C Borrower, such Subsidiary shall execute and deliver to Collateral Agent a counterpart to this Agreement in the form attached hereto as Annex 2 ("COUNTERPART"). Upon delivery of any such Counterpart to Collateral Agent, each such Additional Detroit L/C Borrower or Additional New L/C Borrower shall be a Detroit L/C Borrower or New L/C Borrower, as applicable, and shall be as fully a party hereto as if such Additional Detroit L/C Borrower or Additional New L/C Borrower were an original signatory hereto. Each Borrower expressly agrees that its obligations arising hereunder shall not be affected or diminished by the addition or release of any other Borrower hereunder, nor by any election of Collateral Agent or Secured Party not to cause any Subsidiary of Company to become an Additional Detroit L/C Borrower or Additional New L/C Borrower, as applicable, hereunder. This Agreement shall be fully effective as to any Borrower that is or becomes a party hereto regardless of whether any other Person becomes or fails to become or ceases to be a Borrower hereunder.
SECTION VII
7.1 MISCELLANEOUS.
(a) All notices and other communications provided for herein
shall be in writing and may be personally served, or sent by
telefacsimile or United States mail or courier service or electronic
mail (as further provided in this clause (a)) and shall be deemed to
have been given (i) when delivered in person or by courier service,
(ii) upon receipt of telefacsimile in complete and legible form, (iii)
three Business Days after deposit in the United States mail with
postage prepaid and properly addressed, or (iv) in the case of
electronic mail to the extent provided in this clause (a); provided
that notices to Collateral Agent shall not be effective until received.
For the purposes hereof, the addresses of the parties hereto (until
notice of a change thereof is delivered as provided in this subsection
7.1(a)) shall be as set forth under each party's name on the signature
pages (including acknowledgments) hereof. Notices and other
communications to the Lenders, Detroit L/C Agents and New L/C Agent
hereunder may be delivered or furnished by electronic communication
(including e-mail and Internet or intranet websites) pursuant to
procedures approved by Collateral Agent. Collateral Agent or any
Borrower may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it, provided that approval of such procedures
may be limited to particular notices or communications.
(b) No amendment, modification, termination or waiver of any provision of this Agreement, and no consent to any departure by any Party therefrom, shall in any event be effective without the written concurrence of Requisite Detroit L/C Lenders and Requisite New L/C Lenders; provided that (i) no such amendment, modification, termination or waiver shall, without the consent of each Lender with Secured Obligations directly affected thereby, amend,
Domestic Intercreditor Agreement
modify, terminate or waive, or have the effect of amending, modifying,
terminating or waiving, the definition of "Requisite Obligees", (ii) no
such amendment, modification, termination or waiver shall, without the
consent of each Lender and Agent with Secured Obligations directly
affected thereby, amend, modify, terminate or waive, or have the effect
of amending, modifying, terminating or waiving (A) subsection 3.1 or
4.2 or this subsection 7.1(a), or (B) any other provision of this
Agreement in a manner that would impose any additional material
obligations on any Lender or Agent or prejudice any material rights or
remedies of such Lender or Agent, (iii) no amendment, modification,
termination or waiver of any provision of subsection 2.1 or 2.2 or
Section 5 or 6 or of any other provision of this Agreement which, by
its terms, expressly requires the approval or concurrence of Collateral
Agent shall be effective without the written concurrence of Collateral
Agent; or (iv) no such amendment, modification, termination or waiver
of this Agreement shall materially increase or materially adversely
affect obligations of any Loan Party or adversely affect any rights of
Loan Party under the other Credit Documents in each case without such
loan party's prior consent; provided, further, that no amendment,
modification, termination or waiver shall (1) reduce or otherwise
adversely affect the right of the High Yield Trustee to request or
direct Collateral Agent to take action on the terms set forth in
subsection 2.1(a), or (2) subordinate in right of payment the High
Yield Obligations, or (3) modify or otherwise alter in any manner
adverse to the holders of the High Yield Notes the priority of such
holders' Lien in the Collateral as provided in subsection 3.1 as in
effect on the date hereof or the right of such holders to receive
Proceeds in the amount and order of priority and under the
circumstances described in subsections 4.1(a) and 4.2(a), as in effect
on the date hereof. To the extent (if any) the provisions of this
Agreement are inconsistent with the provisions set forth in any
Facility Agreement or the High Yield Indenture in any particular
circumstance, then the provisions set forth in this Agreement shall
prevail to the extent necessary to eliminate or avoid such
inconsistency in such circumstance.
(c) Subject to the provisions of subsection 6.1(f), this Agreement shall be binding upon and inure to the benefit of Collateral Agent, each other Party and each Secured Party and their respective successors and assigns, including, subject to compliance with the provisions of subsection 6.1(f), successors to Detroit L/C Agents, New L/C Agent and any Lenders and High Yield Trustee under the Detroit L/C Facility Agreement, New L/C Facility, and High Yield Indenture, as applicable.
(d) This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart.
(e) This Agreement shall become effective on the Closing Date and upon the execution of this Agreement by each Loan Party, New L/C Lender and Detroit L/C Lender and New L/C Agent, Detroit L/C Agents, High Yield Trustee and Collateral Agent.
(f) The Collateral Agent may deem and treat the Secured Parties executing and delivering this Agreement and the High Yield Noteholders as the "Secured Parties" for all purposes hereof unless and until a notice of the assignment or transfer of any interest held by such Party shall have been filed with the Collateral Agent in accordance with subsection 6.1(f). The Company agrees that it will advise the Collateral Agent of any transfer by any Creditor Party of any Detroit L/C Exposure or New L/C Aggregate
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Exposure held by such Creditor Party and will, from time to time upon request of the Collateral Agent, deliver a list to the Collateral Agent (which shall be distributed by the Collateral Agent to each Creditor Party) setting forth, for the Detroit L/C Exposure and New L/C Aggregate Exposure, the unpaid principal amount (or outstanding undrawn letters of credit with respect thereto) and holder thereof. The Collateral Agent may rely on such list unless, after the distribution thereof, the Collateral Agent is notified by a Secured Party that such information as set forth on such list is inaccurate.
(g) ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY OF THE
PARTIES ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY BE BROUGHT IN
ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF
NEW YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE
PARTIES IRREVOCABLY (I) ACCEPTS FOR ITSELF, IN CONNECTION WITH ITS
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS, (II) WAIVES ANY DEFENSE OF FORUM
NON CONVENIENS, (III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL, RETURN RECEIPT REQUESTED, TO SUCH PARTY HERETO AT ITS ADDRESS
PROVIDED IN ACCORDANCE WITH SUBSECTION 7.1(a) HEREOF, (IV) AGREES THAT
SERVICE OF PROCESS AS PROVIDED IN CLAUSE (III) IS SUFFICIENT TO CONFER
PERSONAL JURISDICTION OVER SUCH PERSON IN ANY SUCH PROCEEDING IN ANY
SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN
EVERY RESPECT, (V) AGREES THAT THE PARTIES HERETO RETAIN THE RIGHT TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING
PROCEEDINGS AGAINST SUCH PARTY IN THE COURTS OF ANY OTHER JURISDICTION,
AND (VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 7.1(g) RELATING
TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE
FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW
SECTION 5-1402 OR OTHERWISE.
(h) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THE INTERCREDITOR RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. Each party hereto acknowledges that this waiver is a material inducement to enter into a business relationship, that each has already relied on the waiver in entering into this Agreement, and that each will continue to rely on the waiver in their related future dealings. Each party hereto further warrants and represents that each has reviewed this waiver with its legal counsel, and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS
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WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, REPLACEMENTS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.
(i) NO CLAIM MAY BE MADE BY ANY SECURED PARTY OR ANY OF THEIR RESPECTIVE AFFILIATES, PARTNERS, DIRECTORS, OFFICERS, EMPLOYEES, OR ATTORNEYS AGAINST ANY OTHER SECURED PARTY OR THEIR RESPECTIVE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, OR ATTORNEYS FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES IN RESPECT OF ANY BREACH OR WRONGFUL CONDUCT (WHETHER THE CLAIM THEREFOR IS BASED ON CONTRACT, TORT OR DUTY IMPOSED BY LAW) IN CONNECTION WITH, ARISING OUT OF OR IN ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED AND RELATIONSHIP ESTABLISHED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH; AND EACH SECURED PARTY HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY SUCH CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.
(j) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER OR ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THAT WOULD REQUIRE APPLICATION OF ANOTHER LAW.
(k) All undertakings and agreements contained in this Agreement are solely for the benefit of the Secured Parties and there are no other Persons (other than Loan Parties to the extent expressly provided herein) who are intended to be benefited in any way by this Agreement. Each Loan Party agrees that no Secured Party shall have any liability to any of the Loan Parties for performing its obligations and responsibilities under this Agreement with respect to the other Secured Parties.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.
LOAN PARTIES:
COVANTA ENERGY CORPORATION
By: _______________________________________
Name: Anthony Orlando
Title: Authorized Officer
Notice Address:
c/o Covanta Energy Corporation
40 Lane Road
Fairfield, NJ 07007
Attn: Timothy J. Simpson
EACH OF THE ENTITIES NAMED ON SCHEDULE A ANNEXED HERETO, AS DETROIT L/C BORROWERS, NEW L/C BORROWERS AND HIGH YIELD GUARANTORS
By: ____________________________________________ Name: Anthony Orlando Authorized Officer
Notice Address:
c/o Covanta Energy Corporation
40 Lane Road
Fairfield, NJ 07007
Attn: Timothy J. Simpson
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Schedule A
1. AMOR 14 Corporation
2. Burney Mountain Power
3. Covanta Acquisition, Inc.
4. Covanta Alexandria/Arlington, Inc.
5. Covanta Bessemer, Inc.
6. Covanta Bristol, Inc.
7. Covanta Cunningham Environmental Support, Inc.
8. Covanta Energy Americas, Inc.
9. Covanta Energy Construction, Inc.
10. Covanta Energy Group, Inc.
11. Covanta Energy International, Inc.
12. Covanta Energy Resource Corp.
13. Covanta Energy Services, Inc.
14. Covanta Energy West, Inc.
15. Covanta Engineering Services, Inc.
16. Covanta Fairfax, Inc.
17. Covanta Geothermal Operations Holdings, Inc.
18. Covanta Geothermal Operations, Inc.
19. Covanta Haverhill Properties, Inc.
20. Covanta Haverhill, Inc.
21. Covanta Heber Field Energy, Inc.
22. Covanta Hennepin Energy Resource Co., Limited Partnership
23. Covanta Hillsborough, Inc.
24. Covanta Honolulu Resource Recovery Venture
25. Covanta Huntsville, Inc.
26. Covanta Hydro Energy, Inc.
27. Covanta Hydro Operations West, Inc.
28. Covanta Hydro Operations, Inc.
29. Covanta Imperial Power Services, Inc.
30. Covanta Indianapolis, Inc.
31. Covanta Kent, Inc.
32. Covanta Lancaster, Inc.
33. Covanta Lee, Inc.
34. Covanta Long Island, Inc.
35. Covanta Marion Land Corp.
36. Covanta Marion, Inc.
37. Covanta Mid-Conn., Inc.
38. Covanta Montgomery, Inc.
39. Covanta New Martinsville Hydroelectric Corporation
40. Covanta New Martinsville Hydro-Operations Corporation
41. Covanta Oahu Waste Energy Recovery, Inc.
42. Covanta Omega Lease, Inc.
43. Covanta Onondaga Operations, Inc.
44. Covanta Operations of Union, LLC
Domestic Intercreditor Agreement
45. Covanta OPW Associates, Inc.
46. Covanta OPWH, Inc.
47. Covanta Pasco, Inc.
48. Covanta Plant Services of New Jersey, Inc.
49. Covanta Power Equity Corporation
50. Covanta Power Pacific, Inc.
51. Covanta Power Plant Operations
52. Covanta Projects of Hawaii, Inc.
53. Covanta Projects, Inc.
54. Covanta RRS Holdings, Inc.
55. Covanta Secure Services, Inc.
56. Covanta SIGC Energy, Inc.
57. Covanta SIGC Energy II, Inc.
58. Covanta SIGC Geothermal Operations, Inc.
59. Covanta Stanislaus, Inc.
60. Covanta Systems, LLC
61. Covanta Wallingford Associates, Inc.
62. Covanta Waste to Energy , LLC
63. Covanta Water Holdings, Inc.
64. Covanta Water Systems, Inc.
65. Covanta Water Treatment Services, Inc.
66. DSS Environmental, Inc.
67. ERC Energy II, Inc.
68. ERC Energy, Inc.
69. Haverhill Power, LLC
70. Heber Field Energy II, Inc.
71. Heber Loan Partners
72. LMI, Inc.
73. Mammoth Geothermal Company
74. Mammoth Power Company
75. Michigan Waste Energy, Inc.
76. Mt. Lassen Power
77. Pacific Geothermal Company
78. Pacific Oroville Power, Inc.
79. Pacific Wood Fuels Company
80. Pacific Wood Services Company
81. Three Mountain Operations, Inc.
82. Three Mountain Power, LLC
Domestic Intercreditor Agreement
MANAGEMENT SERVICES AND REIMBURSEMENT AGREEMENT BENEFICIARIES:
COVANTA ENERGY CORPORATION
By: __________________________________________
Name:
Title:
Notice Address:
c/o Covanta Energy Group, Inc.
40 Lane Road
Fairfield, NJ 07007
Attn: Timothy J. Simpson
EACH OF THE ENTITIES NAMED ON SCHEDULE B ANNEXED HERETO, AS MANAGEMENT SERVICES AND REIMBURSEMENT AGREEMENT BENEFICIARIES
By: ___________________________________________ Name: Timothy J. Simpson Authorized Officer
Notice Address for each Management Services Agreement Beneficiary:
c/o Covanta Energy Group, Inc.
40 Lane Road
Fairfield, NJ 07007
Attn: Timothy J. Simpson
Domestic Intercreditor Agreement
Schedule B
1. Covanta Energy Group, Inc.
2. Covanta Projects, Inc.
Domestic Intercreditor Agreement
DANIELSON:
DANIELSON HOLDING CORPORATION
By: __________________________
Name: Philip G. Tinkler
Title: Chief Financial Officer
Notice Address:
Danielson Holding Corporation
2 North Riverside Plaza
Suite 600
Chicago, Illinois 60606
Attention: Philip G. Tinkler
Telephone: (312) 466-3842
Facsimile: (312) 470-1126
with copies to:
Neal, Gerber & Eisenberg LLP
Two North LaSalle Street
Suite 2200
Chicago, Illinois 60602
Attention: David S. Stone
Telephone: (312) 269-8000
Facsimile: (312) 269-1747
and
Skadden, Arps, Slate, Meagher & Flom LLP
333 W. Wacker Drive, Suite 2100
Chicago, Illinois 60606
Attention: Peter C. Krupp
Telephone: (312) 407-0855
Facsimile: (312) 407-0411
Domestic Intercreditor Agreement
AGENTS AND LENDERS:
BANK OF AMERICA, N.A.,
as Collateral Agent and Detroit L/C Facility Agent
By: ______________________________________________
Name: Henry Y. Yu
Title: Managing Director
Notice Address:
Bank of America, N.A., as Administrative Agent
555 So. Flower Street, 17th Floor
CA9-706-17-54
Los Angeles, California 90071
Attention: David Price, Vice President
Voice: (213) 345-1300
Fax: (415) 503-5011
email: david.price@bankofamerica.com
BANK OF AMERICA, N.A.,
as Cash Management Bank
By: ______________________________________________
Name: Henry Y. Yu
Title: Managing Director
Notice Address:
Domestic Intercreditor Agreement
DEUTSCHE BANK SECURITIES, INC.,
as Detroit L/C Documentation Agent
By: ______________________________________________
Name:
Title:
By: ______________________________________________
Name:
Title:
Notice Address:
Attention:
Deutsche Bank Securities, Inc.
60 Wall Street
New York, NY 10005
Domestic Intercreditor Agreement
BANK ONE, NA,
as New L/C Agent and a New L/C Lender
By: ______________________________________________
Name:
Title:
Notice Address:
Domestic Intercreditor Agreement
SZ INVESTMENTS, L.L.C.,
as a New L/C Lender
By: ________________________________________
Name: Philip G. Tinkler
Title: Treasurer
Notice Address:
Two North Riverside Plaza,
Suite 600,
Chicago, Illinois 60606
Attn: Donald J. Liebentritt
Domestic Intercreditor Agreement
THIRD AVENUE TRUST, ON BEHALF OF THIRD AVENUE
VALUE FUND SERIES,
as a New L/C Lender
By: ________________________________________
Name:
Title:
Notice Address:
622 Third Avenue
New York, NY 10017
Attn: General Counsel
Facsimile: (212) 735-0003
with a copy to Pillsbury Winthrop LLP
One Battery Park Plaza
New York, NY 10004
Attn: Richard Epling, Esq.
Facsimile: (212) 858-1500
Domestic Intercreditor Agreement
D.E. SHAW LAMINAR PORTFOLIOS, L.L.C.,
as a New L/C Lender
By: ______________________________________________
Name:
Title:
Notice Address:
Domestic Intercreditor Agreement
BANC OF AMERICA SECURITIES LLC,
as Agent for BANK OF AMERICA, N.A., as a Detroit
L/C Lender
By: ______________________________________________
Name:
Title:
Domestic Intercreditor Agreement
BAYERISCHE HYPO-UND VEREINSBANK AG,
as a Detroit L/C Lender
By: ______________________________________________
Name:
Title:
By: ______________________________________________
Name:
Title:
Domestic Intercreditor Agreement
BEAR STEARNS & CO. INC.,
as a Detroit L/C Lender
By: ______________________________________________
Name:
Title:
Domestic Intercreditor Agreement
DEUTSCHE BANK AG, NEW YORK BRANCH,
as a Detroit L/C Lender
By: ______________________________________________
Name: Keith Braun
Title: Director
By: ______________________________________________
Name: Patrick Dowling
Title: Vice President
Domestic Intercreditor Agreement
IIB BANK LIMITED,
as a Detroit L/C Lender
By: ______________________________________________
Name:
Title:
By: ______________________________________________
Name:
Title:
Domestic Intercreditor Agreement
KBC BANK,
as a Detroit L/C Lender
By: ______________________________________________
Name:
Title:
By: ______________________________________________
Name:
Title:
Notice Address:
Attention: Rose Pagan
KBC Bank NV, New York Branch
125 West 55th Street
New York, NY 10019
Telephone No.: (212) 541-0657
Fax No.: (212) 956-5581
Domestic Intercreditor Agreement
LANDESBANK HESSEN-THURINGEN GIROZENTRALE,
as a Detroit L/C Lender
By: ______________________________________________
Name:
Title:
By: ______________________________________________
Name:
Title:
Notice Address:
420 Fifth Avenue
New York, New York 10018
Attention: Structured Finance
Telephone: 212-703-5303
Telecopier: 212-703-5262
Domestic Intercreditor Agreement
MERRILL LYNCH, PIERCE, FENNER & SMITH, INCORPORATED,
as a Detroit L/C Lender
By: ______________________________________________
Name:
Title:
Domestic Intercreditor Agreement
THE BANK OF NEW YORK,
as a Detroit L/C Lender
By: ______________________________________________
Name:
Title:
Domestic Intercreditor Agreement
UBS AG, STAMFORD BRANCH,
as issuer of Detroit L/Cs
By: ______________________________________________
Name:
Title:
By: ______________________________________________
Name:
Title:
Domestic Intercreditor Agreement
UBS LOAN FINANCE LLC,
as a Detroit L/C Lender
By: ______________________________________________
Name:
Title:
By: ______________________________________________
Name:
Title:
Domestic Intercreditor Agreement
U.S. BANK NATIONAL ASSOCIATION
(FORMERLY KNOWN AS FIRSTAR BANK, N.A.),
as a Detroit L/C Lender
By: ______________________________________________
Name: Alan R. Milster
Title: Vice President
Domestic Intercreditor Agreement
WESTLB AG (FORMERLY KNOWN AS WESTDEUTSCHE
LANDESBANK GIROZENTRALE), NEW YORK BRANCH,
as a Detroit L/C Lender
By: ______________________________________________
Name:
Title:
By: ______________________________________________
Name:
Title:
Domestic Intercreditor Agreement
HIGH YIELD TRUSTEE:
U.S. BANK NATIONAL ASSOCIATION, as Trustee
By: ______________________________________________
Name:
Title:
Notice Address:
Domestic Intercreditor Agreement
Annex 1 to Intercreditor Agreement
ASSUMPTION AGREEMENT, dated as of __________, 200_, made by
_________________ (the "ADDITIONAL SECURED PARTY").
W I T N E S S E T H :
WHEREAS, Covanta Energy Corporation ("COVANTA") and the Subsidiaries of Covanta listed on the signature pages thereof (together with any other borrowers that subsequently become party thereto); certain entities listed on the signature pages thereof as New L/C Lenders ("NEW L/C LENDERS"); certain financial institutions listed on the signature pages thereof as Detroit L/C Lenders ("DETROIT L/C LENDERS"); Bank of America, N.A., as administrative agent for Detroit L/C Lenders and as collateral agent, and Deutsche Bank Securities, Inc., as documentation agent for and Detroit L/C Lenders, Bank One, NA, as administrative agent for the New L/C Lenders, Danielson Holding Corporation, the companies listed on the signature pages thereof as Management Services and Reimbursement Agreement Beneficiaries and U.S. Bank National Association, in its capacity as trustee under the High Yield Indenture are parties to that certain Intercreditor Agreement dated as of March 10, 2004 (as amended, supplemented or otherwise modified from time to time, the "INTERCREDITOR AGREEMENT");
WHEREAS, the Loan Parties have executed the Collateral Documents pursuant to which the Loan Parties party to each such document have granted to the Collateral Agent, for the benefit of the Secured Parties, a security interest in the Collateral to secure their respective obligations arising in connection with the Credit Document;
WHEREAS, subsection 6.1(f) of the Intercreditor Agreement requires the Additional Secured Party to become a party to the Intercreditor Agreement; and
WHEREAS, the Additional Secured Party has agreed to execute and deliver this Assumption Agreement in order to become a party to the Intercreditor Agreement;
NOW, THEREFORE, IT IS AGREED:
1. Defined Terms. Unless otherwise defined herein, terms defined in the Intercreditor Agreement and used herein shall have the meanings given to them in the Intercreditor Agreement.
2. Intercreditor Agreement. By executing and delivering this
Assumption Agreement, the Additional Secured Party hereby becomes a party to the
Intercreditor Agreement as [New L/C Agent] [Detroit L/C Facility Agent] [Detroit
L/C Documentation Agent] [High Yield Trustee] [a Detroit L/C Lender] [a New L/C
Lender] and Secured Party thereunder with the same force and effect as if
originally named therein as [New L/C Agent] [Detroit L/C Facility Agent]
[Detroit L/C Documentation Agent] [High Yield Trustee] [a Detroit L/C Lender]
Domestic Intercreditor Agreement
A-1-1
[a New L/C Lender] and Secured Party and, without limiting the generality of the foregoing, hereby expressly assumes all obligations and liabilities of [New L/C Agent] [Detroit L/C Facility Agent] [Detroit L/C Documentation Agent] [High Yield Trustee] [a Detroit L/C Lender] [a New L/C Lender] and a Secured Party thereunder and agrees to be bound by the terms thereof.
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL SECURED PARTY]
By: ______________________________________________
Name:
Title:
Domestic Intercreditor Agreement
A-1-2
Annex 2 to Intercreditor Agreement v1
COUNTERPART
COUNTERPART (this "COUNTERPART"), dated as of _______, is delivered pursuant to subsection 6.1(l) of the Intercreditor Agreement referred to below. The undersigned hereby agrees that this Counterpart may be attached to the Intercreditor Agreement, dated as of March 10, 2004 (said Intercreditor Agreement, as it may heretofore have been and as it may hereafter be further amended, restated, supplemented or otherwise modified from time to time being the "INTERCREDITOR AGREEMENT"; capitalized terms used herein not otherwise defined herein shall have the meanings ascribed therein), among Covanta Energy Corporation ("COVANTA") and the subsidiaries of Covanta listed on the signature pages thereof (together with any other borrowers that subsequently become party thereto); certain entities listed on the signature pages thereof as New L/C Lenders ("NEW L/C LENDERS"); certain financial institutions listed on the signature pages thereof as Detroit L/C Lenders ("DETROIT L/C LENDERS"); Bank of America, N.A., as administrative agent for Detroit L/C Lenders and as collateral agent, and Deutsche Bank Securities, Inc., as documentation agent for Detroit L/C Lenders, Bank One, NA, as administrative agent for the New L/C Lenders, Danielson Holding Corporation, the companies listed on the signature pages thereof as Management Services and Reimbursement Agreement Beneficiaries and U.S. Bank National Association, in its capacity as trustee under the High Yield Indenture. The undersigned by executing and delivering this Counterpart hereby becomes a [New L/C Borrower][Detroit L/C Borrower] under the Intercreditor Agreement in accordance with subsection 6.1(l) thereof and agrees to be bound by all of the terms thereof.
[NAME OF ADDITIONAL DETROIT L/C BORROWER/NEW
L/C BORROWER]
By: ______________________________________________
Name:
Title:
Domestic Intercreditor Agreement
A-2-1
EXHIBIT 4.26
INTERCREDITOR AGREEMENT
This INTERCREDITOR AGREEMENT (as amended, restated,
supplemented or otherwise modified from time to time in accordance with the
terms hereof, herein called this "AGREEMENT") is dated as of March __, 2004 and
entered into by and among COVANTA POWER INTERNATIONAL HOLDINGS, INC., a Delaware
corporation ("CPIH" or "COMPANY"), and THE SUBSIDIARIES OF CPIH LISTED ON THE
SIGNATURE PAGES HEREOF AS REVOLVER BORROWERS (together with Company,
collectively, "REVOLVER BORROWERS" and each a "REVOLVER BORROWER") and THE
SUBSIDIARIES OF CPIH LISTED ON THE SIGNATURE PAGES HEREOF AS TERM LOAN BORROWERS
(together with Company, collectively, "TERM LOAN BORROWERS" and each a "TERM
LOAN BORROWER"; the Revolver Borrowers together with the Term Loan Borrowers,
collectively, "BORROWERS" and each a "BORROWER"); COVANTA ENERGY AMERICAS, INC.,
a Delaware corporation ("CEA"); THE FINANCIAL INSTITUTIONS LISTED ON THE
SIGNATURE PAGES HEREOF AS REVOLVER LENDERS (each, in its capacity as a Revolver
Lender, together with any other Person (this and other capitalized terms used
herein without definition being used as defined in subsection 1.1) that becomes
a party hereto as a Revolver Lender pursuant to subsection 6.1(f), individually
referred to herein as a "REVOLVER LENDER" and collectively as "REVOLVER
LENDERS"); THE PERSONS IDENTIFIED AS TERM LOAN LENDERS ON THE SIGNATURE PAGES
HEREOF (each, in its capacity as a Term Loan Lender, together with any other
Person that becomes a party hereto as a Term Loan Lender pursuant to subsection
6.1(f) or subsection 7.1(c), individually referred to herein as a "TERM LOAN
LENDER" and collectively as "TERM LOAN LENDERS"); BANK OF AMERICA, N.A. ("BANK
OF AMERICA"), as administrative agent for Term Loan Lenders (and any successor,
administrative agent for Term Loan Lenders pursuant to the Term Loan Agreement,
in such capacity "TERM LOAN AGENT"), as Collateral Agent and as Cash Management
Bank; DEUTSCHE BANK SECURITIES, INC., as documentation agent for Term Loan
Lenders (and any successor documentation agent for the Term Loan Lenders
pursuant to the Term Loan Agreement, in such capacity "TERM LOAN DOCUMENTATION
AGENT"); DEUTSCHE BANK AG, NEW YORK BRANCH, as administrative agent for Revolver
Lenders (and any successor administrative agent for Revolver Lenders pursuant to
the Revolver Credit Agreement, in such capacity "REVOLVER AGENT"); U.S. BANK
NATIONAL ASSOCIATION, in its capacity as agent for the holders of the
Prepetition Unsecured Claims Participation Interest pursuant to the Plan of
Reorganization (in such capacity, the "PREPETITION UNSECURED CLAIMS AGENT"); THE
COMPANIES LISTED ON THE SIGNATURE PAGES HEREOF AS MANAGEMENT SERVICES AND
REIMBURSEMENT AGREEMENT BENEFICIARIES (the "MANAGEMENT SERVICES AND
REIMBURSEMENT AGREEMENT BENEFICIARIES"); THE COMPANIES LISTED ON THE SIGNATURE
PAGES HEREOF AS MANAGEMENT SERVICES AND REIMBURSEMENT AGREEMENT OBLIGORS (the
"MANAGEMENT SERVICES AND REIMBURSEMENT AGREEMENT OBLIGORS") and the other
Persons who may become parties to this Agreement from time to time pursuant to
and in accordance with subsections 6.1(f) of this Agreement; WELLS FARGO BANK,
N.A., as Debenture Disbursing Agent; and U.S. BANK NATIONAL ASSOCIATION, as
Allowed Class 6 Disbursing Agent.
R E C I T A L S
WHEREAS, the Borrowers have proposed, their creditors have approved, and the Bankruptcy Court has confirmed, the Plan of Reorganization;
WHEREAS, in connection with the Plan of Reorganization, simultaneously herewith the Borrowers have received financing pursuant to the Term Loan Agreement and Revolver Credit Agreement;
WHEREAS, it is a condition precedent to (i) the obligations of Revolver Lenders to enter into and extend credit under the Revolver Credit Agreement, (ii) the obligations of Term Loan Lenders to enter into and extend credit under the Term Loan Agreement, (iii) the obligations of Management Services and Reimbursement Agreement Beneficiaries to enter into the Management Services and Reimbursement Agreement and (iv) the effectiveness of the Plan of Reorganization, as applicable, that each Party shall have executed and delivered this Agreement to the Collateral Agent;
WHEREAS, on the date hereof Loan Parties have executed and delivered to Collateral Agent the Collateral Documents pursuant to which Loan Parties granted a security interest in the Collateral as security for (i) in the case of Revolver Borrowers, all Obligations of Revolver Borrowers under and in respect of the Revolver Credit Agreement and all other Revolver Documents to which Revolver Borrowers are a party to from time to time, in each case as described therein, and (ii) in the case of Term Loan Borrowers, all Obligations of Term Loan Borrowers under and in respect of the Term Loan Agreement and all other Term Loan Documents to which Term Loan Borrowers are party to from time to time, in each case as described therein;
WHEREAS, Creditor Parties desire to set forth certain provisions regarding the appointment, duties and responsibilities of Collateral Agent and to set forth certain other provisions concerning the obligations of Loan Parties to Creditor Parties under the agreements referred to in the foregoing recitals; and
WHEREAS, Creditor Parties wish to set forth their mutual intentions as to certain matters relating to the exercise of remedies with respect to the Collateral and payments made by or for the account of the applicable Loan Parties under the Credit Documents as more fully set forth herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION I
1.1 DEFINITIONS. Terms used in the Agreement have the meanings set forth in the introduction and recitals hereto. In addition, the following terms shall have the following meanings:
"ADDITIONAL INTEREST LOANS" means "Additional Interest Loans" as such term is defined in the Term Loan Agreement.
"AFFILIATE", as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person (other than exclusively as a result of such Person's role as a senior executive of that Person or Project manager or operator), whether through the ownership of voting securities or by contract or otherwise.
"AGENTS" means Collateral Agent, Term Loan Agents and Revolver Agent.
"AGGREGATE NET SALES PROCEEDS" means (i) Net Asset Sales Proceeds and (ii) Proceeds received by Collateral Agent in connection with the foreclosure or other disposition of Collateral in connection with any Enforcement Action.
"ALLOWED CLASS 6 CLAIMS" means "Allowed Class 6 Claims" as such term is defined in the Approved Plan of Reorganization.
"ALLOWED CLASS 6 CLOSING DATE" means the date on which the Bankruptcy Court shall have entered the Allowed Class 6 Disbursing Agent Authorization Order.
"ALLOWED CLASS 6 DISBURSING AGENT" means U.S. Bank National Association, in its capacity as disbursing agent for the holders of the Allowed Class 6 Claims, and each of its successors, under the Approved Plan of Reorganization, Confirmation Order, the Allowed Class 6 Disbursing Agent Authorization Order, and the agency agreement relating thereto to be entered into on or after the Closing Date.
"ALLOWED CLASS 6 DISBURSING AGENT AUTHORIZATION ORDER" means an order or orders of the Bankruptcy Court authorizing U.S. Bank National Association to enter into this Agreement as a Term Loan Lender and to serve as the Allowed Class 6 Disbursing Agent with respect to Term Loans allocable to the Allowed Class 6 Disbursing Agent as described in the first sentence of subsection 9.25A(i) of the Term Loan Agreement.
"ALLOWED CLASS 6 INTEREST" means, with respect to any Non-Confirming Holder, (i) prior to the Closing Date, an Allowed Class 6 Claim of such Non-Confirming Holder, and (ii) on and after the Closing Date, the interest held by such Non-Confirming Holder in any Term Loan distributed on the Allowed 6 Closing Date or the Determination Date to the Allowed Class 6 Disbursing Agent.
"APPROVED OPERATING EXPENSES" means, as at any date of
determination, the following operating expenses of Company and its Domestic
Subsidiaries: (i) payments then due and payable by Company to Covanta pursuant
Sections 2, 3, and 4(a) of the Management Services and Reimbursement Agreement,
(ii) amounts then due and payable to DHC pursuant to Section 6 of the DHC Tax
Sharing Agreement, and (iii) fees and expenses then due and payable to senior
executive management of Company (including any success-based fees). "Approved
Operating Expenses" shall not include any Management Services and Reimbursement
Agreement Obligations or operating expenses directly related to any Project
(other than
operating expenses related to a Project and payable to Management Services and Reimbursement Agreement Beneficiaries pursuant to the Management Services and Reimbursement Agreement).
"APPROVED PLAN OF REORGANIZATION" means the Plan of Reorganization and all amendments, modifications, revisions and restatements thereof, if any, approved by the creditors of Borrowers in requisite number and percentage, and confirmed by the Bankruptcy Court pursuant to the Confirmation Order and delivered to Revolver Agents and Term Loan Agents.
"ASSET SALE" means (A) the sale by CEA of any of the Capital
Stock of Company to any Person or (B) the sale by Company or any of its
Subsidiaries to any Person of (i) any of the Capital Stock of any of Company's
Subsidiaries, (ii) substantially all of the assets of any division or line of
business of Company or any of its Subsidiaries, or (iii) any other assets
(whether tangible or intangible) of Company or any of its Subsidiaries (other
than (a) inventory sold in the ordinary course of business and (b) any such
other assets to the extent that the aggregate value of such assets sold in any
single transaction or related series of transactions is equal to $250,000 or
less and the aggregate value of all such other assets since the Closing Date is
equal to $1,000,000 or less, in each case so long as not less than 90% of the
consideration received for such assets shall be cash); provided, however, that
Asset Sales shall not include (1) any sale or discount, in each case without
recourse, of accounts receivable arising in the ordinary course of business, but
only in connection with the compromise or collection thereof (provided, that
sales and discounts of not more than $2,000,000 in the aggregate in face value
of accounts receivable may be excluded from Asset Sales pursuant to this clause
(1), and the sole consideration received in connection with any such sale of
accounts receivable shall be cash), (2) any sale or exchange of specific items
of equipment, so long as the purpose of each such sale or exchange is to acquire
(and results within 120 days of such sale or exchange in the acquisition of)
replacement items of equipment which are the functional equivalent of the item
of equipment so sold or exchanged (provided, that any cash received in
connection with any such sale or exchange, to the extent in excess of the
amounts set forth in clause (b) of this definition, shall be deemed cash
proceeds of an Asset Sale), (3) disposals of obsolete, worn out or surplus
property in the ordinary course of business (provided, that not less than 75% of
the consideration, if any, received in connection with any such disposal shall
be cash, and any such cash received, to the extent in excess of the amounts set
forth in clause (b) of this definition, shall be deemed cash proceeds of an
Asset Sale), or (4) any discount or compromise of notes or accounts receivable
for less than the face value thereof, to the extent Company deems necessary in
order to resolve disputes that occur in the ordinary course of business or (5)
any sale of shares in the Madurai Project Entity permitted under subsection
6.7(vi) of each Credit Agreement.
"BANK OF AMERICA" shall have the meaning assigned to that term in the introduction to this Agreement.
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled "Bankruptcy", as now and hereafter in effect, or any successor statute.
"BANKRUPTCY COURT" means the United States Bankruptcy Court for the Southern District of New York and any other court properly exercising jurisdiction over any relevant Chapter 11 Case.
"BANKRUPTCY EVENT" means any of one or more of the following events regardless of the reason therefor:
(a) (i) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of any Loan Party in an involuntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, which decree or order is not stayed; or any other similar relief shall be granted under any applicable federal, or state law; or (ii) an involuntary case shall be commenced against any Loan Party under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over any Loan Party, or over all or a substantial part of its property, shall have been entered; or the involuntary appointment of an interim receiver, trustee or other custodian of any Loan Party for all or a substantial part of its property; or the issuance of a warrant of attachment, execution or similar process against any substantial part of the property of any Loan Party, and the continuance of any such event in clause (ii) for 60 days unless dismissed, bonded or discharged; or
(b) (i) any Loan Party shall have an order for relief entered with respect to it or commence a voluntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property, or shall make any assignment for the benefit of creditors; or
(ii) the inability or failure of any Loan Party, or the
admission by any Loan Party in writing of its inability, to pay its
debts as such debts become due; or the Governing Body (or any committee
thereof) of any Loan Party adopts any resolution or otherwise
authorizes action to approve any of the actions referred to in clause
(i) or this clause (ii); or
(c) any order, judgment or decree shall be entered against any Loan Party decreeing the dissolution, winding up or split up of that Loan Party and such order shall remain undischarged or unstayed for a period in excess of 30 days.
"BANKRUPTCY PROCEEDING" means any case or proceeding of the type described in the definition of "Bankruptcy Event" with respect to any Loan Party.
"BORROWER" and "BORROWERS" shall have the meaning assigned to such terms in the introduction to this Agreement.
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York, the State of Texas or the State of California or is a day on which banking institutions located in any such state are authorized or required by law or other governmental action to close.
"CAPITAL STOCK" means the capital stock or other equity interests of a Person.
"CASH MANAGEMENT BANK" shall have the meaning assigned to that term in the definition of "Cash Management System".
"CASH MANAGEMENT OBLIGATIONS" means the obligations of Borrowers to the Cash Management Bank arising from or relating to the Cash Management System including any liability of Borrower on any claim arising out of or relating to the Cash Management System, whether or not the right to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed or contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any bankruptcy, insolvency, reorganization or other similar proceeding.
"CASH MANAGEMENT SYSTEM" means the cash management system of Company and its Subsidiaries in the United States maintained with Bank of America (in such capacity, "CASH MANAGEMENT BANK") as described in Schedule 3.1P annexed to each Credit Agreement, as such Cash Management System may be modified pursuant to subsection 5.10 of each Credit Agreement, and any other related services provided by Cash Management Bank to Company and its Subsidiaries, including treasury, depositary and cash management services or in connection with automated clearing house transfers of funds.
"CASH ON HAND" means, as of any date of determination, the aggregate amounts on deposit in the Cash Management System in the United States as of the close of business on the preceding Business Day.
"CEA" shall have the meaning assigned to that term in the introduction to this Agreement.
"CEA STOCK PLEDGE AGREEMENT" means the Pledge Agreement executed and delivered by CEA on the Closing Date, substantially in the form of Exhibit VIII annexed to the Term Loan Agreement (it being understood that such Pledge Agreement shall contain a covenant requiring CEA to pay to Collateral Agent any proceeds received by it from or in connection with the sale of any of the common stock of Company to any Person), as such Pledge Agreement may thereafter be amended, restated, supplemented or otherwise modified from time to time to the extent permitted pursuant to subsection 2.4.
"CLOSING DATE" means March __, 2004.
"COLLATERAL" means, collectively, all of the real, personal and mixed property (including Capital Stock) and interests in property now owned or hereafter acquired by any Loan Party in or upon which a security interest, Lien or mortgage is granted or purported to be granted to Collateral Agent pursuant to the Collateral Documents, including Proceeds thereof.
"COLLATERAL AGENT" shall have the meaning assigned to that term in subsection 2.1.
"COLLATERAL DOCUMENTS" means the Security Agreement, any foreign pledge agreements, Control Agreements, Mortgages (as defined in the Credit Agreements), CEA Stock
Pledge Agreement and all other instruments or documents (pursuant to which a Lien to secure all or any portion of the Secured Obligations is purported or intended to be created, granted, evidenced or perfected) delivered from time to time by any Loan Party pursuant to the Credit Agreements or any other Revolver Document or Term Loan Document, in each case in order to grant to Collateral Agent a Lien on any real, personal or mixed property as security for any or all of the Secured Obligations, as such instruments and documents may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted pursuant to subsection 2.4.
"COMPANY" shall have the meaning assigned to that term in the introduction to this Agreement.
"CONFIRMATION ORDER" means the Findings of Fact, Conclusions of Law and Order under 11 U.S.C. Section 1129 and Rule 3020 of the Federal Rules of Bankruptcy Procedure Confirming Debtors' Second Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code entered by the Bankruptcy Court on March 5, 2004 in the Chapter 11 Cases, without modification, revision or amendment.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any provision of any Security issued by that Person or of any material indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject.
"CONTROL AGREEMENT" means an agreement, satisfactory in form and substance to Revolver Agent and Term Loan Agent and executed by the financial institution or securities intermediary at which a Deposit Account or a Securities Account, as the case may be, is maintained, pursuant to which such financial institution or securities intermediary confirms and acknowledges Collateral Agent's security interest in such account, and agrees that the financial institution or securities intermediary, as the case may be, will comply with instructions originated by Collateral Agent as to disposition of funds in such account, without further consent by Company or any Subsidiary, as such agreement may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted pursuant to subsection 2.4.
"COVANTA" means Covanta Energy Corporation, a Delaware corporation.
"CREDIT AGREEMENTS" means the Term Loan Agreement and Revolver Credit Agreement.
"CREDIT DOCUMENTS" means, collectively, (i) the Term Loan Agreement and the other Term Loan Documents, (ii) the Revolver Credit Agreement and the other Revolver Documents, and (iii) the Management Services and Reimbursement Agreement, in each case as they may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted thereunder and pursuant to subsection 2.5.
"CREDITOR OBLIGATIONS" means, collectively, the Approved Operating Expenses, Revolver Loan Obligations, Term Loan Obligations, Management Services and Reimbursement Agreement Obligations, Cash Management Obligations, and Prepetition Unsecured Claims Participation Interest.
"CREDITOR PARTIES" means Collateral Agent, Revolver Agent, Term Loan Agents, Revolver Lenders, Term Loan Lenders, Cash Management Bank, Prepetition Unsecured Claims Agent and Management Services and Reimbursement Agreement Beneficiaries.
"DEBENTURE CLOSING DATE" means the date on which the Bankruptcy Court shall have entered the Debenture Disbursing Agent Authorization Order.
"DEBENTURE DISBURSING AGENT" means Wells Fargo Bank, N.A., in its capacity as disbursing agent for the holders of the 9.25% Debentures, and each of its successors, under the Approved Plan of Reorganization, the Confirmation Order, the Debenture Disbursing Agent Authorization Order and the disbursing agreement relating thereto to be entered into on or after the Closing Date.
"DEBENTURE DISBURSING AGENT AUTHORIZATION ORDER" means an order or orders of the Bankruptcy Court authorizing Wells Fargo Bank, N.A. to enter into this Agreement as a Term Loan Lender and to serve as the Debenture Disbursing Agent with respect to Term Loans allocable to the Debenture Disbursing Agent as described in the first sentence of subsection 9.25A(i) of the Term Loan Agreement.
"DEBENTURE INTEREST" means, with respect to any Non-Confirming Holder, (i) prior to the Debenture Closing Date, the claim in respect of the 9.25% Debentures held by such Non-Confirming Holder, and (ii) on and after the Debenture Closing Date, the interest held by such Non-Confirming Holder in any Term Loan distributed on the Debenture Closing Date or the Determination Date to the Debenture Disbursing Agent; provided, however, that any Debenture Interest shall cease to be a Debenture Interest at such time that the Non-Confirming Holder with respect thereto shall become a Lender in accordance with subsection 9.25 of the Term Loan Agreement.
"DETERMINATION DATE" means the "Determination Date" as defined in the Approved Plan of Reorganization.
"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or similar account maintained with a Person engaged in the business of banking, including a savings bank, savings and loan association, credit union or trust company.
"DHC" means Danielson Holding Corporation, a Delaware corporation.
"DHC TAX SHARING AGREEMENT" means the tax sharing agreement entered into by DHC, Company and Covanta on the Closing Date, as such agreement may be amended, restated supplemented or otherwise modified from time to time to the extent permitted thereunder and pursuant to subsection 2.5(a).
"DISBURSING AGENT" means either Debenture Disbursing Agent or Allowed Class 6 Disbursing Agent, and "DISBURSING AGENTS" means each of them.
"DISTRIBUTION" means, with respect to any Creditor Obligation,
(a) any payment or distribution by Covanta or any of its Subsidiaries of cash,
securities or other assets and properties of any kind whatsoever, real or
personal, tangible or intangible, or mixed, whether
now owned or existing or hereafter acquired or arising and wheresoever located, by set-off or otherwise, on account of such Creditor Obligation, (b) any redemption, purchase or other acquisition of such Creditor Obligation by Covanta or any of its Subsidiaries or (c) the granting of any Lien to or for the benefit of the holders of such Creditor Obligation in or upon any or all assets and properties of any kind whatsoever, real or personal, tangible or intangible, or mixed, whether now owned or existing or hereafter acquired or arising and wheresoever located of Covanta or any of its Subsidiaries.
"DOMESTIC SUBSIDIARY" means any Subsidiary of any Borrower that is incorporated or organized under the laws of the United States, any state thereof or in the District of Columbia.
"ENFORCEMENT ACTION" shall mean the exercise by any Secured Party of any of the enforcement rights and remedies under, and subject to the provisions of, the Collateral Documents at any time on or after an Event of Default, including any or all of the following: any motion to vacate any stay on enforcement of the Liens on the Collateral, solicitation of bids from third parties to conduct the liquidation of Collateral, the engagement or retention of third parties for the purposes of marketing, promoting or selling all or any Collateral, the commencement of any action to foreclose on the Liens on any of the Collateral, notification of account debtors to make payments to any Secured Party or its agents, any action to take possession of any Collateral or otherwise in connection with the preservation or protection of any of the Collateral, its value or any rights or remedies therein or otherwise or as may be deemed necessary or appropriate to enhance the likelihood or maximize the repayment of the Secured Obligations.
"EVENT OF DEFAULT" means a Revolver Event of Default and/or a Term Loan Event of Default.
"EXISTING IPP INTERNATIONAL PROJECT GUARANTIES" means, collectively, (i) the existing guaranty by Covanta Energy Group of the obligations of certain Subsidiaries of Company under certain agreements relating to the Haripur Project, the Samalpatti Project and the Trezzo Project, (ii) the existing guaranty by Covanta Projects, Inc. of the obligations of certain Subsidiaries of Company under certain agreements relating to the Quezon Project, and (iii) the existing guaranty by Covanta of the obligations certain Subsidiaries of Company under certain agreements relating to the Balaji/Madurai Project and the LICA Project, as each such guaranty may be amended, restated, supplemented or otherwise modified to the extent permitted pursuant to subsection 2.5(a).
"GOVERNING BODY" means the board of directors or other body having the power to direct or cause the direction of the management and policies of a Person that is a corporation, partnership, trust or limited liability company.
"GROSS RECEIPTS" means, in respect of any Asset Sale, the total cash payments (including any cash received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) received from such Asset Sale minus any repayment of debt related to the assets sold in such Asset Sale which is made in connection with such Asset Sale and is not prohibited under the Revolver Credit Agreement and Term Loan Agreement.
"JUNIOR CREDITOR" shall have the meaning assigned to that term in subsection 4.2(e).
"LENDERS" means Term Loan Lenders and Revolver Lenders.
"LIEN" means any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing.
"LOAN PARTIES" means Company, the other Borrowers, CEA, and Management Services and Reimbursement Agreement Obligors.
"MANAGEMENT SERVICES AND REIMBURSEMENT AGREEMENT" means the management services and reimbursement agreement entered into by Company and Covanta and certain of their respective Subsidiaries on the Closing Date, in form and substance satisfactory to Revolver Agent and Term Loan Agents as such agreement may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted thereunder and pursuant to subsection 2.5(a).
"MANAGEMENT SERVICES AND REIMBURSEMENT AGREEMENT
BENEFICIARIES" shall have the meaning assigned to that term in the introduction to this Agreement.
"MANAGEMENT SERVICES AND REIMBURSEMENT AGREEMENT OBLIGATIONS" means, as at any date of determination, the obligations of Management Services and Reimbursement Agreement Obligors then due and payable under Section 4(b) of the Management Services and Reimbursement Agreement; provided, however, that no such obligations shall be included in "Management Services and Reimbursement Agreement Obligations" if such obligation arises as a result of (i) any action or inaction by Covanta or any of its Subsidiaries (other than Company and its Subsidiaries), not triggered by a failure to perform by Company or any of its Subsidiaries or (ii) the failure of any Management Services and Reimbursement Agreement Beneficiary to renew, replace or extend, or cause the renewal, replacement or extension of, a Letter of Credit (as defined in the Management Services and Reimbursement Agreement); provided, however that the letter of credit dated February 28, 1999 issued by Citibank, N.A. to secure an obligation of NEPC Consortium Ltd. under certain Haripur project documents, and any renewal, replacement or extension of such letter of credit, shall in each case be excluded under this clause (ii) to the extent such letter of credit is not renewed, replaced or extended as a result of (x) the refusal of the issuer thereof (or any other proposed issuer acceptable to the beneficiary thereof) to so renew, replace or extend such letter of credit on an unsecured basis or (y) the failure of any other account party thereunder to satisfy any condition precedent imposed by the issuer thereof (or any other proposed issuer acceptable to the beneficiary thereof) to such renewal, replacement or extension.
"MANAGEMENT SERVICES AND REIMBURSEMENT AGREEMENT OBLIGORS" shall have the meaning assigned to that term in the introduction to this Agreement.
"MANDATORY PAYMENTS" means any amount described in subsections 2.4A(iii)(a)-(e) of the Revolver Credit Agreement and subsections 2.4A(ii)(a)-(e) of
the Term Loan Agreement to be applied as a prepayment of the Term Loans and/or the Revolver Loans and/or a permanent reduction of the Revolver Loan Commitments.
"NET ASSET SALE PROCEEDS" means, with respect to any Asset Sale, Gross Receipts received from such Asset Sale, net of any bona fide direct costs incurred in connection with such Asset Sale, including (i) income taxes reasonably estimated to be actually payable prior to the earlier of (a) the date which is eighteen months from the date of such Asset Sale and (b) the Maturity Date as a result of any gain recognized in connection with such Asset Sale, (ii) additional Taxes actually payable upon the closing of such Asset Sale (including any transfer Taxes or Taxes on gross receipts), (iii) actual, reasonable and documented out-of-pocket fees and expenses (including reasonable legal fees, reasonable fees to advisors and severance costs that are due (pursuant to a Contractual Obligation of Company or any of its Subsidiaries in effect prior to such Asset Sale or pursuant to applicable law) and payable immediately upon consummation of such Asset Sale to employees of Company and its Subsidiaries that are terminated as a result thereof) paid to Persons other than Company and its Subsidiaries and their respective Affiliates in connection with such Asset Sale (including fees necessary to obtain any required consents of such Persons to such Asset Sale), and (iv) payment of the outstanding principal amount of, premium or penalty, if any, and interest on any indebtedness (other than Revolver Loans and Term Loans) that is (x) secured by a valid, enforceable and perfected Lien on the stock or assets in question that is permitted under subsection 6.2 of each Credit Agreement and (y) required to be repaid under the terms of such indebtedness as a result of such Asset Sale (without duplication of amounts deducted in calculating the Gross Receipts from such Asset Sale) and is permitted to be paid under the Credit Documents.
"NET INSURANCE/CONDEMNATION PROCEEDS" means any cash payments
or Proceeds received by Company or any of its Subsidiaries (i) under any
business interruption or casualty insurance policy in respect of a covered loss
thereunder or (ii) as a result of the taking of any assets of Company or any of
its Subsidiaries by any Person pursuant to the power of eminent domain,
condemnation or otherwise, or pursuant to a sale of any such assets to a
purchaser with such power under threat of such a taking, in each case net of (a)
income taxes reasonably estimated to be actually payable prior to the earlier of
(1) the date which is eighteen months from the date of such receipt and (2)
March ___, 2007 as a result of the receipt of such payments of proceeds and (b)
any actual, reasonable and documented out-of-pocket fees and expenses (including
reasonable legal fees, reasonable fees to advisors and severance costs that are
due (pursuant to a Contractual Obligation, or written employment policy
applicable to terminated employees generally, of Company or any of its
Subsidiaries in effect prior to the event causing or relating to the payment
referred to in clause (i) or (ii) hereof or pursuant to applicable law) and
payable on or prior to the receipt of such payment or proceeds to employees of
Company and its Subsidiaries that have been terminated as a result of the
relevant loss, taking or sale) paid to Persons other than Company and its
Subsidiaries and their respective Affiliates in connection with the relevant
loss, taking or sale or the adjustment or settlement of any claims of Company or
such Subsidiary in respect thereof; provided, however, that Net
Insurance/Condemnation Proceeds shall be reduced in an amount equal to the
amount of proceeds Subsidiaries of Company are legally bound or required,
pursuant to Contractual Obligations in effect on the Closing Date, or which were
entered into after the Closing Date with respect to the financing or acquisition
of a Project, to use for purposes other than application pursuant to subsection
4.1(b).
"9.25% DEBENTURES" means the "9.25% Debenture Claims" as such term is defined in the Approved Plan of Reorganization.
"NON-CONFIRMING HOLDER" means, on any date of determination, a Person that holds on such date a Debenture Interest or an Allowed Class 6 Interest in Term Loans initially allocable in accordance with subsection 9.25A(i) of the Term Loan Agreement to the Debenture Disbursing Agent or the Allowed Class 6 Disbursing Agent, respectively.
"OBLIGATIONS" means all obligations of every nature of Loan Parties under the Credit Documents, including any liability of such Loan Party on any claim arising out of or relating to the Credit Documents, whether or not the right to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed or contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any bankruptcy, insolvency, reorganization or other similar proceeding. Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Credit Documents include (a) the obligation to pay principal, interest (including all interest which accrues after the commencement of any case or proceeding in bankruptcy after the insolvency of, or for the reorganization of, any Loan Party, whether or not allowed in such case or proceeding), charges, expenses, fees, attorneys' fees and disbursements, indemnities and other amounts payable by any Borrower and any other Loan Party under any Credit Document and (b) the obligation to reimburse any amount in respect of any of the foregoing that any Agent or any Lender, in its sole discretion, may elect to pay or advance on behalf of such Borrower or other Loan Party; provided, that nothing in this definition shall be construed as creating any obligations of DHC under the Credit Documents that are not expressly set forth in such Credit Documents.
"OFFICER'S CERTIFICATE" means, as applied to any Person that is a corporation, partnership, trust or limited liability company, a certificate executed on behalf of such Person by one or more Officers of such Person or one or more Officers of a general partner or a managing member if such general partner or managing member is a corporation, partnership, trust or limited liability company.
"PAYMENT IN FULL" and "PAID IN FULL" means (i) as to the
Revolver Loan Obligations, the payment and satisfaction in full in immediately
available funds of all of such Revolver Loan Obligations and, other than for
purposes of subsection 4.2(a), the termination of all Revolver Loan Commitments,
(ii) as to the Term Loan Obligations, the payment and satisfaction in full in
immediately available funds of all of such Term Loan Obligations and the
termination of the Term Loan Commitments, (iii) as to the Approved Operating
Expenses, the payment in full in immediately available funds of all such
Approved Operating Expenses to the extent then due and payable, (iv) as to the
Management Services and Reimbursement Agreement Obligations, the payment and
satisfaction in full in immediately available funds of all of such Management
Services and Reimbursement Agreement Obligations to the extent then due and
payable pursuant to the Management Services and Reimbursement Agreement, (v) as
to any amounts payable hereunder with respect to the Prepetition Unsecured
Claims Participation Interest, the payment to Prepetition Unsecured Claims Agent
of 5% of the aggregate cumulative amount of Aggregate Net Sales Proceeds not to
exceed $4,000,000 and (vi) as to any other Secured Obligations, the payment and
satisfaction in full in immediately available funds of all
such Secured Obligations then outstanding. If after receipt of any payment of, or Proceeds of Collateral applied to the payment of, any of the Creditor Obligations, Collateral Agent or any other Creditor Party, as applicable, is required to surrender or return such payment or Proceeds to any Person for any reason, then the Creditor Obligations intended to be satisfied by such payment or Proceeds shall be reinstated and continue and this Agreement shall continue in full force and effect as if such payment or Proceeds had not been received by Collateral Agent or such other Creditor Party, as the case may be.
"PARTIES" means the Loan Parties, Secured Parties and Creditor Parties from time to time party to this Agreement.
"PERMITTED ENCUMBRANCES" shall have the meaning assigned to that term in both the Term Loan Agreement and Revolver Credit Agreement as in effect on the date hereof.
"PERSON" or "PERSONS" means and include natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, Joint Ventures (as defined in the Credit Agreements), associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments (whether federal, state or local, domestic or foreign, and including political subdivisions thereof) and agencies or other administrative or regulatory bodies thereof.
"PETITION DATE" means April 1, 2002.
"PLAN OF REORGANIZATION" means the Debtors' Second Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code as filed with the Bankruptcy Court on January 14, 2004 (and as revised and amended through March 2, 2004), together with the Reorganization Plan Supplement to Debtors' Second Joint Plan of Reorganization filed with the Bankruptcy Court on February 18, 2004 in connection therewith.
"PREPETITION UNSECURED CLAIMS" means "Parent and Holding Company Unsecured Claims" that are "Allowed," as such terms are defined in the Approved Plan of Reorganization.
"PREPETITION UNSECURED CLAIMS AGENT" shall have the meaning assigned to that term in the introduction to this Agreement.
"PREPETITION UNSECURED CLAIMS PARTICIPATION INTEREST" means the right of holders of Allowed Class 6 Claims to receive 5% of the amount of Aggregate Net Sale Proceeds up to but not exceeding the total sum of $4,000,000 in the aggregate.
"PROCEEDS" means "proceeds", as such term is defined in the UCC and, in any event, shall include (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to any of the Loan Parties or Collateral Agent from time to time with respect to any of the Collateral, (ii) any and all payments (in any form whatsoever) made or due and payable to any of the Loan Parties from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral, by any governmental body, authority, bureau or agency (or any person acting under color of governmental authority),
and (iii) any and all other consideration (in any form whatsoever) or other amounts from time to time paid or payable under or in connection with any of the Collateral upon disposition or otherwise.
"PROJECT" means any waste-to-energy facility, electrical generation plant, cogeneration plant, water treatment facility or other facility for the generation of electricity or engaged in another line of business in which Company and its Subsidiaries are permitted to be engaged hereunder for which a Subsidiary or Subsidiaries of Company was, is or will be (as the case may be) an owner, operator, manager or builder, and shall also mean any two or more of such plants or facilities in which an interest has been acquired in a single transaction, so long as such interest constitutes an existing Investment on the Closing Date permitted under this Agreement; provided, however, that a Project shall cease to be a Project of Company and its Subsidiaries at such time that Company or any of its Subsidiaries ceases to have any existing or future rights or obligations (whether direct or indirect, contingent or matured) associated therewith.
"REQUISITE OBLIGEES" means (i) until Payment in Full of all Revolver Loan Obligations, Requisite Revolver Lenders; and (ii) from and after Payment in Full of all Revolver Loan Obligations, Requisite Term Loan Lenders.
"REQUISITE REVOLVER LENDERS" means Lenders having or holding more than 50% of the aggregate Revolver Loan Exposure of all Revolver Lenders; provided, however, that prior to the Closing Date, for purposes of this definition the Revolver Loan Exposure of each Revolver Loan Lender shall equal the original Revolver Loan Commitment of such Revolver Loan Lender on the Closing Date.
"REQUISITE TERM LOAN LENDERS" means Lenders having or holding more than 50% of the aggregate Term Loan Exposure of all Term Loan Lenders; provided, however, that prior to the Closing Date, for purposes of this definition the Term Loan Exposure of each Term Loan Lender shall equal the original Term Loan Commitment of such Term Loan Lender on the Closing Date.
"REVOLVER AGENT" shall have the meaning assigned to that term in the introduction hereto.
"REVOLVER BORROWER" shall have the meaning assigned to that term in the introduction hereto.
"REVOLVER CREDIT AGREEMENT" means that (i) certain credit agreement dated as of the date hereof by and among Company and the other Revolver Borrowers, Revolver Lenders and Revolver Agent, (ii) any credit agreement entered into by Revolver Borrowers to refinance, replace, renew or extend, in whole or in party, the credit agreement referenced in clause (i) and the indebtedness issued thereunder to the extent permitted pursuant to the Term Loan Agreement, in the case of clause (i) or (ii), as such credit agreement may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted thereunder and pursuant to subsection 2.5(b).
"REVOLVER DOCUMENTS" means the "Loan Documents" as such term is defined in the Revolver Credit Agreement (or any comparable term with respect to any replacement Revolver Credit Agreement not prohibited hereunder).
"REVOLVER EVENT OF DEFAULT" means an "Event of Default" under and as defined in the Revolver Credit Agreement.
"REVOLVER LENDER" shall have the meaning assigned to that term in the introduction to this Agreement.
"REVOLVER LOAN" or "REVOLVER LOANS" means the loans made (or deemed made) by Revolver Lenders to Revolver Borrowers under the Revolver Credit Agreement.
"REVOLVER LOAN COMMITMENT" means, as at any date of determination, the commitment of a Revolver Lender to make Revolver Loans to Revolver Borrowers pursuant to the Revolver Credit Agreement.
"REVOLVER LOAN EXPOSURE" with respect to any Revolver Lender,
means, as of any date of determination (i) prior to the termination of the
Revolver Loan Commitments, that Revolver Lender's Revolver Loan Commitment, and
(ii) after the termination of the Revolver Loan Commitments, the aggregate
outstanding principal amount of the Revolver Loans of that Revolver Lender.
"REVOLVER LOAN OBLIGATIONS" means any and all Obligations to the extent arising under or with respect to the Revolver Loan Commitments or the Revolver Loans, including principal and interest on any Revolver Loans and the fees and other amounts accruing or otherwise owed with respect to the Revolver Loan Exposure and all other Obligations of a Loan Party with respect to Revolver Loans; provided, however, that Obligations of any Loan Party for interest or commitment fees with respect to any Revolver Loan Document and Revolver Loan Commitments that accrue or may be incurred under any Revolver Loan Document after the commencement by or against any Loan Party of a Bankruptcy Proceeding shall be included in the Revolver Loan Obligations solely to the extent recoverable from such Loan Party or its estate in such proceeding.
"SECURED PARTIES" means Term Loan Lenders, Revolver Lenders, Term Loan Agents, Revolver Agent, Cash Management Bank and Collateral Agent.
"SECURED OBLIGATIONS" means all Obligations of Loan Parties from time to time under the Credit Agreements and the other Revolver Documents and Term Loan Documents and all obligations owing to Collateral Agent hereunder or under each Collateral Document, and all Cash Management Obligations.
"SECURITIES" means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated, certificated or uncertificated, or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or
participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing.
"SECURITIES ACCOUNT" means an account to which a financial asset is or may be credited in accordance with an agreement under which the Person maintaining the account undertakes to treat the Person for whom the account is maintained as entitled to exercise the rights that comprise the financial asset.
"SECURITY AGREEMENT" means the Security Agreement executed and delivered by Borrowers on the Closing Date pursuant to the Revolver Credit Agreement and Term Loan Agreement, as such agreement may from time to time hereafter be amended, restated, supplemented or otherwise modified to the extent permitted pursuant to subsection 2.4.
"SENIOR AGENT" means, (i) until Payment in Full of all Revolver Loan Obligations, Revolver Loan Agent and (ii) from and after Payment in Full of all Revolver Loan Obligations and until Payment in Full of all Term Loan Obligations, Term Loan Agent.
"SENIOR CREDITOR" shall have the meaning assigned to that term in subsection 4.2(e).
"SUBSIDIARY" means, with respect to any Person, any corporation, partnership, trust, limited liability company, association, joint venture or other business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the members of the Governing Body is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof.
"SUPERPRIORITY TERM LOAN OBLIGATIONS" means all Term Loan Obligations in respect of accrued and unpaid interest on the Term Loans (including, for the avoidance of doubt, accrued and unpaid interest on Additional Interest Loans; it being understood and agreed that, to the extent interest on the Term Loans is paid through the issuance of Additional Interest Loans pursuant to subsection 2.2B(ii) of the Term Loan Agreement, such interest shall be deemed paid for purposes of this definition).
"SUPPLEMENTAL COLLATERAL AGENT" has the meaning assigned to that term in subsection 6.1(c).
"TAX" or "TAXES" means any present or future tax, levy, impost, duty, charge, fee, deduction or withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed, including interest, penalties, additions to tax and any similar liabilities with respect thereto.
"TERM LOAN" or "TERM LOANS" means the loans made (or deemed made) by Term Loan Lenders to Term Loan Borrowers pursuant to the Term Loan Agreement, including any Additional Interest Loans (as defined in the Term Loan Agreement) and loans deemed made after the Closing Date pursuant to subsection 2.1 of the Term Loan Agreement.
"TERM LOAN AGENT" shall have the meaning assigned to that term in the introduction to this Agreement.
"TERM LOAN AGENTS" means Term Loan Agent and Term Loan Documentation Agent.
"TERM LOAN AGREEMENT" means that (i) certain credit agreement dated as of the date hereof by and among Company and the other Term Loan Borrowers, Term Loan Lenders and the Term Loan Agents, (ii) any credit agreement entered into by the Term Loan Borrowers to refinance, replace, renew or extend, in whole or in part, the credit agreement referenced in clause (i) and the indebtedness thereunder to the extent permitted pursuant to the Revolver Credit Agreement, in the case of clause (i) or (ii), as such credit agreement may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted thereunder and pursuant to subsection 2.5(c).
"TERM LOAN BORROWERS" shall have the meaning assigned to that term in the introduction to this Agreement.
"TERM LOAN COMMITMENT" means, as at any date of determination, the commitment of a Term Loan Lender to make Term Loans to Term Loan Borrowers pursuant to the Term Loan Agreement.
"TERM LOAN DOCUMENTATION AGENT" shall have the meaning assigned to that term in the introduction to this Agreement.
"TERM LOAN DOCUMENTS" means the "Loan Documents" as such term is defined in the Term Loan Agreement (or any comparable term with respect to any replacement Term Loan Agreement not prohibited hereunder).
"TERM LOAN EVENT OF DEFAULT" means an "Event of Default" under and as defined in the Term Loan Agreement.
"TERM LOAN EXPOSURE" with respect to any Term Loan Lender, means, as of any date of determination the aggregate outstanding principal amount of the Term Loans of that Term Loan Lender.
"TERM LOAN LENDER" shall have the meaning assigned to that term in the introduction to this Agreement.
"TERM LOAN OBLIGATIONS" means any and all Obligations to the extent arising under or with respect to the Term Loan Commitments or the Term Loans, including principal and interest on any Terms Loans and fees and other amounts accruing or otherwise owed with respect to the Term Loan Exposure; provided, however, that Obligations of any Loan Party for interest with respect to any Term Loan Document and Term Loan Commitments that accrue or may be incurred under any Term Loan Document after the commencement by or against any Loan Party of a Bankruptcy Proceeding shall be included in the Term Loan Obligations solely to the extent recoverable from such Loan Party or its estate in such proceeding.
"THIRD-PARTY GUARANTY" shall have the meaning assigned to that term in subsection 4.2(h).
"UCC" means the Uniform Commercial Code as the same may, from time to time, be in effect in the State of New York; provided, however, in the event that, by reason of mandatory provisions of law, the priority of any Secured Party's security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, the term "UCC" means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such priority and for purposes of definitions related to such provisions.
"UNITED STATES" means the United States of America.
1.2 OTHER DEFINITIONAL PROVISIONS AND RULES OF CONSTRUCTION.
(a) Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference.
(b) References to "Sections" and "subsections" shall be to Sections and subsections, respectively, of this Agreement unless otherwise specifically provided.
(c) The use of the word "include" or "including", when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation" or "but not limited to" or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter.
(d) In the event of any refinancing, replacement or extension of any Credit Agreement, references in this Agreement to sections or subsections of such Credit Agreement shall refer to the functionally equivalent sections or subsections in such refinanced, replaced or extended agreement as the context requires.
SECTION II
2.1 APPOINTMENT AS COLLATERAL AGENT. Each Secured Party (i) appoints Bank of America to serve as collateral agent and representative of each such Secured Party (to the extent applicable) under this Agreement and each of the Collateral Documents (in such capacity, together with its successors in such capacity, the "COLLATERAL Agent") and (ii) irrevocably authorizes Collateral Agent to act as agent for the Secured Parties for the purpose of executing and delivering, on behalf of all such Secured Parties, the Collateral Documents and, subject to the provisions of this Agreement, for the purpose of exercising such powers, rights and remedies hereunder and under the other Collateral Documents as are specifically delegated or granted to Collateral Agent by the terms hereof and thereof, together with such powers, rights and remedies as are reasonably incidental thereto. For the avoidance of doubt, it is understood and agreed that the Collateral Agent is the "Secured Party" or, as the case may be, the "Mortgagee" referred to in the Collateral Documents. Each Secured Party and Collateral Agent hereby appoints each other
Secured Party as agent for the purpose of perfecting Collateral Agent's security interest in Collateral that, in accordance with the UCC, can be perfected by possession or control.
2.2 DECISIONS RELATING TO ENFORCEMENT ACTIONS AND OTHER MATTERS VESTED IN REQUISITE OBLIGEES.
(a) Collateral Agent agrees to take such Enforcement Actions and all such actions with respect to Collateral which is perfected only by control of such Collateral, in each case as may be directed by Requisite Obligees (it being understood and agreed that if, at any time Collateral Agent determines that the requisite percentages constituting Requisite Obligees shall have been obtained, the Collateral Agent may and shall be fully authorized, as of such time and without the need for further direction from any Secured Party, to take or not take such action as the Requisite Obligees direct); provided, however, that notwithstanding anything in this Agreement to the contrary, Collateral Agent shall not be required to take any action that is in its judgment contrary to law or to the terms of this Agreement or any or all of the Collateral Documents or which would in its opinion subject it or any of its officers, employees or directors to liability, and Collateral Agent shall not be required to take any action under this Agreement or any or all of the Collateral Documents unless and until Collateral Agent shall be indemnified to its satisfaction by the relevant Parties against any and all losses, costs, expenses or liabilities in connection therewith.
(b) Each Secured Party agrees that Collateral Agent may act as Requisite Obligees may request (regardless of whether any individual Party or any other Secured Party agrees, disagrees or abstains with respect to such request), that Collateral Agent shall have no liability for acting in accordance with such request (provided such action does not conflict with the express terms of this Agreement) and that no Secured Party shall have any liability to any other Party for any such request, except, in each case, liability arising from the gross negligence or willful misconduct of such Person. Collateral Agent shall give prompt notice to all Secured Parties of actions taken pursuant to the instructions of Requisite Obligees; provided, however, that the failure to give any such notice shall not impair the right of Collateral Agent to take any such action or the validity or enforceability under this Agreement and the applicable Collateral Documents of the action so taken.
(c) Collateral Agent may at any time request directions from the Requisite Obligees with respect to the Collateral Documents as to any course of action or other matter relating hereto or to the Collateral Documents. Except as otherwise provided in the Collateral Documents, directions given by Requisite Obligees to Collateral Agent with respect to the Collateral and Collateral Documents shall be binding on all Secured Parties for all purposes (provided such directions do not conflict with the express terms of this Agreement).
(d) Each Secured Party, by accepting the benefits hereof and of the Collateral Documents, agrees not to take any Enforcement Action whatsoever, in each case except through Collateral Agent in accordance with this Agreement.
2.3 NET INSURANCE/CONDEMNATION PROCEEDS.
(a) Unless prohibited by contractual or other legal requirement, all policies of insurance required to be maintained under any Credit Document shall (a) name Collateral Agent, for the benefit of Secured Parties, as an additional insured thereunder as its interests may appear and (b) in the case of each business interruption and casualty insurance policy, contain a loss payable clause or endorsement, satisfactory in form and substance to Revolver Loan Agent and Term Loan Agent, that names Collateral Agent for the benefit of Secured Parties as the loss payee thereunder for any covered loss in excess of $1,000,000 and provides for at least 30 days prior written notice to Collateral Agent of any modification or cancellation of such policy. As soon as practicable after the Closing Date, Company shall deliver to Agents, a certificate from Borrowers' insurance broker(s) or other evidence satisfactory to it that all insurance required to be maintained pursuant to this subsection 2.3 is in full force and effect and that Collateral Agent on behalf of Secured Parties has been named as additional insured and/or loss payee thereunder to the extent required under this subsection 2.3.
(b) Upon receipt by Collateral Agent of any Net
Insurance/Condemnation Proceeds as loss payee, (a) if and to the extent
Company would have been required to apply such Net
Insurance/Condemnation Proceeds (if it had received them directly)
pursuant to the Revolver Credit Agreement (or, if the Revolver Loan
Obligations have been Paid in Full, the Term Loan Agreement),
Collateral Agent shall, and Company hereby authorizes Collateral Agent
to, apply such Net Insurance/Condemnation Proceeds as provided in
subsection 4.1(b) or, to the extent applicable, subsection 4.2, and (b)
to the extent the foregoing clause (a) does not apply, Collateral Agent
shall deliver such Net Insurance/Condemnation Proceeds to Company, and
(1) Company and its Subsidiaries may retain and apply any portion
thereof that is business interruption insurance proceeds for working
capital purposes or any other purposes not prohibited under the Credit
Agreements and (2) Company shall, or shall cause one or more of its
Subsidiaries to, promptly apply such Net Insurance/Condemnation
Proceeds that are not business interruption insurance proceeds to the
costs of repairing, restoring, or replacing the assets in respect of
which such Net Insurance/Condemnation Proceeds were received; provided,
however that if at any time Senior Agent reasonably determines (A) that
Company or such Subsidiary is not proceeding diligently with such
repair, restoration or replacement or that such repair, restoration or
replacement cannot be completed within 180 days after the receipt by
Collateral Agent of such Net Insurance/Condemnation Proceeds, Senior
Agent may direct Collateral Agent, and Company hereby authorizes Senior
Agent and Collateral Agent to apply such Net Insurance/Condemnation
Proceeds as provided in subsection 4.1(b).
2.4 AMENDMENTS, MODIFICATIONS, WAIVERS AND RELEASES. Notwithstanding anything in the Credit Agreements, Collateral Documents and other Credit Documents to the contrary (but subject to subsection 7.1(c)),
(a) except in connection with any Enforcement Action, the release of the Lien granted in favor of Collateral Agent on all or substantially all of the Collateral under the Collateral Documents shall require the prior written consent of each Revolver Lender and
each Term Loan Lender; (except that such Lien may be released on all or substantially all Collateral to the extent such release is required in connection with an Asset Sale or Asset Sales permitted under the Credit Agreements); provided however, that, if prior to or concurrently with any such release the Revolver Loan Obligations are Paid in Full, then such release shall not require any Revolver Lender's consent; and
(b) except as set forth in subsection 2.4(a), any amendment, modification, termination or waiver of, any Collateral Documents shall require the prior written consent of (i) until Payment in Full of all Revolver Loan Obligations, Requisite Revolver Lenders and (ii) until Payment in Full of all Term Loan Obligations, Requisite Term Loan Lenders.
2.5 AMENDMENTS, MODIFICATIONS AND WAIVERS WITH RESPECT TO CREDIT DOCUMENTS. Any amendment or modification of, or waiver of compliance with the terms of any Credit Document, shall (subject to subsection 7.1(c)) be subject to the following requirements:
(a) Until (i) the termination of the Term Loan Agreement and the Payment in Full of all Term Loan Obligations, without the prior written consent of Requisite Term Loan Lenders, and (ii) the termination of the Revolver Credit Agreement and the Payment in Full of all Revolver Loan Obligations, without the prior written consent of Requisite Revolver Lenders, Company shall not, and shall not permit any of its Subsidiaries to amend, restate, modify or waive (or make any payment consistent with an amendment, restatement, modification or waiver of) any material provision of the Management Services and Reimbursement Agreement, the Existing IPP Project Guaranties, or the DHC Tax Sharing Agreement, in each case if the effect of such amendment, restatement, modification or waiver, together with all other amendments, restatements, modifications or waivers made, (a) is to impose additional material obligations on, or confer additional material rights to the holders thereof (or to other obligees with respect thereto) against, Company or any of its Subsidiaries, (b) is otherwise adverse to the interests of the Term Loan Lenders in a manner deemed material in the judgment of the Term Loan Agents or Requisite Term Loan Lenders so notifying Term Loan Agents or Company, or (c) is otherwise adverse to the interests of the Revolver Lenders in a manner deemed material in the judgment of the Revolver Agent or Requisite Revolver Lenders so notifying Revolver Agent or Company.
(b) Subject to the provisions of subsection 2.4, and until the termination of the Term Loan Agreement and the Payment in Full of all Term Loan Obligations, without the prior written consent of Requisite Term Loan Lenders, Revolver Lenders may not amend, restate, modify or waive (or receive any payment consistent with an amendment, restatement, modification or waiver of) any material provision of any of the Revolver Documents, unless (i) the terms of the Revolver Documents as so amended, restated, modified or waived are not more disadvantageous to Company and its Subsidiaries and the Term Loan Lenders (in a manner deemed material by Term Loan Agent or Requisite Term Loan Lenders so notifying Term Loan Agent or Company) than the Revolver Documents in effect on the Closing Date (it being understood and agreed that any amendment, restatement, modification or waiver having the effect of increasing the amount of, or reducing, delaying or waiving any otherwise required reduction in the
amount of, any commitment to extend loans under the Revolver Documents
shall be deemed to be more disadvantageous for purposes of this clause
(i) without further notice or other action by Term Loan Agents or
Requisite Term Loan Lenders), (ii) the aggregate amount of indebtedness
and additional commitments to extend credit, if any, under the Revolver
Documents as so amended, restated, modified or waived, do not exceed
the aggregate amount of the commitments to extend credit in effect
under the Revolver Documents on the Closing Date, (iii) the obligations
under (and the Liens securing) such Revolver Documents as so amended,
restated, modified or waived are subject to this Agreement on terms
substantively identical to the terms applicable to the obligations in
effect under the Revolver Documents on the Closing Date, and (iv)
Company provides to Term Loan Agents reasonable prior advance written
notice of such proposed amendment, restatement, modification or waiver
and copies of all material contracts or other agreements being entered
into in connection therewith.
(c) Subject to the provisions of subsection 2.4, and until the termination of the Revolver Credit Agreement and the Payment in Full of all Revolver Loan Obligations, without the prior written consent of Requisite Revolver Lenders, Term Loan Lenders may not amend, restate, modify or waive (or receive any payment consistent with an amendment, restatement, modification or waiver of) any material provision of any of the Term Loan Documents, unless (i) the terms of the Term Loan Documents as so amended, restated, modified or waived are not more disadvantageous to Company and its Subsidiaries and the Revolver Lenders (in a manner deemed material by Revolver Agent or Requisite Revolver Lenders so notifying Revolver Agent or Company) than the Term Loan Documents in effect on the Closing Date (it being understood and agreed that any amendment, restatement, modification or waiver having the effect of increasing the amount of, or reducing, delaying or waiving any otherwise required reduction in the amount of, any commitment to extend loans under the Term Loan Documents shall be deemed to be more disadvantageous for purposes of this clause (i), without further notice or other action by Revolver Agent or Requisite Revolver Lenders), (ii) the aggregate amount of indebtedness and additional commitments to extend credit, if any, under the Term Loan Documents as so amended, restated, modified or waived, do not exceed the aggregate amount of the commitments to extend credit in effect under the Term Loan Documents on the Closing Date plus the amount of any Additional Interest Loans and other Term Loans deemed made thereunder from time to time pursuant to subsections 2.2B and 2.1A of the Term Loan Agreement, respectively, (iii) the obligations under (and the Liens securing) such Term Loan Documents as so amended, restated, modified or waived are subject to this Agreement on terms substantively identical to the terms applicable to the obligations in effect under the Term Loan Documents on the Closing Date, and (iv) Company provides to Revolver Agent reasonable prior advance written notice of such proposed amendment, restatement, modification or waiver and copies of all material contracts or other agreements being entered into in connection therewith.
(d) Each Lender acknowledges and agrees that Borrowers have agreed to and are bound by the provisions of subsection 5.12 (Most Favored Nations Payments) of each Credit Agreement.
SECTION III
3.1 PRIORITY OF LIENS. Notwithstanding the order or time of attachment, or the order, time or manner of perfection, or the order or time of filing or recordation of any document or instrument, or other method of perfecting a security interest in favor of Collateral Agent in any Collateral, and notwithstanding any conflicting terms or conditions which may be contained in any of the Credit Documents, the Secured Parties agree that as among the Secured Parties, the following Lien priorities shall strictly apply in defining the respective Lien priorities of each Secured Party in the Collateral:
(a) first, the Liens upon the Collateral in favor of Collateral Agent to the extent securing the Secured Obligations owing from time to time to the Collateral Agent, in its capacity as Collateral Agent, to the full extent thereof;
(b) second: the Liens upon the Collateral in favor of Collateral Agent to the extent securing, on a pari passu basis, the Secured Obligations owing from time to time to the Term Loan Agents and Revolver Loan Agent, in their capacities as Term Loan Agents and Revolver Loan Agent, respectively, to the full extent thereof;
(c) third: the Liens upon the Collateral in favor of Collateral Agent to the extent securing, on a pari passu basis, (i) the remaining Revolver Loan Obligations, and (ii) the Cash Management Obligations, in each case to the full extent thereof; and
(d) fourth: the Liens upon the Collateral in favor of Collateral Agent to the extent securing the Term Loan Obligations to the full extent thereof.
3.2 PRIORITIES UNAFFECTED BY ACTION OR INACTION. The Lien priorities in subsection 3.1 shall not be altered or otherwise affected by any amendment, modification, supplement, extension, renewal, restatement or refinancing of any of the Secured Obligations, nor by any action or inaction which Collateral Agent or any other Secured Party may take or fail to take in respect of the Collateral.
SECTION IV
4.1 APPLICATION OF MANDATORY PREPAYMENTS UNDER CREDIT AGREEMENTS AND NET ASSET SALE PROCEEDS. Notwithstanding anything in the Credit Documents to the contrary but subject in all respects to subsection 4.2, so long as any Creditor Obligations are outstanding (including any loans or any commitments to lend):
(a) Any Mandatory Payments pursuant to subsection 2.4A(iii)(e) of the Revolver Credit Agreement and subsection 2.4A(ii)(e) of the Term Loan Agreement shall, in each case, be applied first, to the payment of any Approved Operating Expenses then due and payable to Management Services and Reimbursement Agreement Beneficiaries pursuant to the Management Services and Reimbursement Agreement; second, to the extent of any excess amounts remaining after application in clause first, to the payment of interest then due and payable on the Term Loans pursuant to subsection 2.2B(ii) of the Term Loan Agreement; third, to the extent of any excess amounts remaining after the application described in clauses first and second, to repay any
Management Services and Reimbursement Agreement Obligations then due and payable; and fourth to the extent of any excess amounts remaining after application in clauses first, second and third, to prepay outstanding Term Loans.
(b) Any Mandatory Payments pursuant to subsections 2.4A(iii)(a) - (d) of the Revolver Credit Agreement and subsection 2.4A(ii)(a) - (d) of the Term Loan Agreement shall, in each case, be applied first, to the payment of any Approved Operating Expenses then due and payable to Management Services and Reimbursement Agreement Beneficiaries pursuant to the Management Services and Reimbursement Agreement, second, to the extent of any excess amounts remaining after the application described in clause first, (a) to reduce Revolver Loan Exposure in an amount equal to 50% of such excess amounts with such reduction in Revolver Loan Exposure to occur by repaying outstanding Revolver Loans to the full extent thereof and permanently reducing the Revolver Loan Commitments in the full amount of the portion of such payment so applied to reduce Revolver Loan Exposure (provided, however, that no such application shall reduce the Revolver Loan Commitments to the extent that the sum of any Cash On Hand plus the amount of Revolver Loan Commitments would be less than $10,000,000 after giving effect to such reduction), with any amounts so applied to Revolver Loan Exposure but not actually applied to repay Revolver Loans being retained by Revolver Borrowers, and (b) to repay any Management Services and Reimbursement Agreement Obligations then due and payable and outstanding Term Loans in an amount equal to 50% of such excess amounts, (with such amount being applied first to such Management Services and Reimbursement Agreement Obligations and then to prepay outstanding Term Loans); and third, if either (1) no Revolver Loans are outstanding and the sum of all Cash On Hand plus the amount of Revolver Loan Commitments is less than $10,000,000, or (2) no Management Services and Reimbursement Agreement Obligations and no Term Loans are outstanding, but both events described in clauses (1) and (2) shall not have occurred, to repay and reduce Revolver Loan Exposure by repaying Revolving Loans and permanently reducing Revolving Loan Commitment (with any amounts so applied to Revolver Loan Exposure but not actually applied to repay Revolver Loans being retained by Borrowers) or Management Services and Reimbursement Agreement Obligations and Term Loans (with amounts being applied first to Management Services and Reimbursement Agreement Obligations and then to Term Loans) to the extent required so that both such events shall occur; provided that, notwithstanding anything in the foregoing to the contrary, to the extent that any Mandatory Payment applied to prepay Term Loans pursuant to this subsection 4.1(b) constitutes Net Asset Sale Proceeds, 5% of the aggregate amount of such Net Asset Sale Proceeds shall be applied to the payment of Prepetition Unsecured Claims Participation Interest (provided, that the aggregate cumulative amount of all Net Asset Sale Proceeds so applied, when aggregated with all other Aggregate Net Sales Proceeds paid or distributed in respect of Prepetition Unsecured Claims Participation Interest, shall not exceed $4,000,000) and 95% of such amount shall be applied to prepay Term Loans).
(c) In the event that at the time of receipt by Company or any of its Subsidiaries of any Net Asset Sale Proceeds, the Term Loan Obligations shall have been Paid in Full and the Prepetition Unsecured Claims Participation Interest shall not have been Paid in Full at such time, 5% of the aggregate amount of such Net Asset Sale
Proceeds shall be applied to the payment of the Prepetition Unsecured Claims Participation Interest until such time as the aggregate amount of such Net Asset Sale Proceeds applied to the payment of the Prepetition Unsecured Claims Participation Interest when aggregated with all other Aggregate Net Sale Proceeds paid or distributed in respect of the Prepetition Unsecured Claims Participation Interest, shall total $4,000,000.
(d) All payments of Term Loans pursuant to this subsection 4.1 shall made to the Term Loan Agent for distribution to the Term Loan Lenders and the Disbursing Agents in accordance with the Term Loan Agreement, including subsection 9.25 thereof.
4.2 APPLICATION OF PROCEEDS OF COLLATERAL, ETC.
(a) Except as provided in subsection 4.2(b) or 4.2(c) below, upon the occurrence and during the continuation of an Event of Default or the termination of the Revolver Loan Commitments (other than as a result of any voluntary termination of Revolver Loan Commitments by Revolver Borrowers pursuant to subsection 2.4A(ii) of the Revolver Credit Agreement), if requested by Requisite Revolver Lenders with respect to any Revolver Event of Default or termination of Revolver Loan Commitments, or if requested by Requisite Term Loan Lenders with respect to any Term Loan Event of Default, (1) all Mandatory Payments or other payments received by any Agent or other Creditor Party on account of the Creditor Obligations, whether from any Loan Party or otherwise, shall promptly be delivered to Collateral Agent and upon receipt by Collateral Agent, applied by Collateral Agent against the Creditor Obligations and (2) all Proceeds received by Collateral Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral or other Enforcement Action may, in the discretion of Senior Agent upon written direction to Collateral Agent, be held by Collateral Agent as Collateral for, and/or (then or at any time thereafter) applied in full or in part by Collateral Agent against, the applicable Creditor Obligations, in each case under clauses (1) and (2) in the following order of priority:
(i) First, to the payment of the costs and expenses of the exercise of rights and remedies and such sale, collection or other realization or Enforcement Action, including reimbursement of all expenses, liabilities and advances made or incurred by Collateral Agent in connection therewith (including for reasonable cost, fees and expenses of counsel and other professionals and agents retained by the Collateral Agent) and all amounts for which Collateral Agent is entitled to compensation, reimbursement and indemnification under any Credit Document and any other amounts then owing to Collateral Agent, in its capacity as Collateral Agent, pursuant to the Collateral Documents;
(ii) Second, to the extent proceeds remain after application as described in clause (i) above, pro rata among the following, based on the amounts outstanding as of any date of determination: all Secured Obligations owing to Term Loan Agents and Revolver Agent, in their capacities as Term Loan Agents and Revolver Agent, respectively;
(iii) Third, to the extent proceeds remain after application as described in clauses (i) and (ii) above, to the payment of Approved Operating Expenses until all Approved Operating Expenses have been Paid in Full;
(iv) Fourth, to the extent proceeds remain after application as described in clauses (i) through (iii) above, pro rata among the following, based on the amounts outstanding as of any date of determination: (i) all Revolver Loan Obligations (with any payment of the Revolver Loans resulting in a corresponding permanent reduction in the Revolver Loan Commitments), and (ii) all Cash Management Obligations, until all such Revolver Loan Obligations and Cash Management Obligations have been Paid in Full;
(v) Fifth, to the extent proceeds remain after application as described in clauses (i) through (iv) above, to the payment of the Superpriority Term Loan Obligations, until all Superpriority Term Loan Obligations have been Paid in Full;
(vi) Sixth, to the extent proceeds remain after application as described in clauses (i) through (v) above, to the payment of the Management Services and Reimbursement Agreement Obligations then due and payable, until all Management Services and Reimbursement Agreement Obligations have been Paid in Full;
(vii) Seventh, to the extent proceeds remain after application as described in clauses (i) through (vi) above, 5% of any such excess proceeds constituting Aggregate Net Sales Proceeds to the payment of the Prepetition Unsecured Claims Participation Interest in an aggregate cumulative amount which, when added to all other Aggregate Net Sale Proceeds paid or distributed in respect of the Prepetition Unsecured Claims Participation Interest, does not exceed $ 4,000,000;
(viii) Eighth, to the extent proceeds remain after application as described in clauses (i) through (vii) above, to the payment of the remaining Term Loan Obligations, until all Term Loan Obligations have been Paid in Full; and
(ix) Ninth, after application as described in clauses
(i) through (viii) above and Payment in Full of all other Secured
Obligations under the Revolver Credit Agreement, Term Loan Agreement,
and all Secured Obligations then due and payable under the Management
Services and Reimbursement Agreement, if any, and the termination of
all Revolver Loan Commitments, to Loan Parties, or, subject to
subsection 7.1(c), their successors or assigns, or to whosoever may be
lawfully entitled to receive the same or as a court of competent
jurisdiction may direct, of any surplus then remaining from such
Proceeds.
(b) Notwithstanding anything in subsection 4.2(a) to the contrary, in the event that no Revolver Event of Default has occurred and is continuing under subsection 7.1 of the Revolver Credit Agreement and no Bankruptcy Proceeding has been commenced by or against any Loan Party, the Term Loan Lenders and Term Loan Agents shall be entitled to receive payments of current interest and fees with respect to the Term Loan Obligations when due under the Term Loan Agreement.
(c) Until Proceeds are applied as set forth in this subsection 4.2, Collateral Agent shall hold such Proceeds in its custody in accordance with its regular procedures for handling deposited funds.
(d) Payments by Collateral Agent to the Revolver Lenders in respect of the Obligations shall be made to the Revolver Agent for distribution to the Revolver Lenders in accordance with the Revolver Credit Agreement and this Agreement; payments by Collateral Agent to the Term Loan Lenders in respect of the Obligations shall be made to the Term Loan Agent for distribution to the Term Loan Lenders and the Disbursing Agents in accordance with the Term Loan Agreement (including subsection 9.25 of the Term Loan Agreement) and this Agreement; any payments in respect of Approved Operating Expenses shall be made to such Persons as shall be directed in writing by Company pursuant to an Officer's Certificate delivered pursuant to subsection 5.1(c); any payments in respect of any Management Services and Reimbursement Agreement Obligations shall be paid to Covanta, for distribution to the applicable Management Services and Reimbursement Agreement Beneficiary; payments in respect of any Prepetition Unsecured Claims Participation Interest shall be paid to Prepetition Unsecured Claims Agent for distribution to the holders of the Prepetition Unsecured Claims Participation Interest; and payments in respect of the Cash Management Obligations shall be made to Cash Management Bank for the benefit of Cash Management Bank.
(e) In the event that any Creditor Party shall receive any Distribution that such Creditor Party is not entitled to receive or retain under the provisions of this Agreement (in such capacity, each, a "JUNIOR CREDITOR"), such Junior Creditor shall hold any such Distribution so received in trust for the benefit of the holders of other Creditor Obligations with the right to receive such Distribution under the provisions of this Agreement (in such capacity, each, a "SENIOR CREDITOR") and shall segregate such Distribution from other assets held by such Junior Creditor; and shall forthwith turn over such Distribution (without liability for interest thereon, but with any appropriate endorsements or assignments, if necessary) to the holders of, or to Collateral Agent for the benefit of the holders of, such Creditor Obligations in the form received (with any appropriate endorsement or assignment, if necessary) to be distributed in accordance with subsection 4.1 or 4.2, as applicable, and applied to such Creditor Obligations. In the event of a failure of any Junior Creditor to make any such endorsement or assignment to Collateral Agent or Senior Creditors, as the case may be, Collateral Agent and such Senior Creditors are hereby irrevocably authorized on behalf of such Junior Creditor to make such endorsement or assignment, as applicable. For the avoidance of doubt, the provisions of this Agreement regarding Junior Creditors and Senior Creditors apply regardless of whether or not a Junior Creditor or Senior Creditor is a Secured Party.
(f) No payment or distribution to any Senior Creditor pursuant to the provisions of this Agreement shall entitle the applicable Junior Creditor or Junior Creditors to exercise any right of subrogation in respect thereof until (i) all Creditor Obligations of such Senior Creditors shall have been indefeasibly Paid in Full, or (ii) all of such Senior Creditors have consented in writing to the taking of such action. With respect to any subrogation claims, each Junior Creditor hereby (to the extent permitted by
applicable law) waives, releases and discharges any and all rights, claims, causes of action, liabilities, claims and demands, in law or equity, which such Junior Creditor has had, now has, or may in the future have, arising out of or relating directly or indirectly to the taking or not taking of any act or proceeding or not proceeding with any action which the Senior Creditors (or that representatives) may take in an effort to collect in respect of the Creditor Obligations owed to such Senior Creditors.
(g) In furtherance of, and without limiting, the priority provisions set forth in this subsection 4.2, but subject to the applicable voting provisions set forth in subsection 2.2, each Secured Party agrees that, in order to enable Collateral Agent to enforce its rights hereunder in any Bankruptcy Proceeding, Collateral Agent is hereby irrevocably authorized and empowered in its sole and absolute discretion to receive and collect any and all dividends or other payments or disbursements made on account of Collateral Agent's Lien on the Collateral in whatever form the same may be paid or issued and to apply the same on account of any such Creditor Obligations in accordance with the provisions of the Credit Documents and this Agreement. At any time, including but not limited to during any Bankruptcy Proceeding, Collateral Agent and each other Party will refrain from taking any action which would contest or challenge in any administrative, legal or equitable action or otherwise the validity or enforceability of the terms of this Agreement, including the priority provisions contained in subsection 4.1 and this subsection 4.2 and the Lien priority provisions contained in subsection 3.1.
(h) Each Secured Party hereby covenants and agrees that (i) such Secured Party will not accept from any Person on behalf of the Borrowers any guarantee (a "THIRD-PARTY GUARANTY") of any Obligations unless such guarantor simultaneously guarantees the payment of all Secured Obligations owed to each of the other Secured Parties (or, if such Third-Party Guaranty guarantees only a portion of the Obligations owing to such Secured Party, such Secured Party will not accept such Third-Party Guaranty unless such guarantor simultaneously guarantees the same proportion of Obligations owing to the other Secured Parties), and (ii) such Secured Party will not take, accept or obtain any security interest in, or lien or encumbrance upon, any assets of any of the Borrowers or any Subsidiary or Affiliate thereof or any other Person to secure the payment and performance of the Obligations unless the Collateral Agent, for the benefit of all Secured Parties, is granted a pari passu security interest in, or lien upon, such assets, in either case, pursuant to documents in form and substance satisfactory to the Revolver Agent and Term Loan Agent.
(i) Each Junior Creditor hereby waives any rights it may have under applicable law to assert the doctrine of marshalling or to otherwise require Collateral Agent or any Senior Creditors to marshal any property of the Loan Parties or any of their respective Affiliates for the benefit of such Junior Creditors.
(j) All payments of Term Loan Obligations pursuant to this subsection 4.2 (including Superpriority Term Loan Obligations) shall be made to the Term Loan Agent for distribution to the Term Loan Lenders and the Disbursing Agents in accordance with the Term Loan Agreement, including subsection 9.25 thereof.
SECTION V
5.1 INFORMATION. From time to time, upon the request of Collateral Agent, each of the following Parties agrees to promptly provide to Collateral Agent the information described below:
(a) Revolver Agent agrees to promptly from time to time to (i) deliver to Collateral Agent a true, correct and complete copy of any amendment, waiver or modification of or supplement to any Revolver Document upon execution and delivery to Revolver Agent thereof by the relevant parties thereto and (ii) notify Collateral Agent of: (A) the aggregate amount of principal of and interest on the relevant Obligations arising under the Revolver Credit Agreement as at such date as Collateral Agent may specify, (B) the current Revolver Loan Commitment under the Revolver Credit Agreement, and (C) any payment received by Revolver Agent to be applied to the principal of or interest on the Obligations and (iii) the amount of any other fees or expenses outstanding under the Revolver Credit Agreement (including fees and expenses of Revolver Agent) and, in each case, Collateral Agent shall be entitled to rely conclusively upon such information.
(b) Term Loan Agent agrees to promptly from time to time to
(i) deliver to Collateral Agent a true, correct and complete copy of
any amendment, waiver or modification of or supplement to any Term Loan
Document upon execution and delivery to Term Loan Agent thereof by the
relevant parties thereto and (ii) notify Collateral Agent of: (A) the
aggregate amount of principal of and interest on the Obligations under
the Term Loan Agreement as at such date as Collateral Agent may
specify, (B) any payment received by Term Loan Agent to be applied to
the principal of or interest on the Obligations and (C) the amount of
any other fees or expenses outstanding under the Term Loan Agreement
(including fees and expenses of Term Loan Agents) and, in each case,
Collateral Agent shall be entitled to rely conclusively upon such
information.
(c) Company agrees promptly from time to time to (i) upon execution of any amendment, waiver, modification or supplement to the Management Services and Reimbursement Agreement, deliver to Collateral Agent an Officer's Certificate certifying that attached thereto is a true, correct and complete copy of any such amendment, waiver or modification or supplement and (ii) upon request of Collateral Agent, promptly deliver to Collateral Agent an Officer's Certificate certifying as to: (A) the outstanding amount of any claim or demand made against any Loan Party pursuant to the Management Services and Reimbursement Agreement and any other amounts owing thereunder, whether for Approved Operating Expenses, Management Services and Reimbursement Agreement Obligations or otherwise, at such date as Collateral Agent may specify, (B) the amount of any payment made pursuant to the Management Services and Reimbursement Agreement and received by any Management Services and Reimbursement Agreement Beneficiary and (C) the outstanding amount of, and applicable recipients of, any Approved Operating Expenses as at any date as Collateral Agent may specify, and, in each case, Collateral Agent shall be entitled to rely conclusively upon such certification.
SECTION VI
6.1 DISCLAIMERS, SUPPLEMENTAL COLLATERAL AGENT, INDEMNITY, ETC.
(a) Collateral Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and the Collateral Documents and Collateral Agent shall not by reason of this Agreement or the Collateral Documents be a trustee for any Party or have any other fiduciary obligation to any Party. Collateral Agent shall not be responsible to any Party for any recitals, statements, representations or warranties contained in this Agreement or any other Credit Document or in any certificate or other document referred to or provided for in, or received by any of them under, this Agreement or any other Credit Document, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Credit Document or any other document referred to or provided for therein or any Lien under the Collateral Documents or the perfection or priority of any such Lien or for any failure by any Loan Party to perform any of its respective obligations this Agreement or any other Credit Document. Collateral Agent may exercise such powers, rights and remedies and perform such duties by or through its Affiliates, agents or employees.
(b) Neither Collateral Agent nor any of its officers, directors, employees or agents shall be liable to any Parties for any action taken or omitted by Collateral Agent under or in connection with this Agreement or any of the Collateral Documents or other Credit Documents except to the extent caused by Collateral Agent's gross negligence or willful misconduct. Collateral Agent shall be entitled to refrain from any act or the taking of any action (including the failure to take an action) in connection with this Agreement or any of the Collateral Documents or other Credit Documents or from the exercise of any power, discretion or authority vested in it hereunder or thereunder unless and until Collateral Agent shall have received instructions in respect thereof from Requisite Obligees (or such other Secured Parties as may be required to give such instructions under subsection 2.4(a)) and, upon receipt of such instructions from Requisite Obligees (or such other Secured Parties, as the case may be), Collateral Agent shall be entitled to act or (where so instructed) refrain from acting, or to exercise such power, discretion or authority, in accordance with such instructions. Without prejudice to the generality of the foregoing, (i) Collateral Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for Company and its Subsidiaries), accountants, experts and other professional advisors selected by it; and (ii) no Party shall have any right of action whatsoever against an Agent as a result of Collateral Agent acting or (where so instructed) refraining from acting under this Agreement or any of the other Collateral Documents or other Credit Documents in accordance with the instructions of Requisite Obligees (or such other Secured Parties as may be required to give such instructions under subsection 2.4(a)).
(c) It is the purpose of this Agreement and the Collateral Documents and other Credit Documents that there shall be no violation of any law of any jurisdiction
denying or restricting the right of banking corporations or associations to transact business as agent or trustee in such jurisdiction. It is recognized that in case of litigation under this Agreement or any of the Collateral Documents or other Credit Documents, and in particular in case of the enforcement of any of the Collateral Documents, or in case Collateral Agent deems that by reason of any present or future law of any jurisdiction it may not exercise any of the rights, powers or remedies granted herein or in any of the other Collateral Documents or take any other action which may be desirable or necessary in connection therewith, it may be necessary that Collateral Agent appoint an additional individual or institution as a separate trustee, co-trustee, collateral agent or collateral co-agent (any such additional individual or institution being referred to herein individually as a "SUPPLEMENTAL COLLATERAL AGENT" and collectively as "SUPPLEMENTAL COLLATERAL AGENTS").
In the event that Collateral Agent appoints a Supplemental Collateral Agent with respect to any Collateral, (i) each and every right, power, privilege or duty expressed or intended by this Agreement or any of the other Collateral Documents to be exercised by or vested in or conveyed to Collateral Agent with respect to such Collateral shall be exercisable by and vest in such Supplemental Collateral Agent to the extent, and only to the extent, necessary to enable such Supplemental Collateral Agent to exercise such rights, powers and privileges with respect to such Collateral and to perform such duties with respect to such Collateral, and every covenant and obligation contained in the Collateral Documents and necessary to the exercise or performance thereof by such Supplemental Collateral Agent shall run to and be enforceable by either Collateral Agent or such Supplemental Collateral Agent, and (ii) the provisions of this Agreement that refer to Collateral Agent shall inure to the benefit of such Supplemental Collateral Agent and all references herein to Collateral Agent shall be deemed to be references to Collateral Agent and/or such Supplemental Collateral Agent, as the context may require.
Should any instrument in writing from any Loan Party be required by any Supplemental Collateral Agent so appointed by Collateral Agent for more fully and certainly vesting in and confirming to him or it such rights, powers, privileges and duties, such Loan Party shall execute, acknowledge and deliver any and all such instruments promptly upon request by Collateral Agent. In case any Supplemental Collateral Agent, or a successor thereto, shall die, become incapable of acting, resign or be removed, all the rights, powers, privileges and duties of such Supplemental Collateral Agent, to the extent permitted by law, shall vest in and be exercised by Collateral Agent until the appointment of a new Supplemental Collateral Agent.
(d) Each Lender ratably in accordance with the amount of the Creditor Obligations of such Lenders, severally agrees that it shall indemnify Collateral Agent and the officers, directors, employees, agents, attorneys, professional advisors and affiliates of Collateral Agent to the extent that any such Person is neither reimbursed by any Loan Party under any Loan Document nor reimbursed out of any Proceeds pursuant to clause First of subsection 4.2(a), for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements and fees and fees and disbursements of any advisor engaged by Collateral Agent) or disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against Collateral Agent or any such Person exercising the powers, rights and remedies of a Collateral Agent or performing duties of a Collateral Agent hereunder or under the other Collateral Documents or in any way relating to or arising out of this Agreement, any Collateral Document or any other Credit Document or any other documents contemplated hereby or thereby or referred to therein or the transactions contemplated hereby or thereby or the enforcement of any of the terms of any thereof; provided, however, that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of Collateral Agent as determined by a final judgment of a court of competent jurisdiction. No Revolver Agent or Term Loan Agent shall have any liability to any Party under this subsection 6.1(d). Obligations of Non-Confirming Holders and Disbursing Agents pursuant to this subsection 6.1(d) shall be subject to the provisions of subsection 9.25 of the Term Loan Agreement.
(e) The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, Collateral Agent in its individual capacity as a Revolver Agent, Term Loan Agent or Term Loan Lender, as the case may be, hereunder or under any Credit Document. With respect to its participation in the Revolver Loan Obligations or Term Loan Obligations, Collateral Agent shall have the same rights and powers hereunder as any other Secured Party and may exercise the same as though it were not performing the duties and functions delegated to it hereunder. Collateral Agent and its Affiliates may accept deposits from, lend money to, acquire equity interests in and generally engage in any kind of commercial banking, investment banking, trust, financial advisory or other business with Company or any of its Affiliates as if it were not performing the duties specified herein, and may accept fees and other consideration from any Loan Party for services in connection with this Agreement and otherwise without having to account for the same to Creditor Parties.
(f) Collateral Agent may deem and treat the payee of any promissory note or other evidence of indebtedness relating to the Creditor Obligations as the owner thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof, signed by such payee and in form satisfactory to Collateral Agent, shall have been filed with Collateral Agent. Any request, authority or consent of any Person who at the time of making such request or giving such authority or consent is the holder of any such note or other evidence of indebtedness shall be conclusive and binding on any subsequent holder, transferee or assignee of such note or other evidence of indebtedness and of any note or notes or other evidences of indebtedness issued in exchange therefor. Notwithstanding anything to the contrary contained in the Term Loan Documents, the Revolver Documents or Management Services and Reimbursement Agreement, (i) no assignment or transfer (including, without limitation, a refinancing or replacement) of any interest of (A) any Revolver Lender in the Revolver Loan Exposure or Revolver Loans (including pursuant to any refinancing, restatement, replacement or extension of the Revolver Credit Agreement not prohibited hereunder), or (B) any interest of any Term Loan Lender in the Term Loan or the Term Loans (including pursuant to any refinancing, restatement, replacement or
extension of the Term Loan Agreement not prohibited hereunder), may in any case be made unless the transferee, assignee or any Person who became a lender pursuant to a refinancing, restatement, replacement or extension of the Term Loan Agreement or Revolver Credit Agreement, as the case may be, executes an Assumption Agreement in the form of Annex 1 hereto, (ii) no appointment (A) of any successor Revolver Agent under the Revolver Credit Agreement (including pursuant to any refinancing, restatement, replacement or extension of the Revolver Credit Agreement not prohibited hereunder), (B) any successor Term Loan Agent or Term Loan Documentation Agent under the Term Loan Agreement (including pursuant to any refinancing, restatement, replacement or extension of the Term Loan Agreement not prohibited hereunder), or (C) any successor Prepetition Unsecured Claims Agent may in any case be made unless the successor executes an Assumption Agreement in the form of Annex 1 hereto and (iii) no Management Services and Reimbursement Agreement Beneficiary may assign or transfer any of its interest in the Management Services and Reimbursement Agreement without the prior written consent of Requisite Revolver Lenders and Requisite Term Loan Lenders.
(g) Except as expressly provided herein and in the Collateral Documents, Collateral Agent shall have no duty to take any affirmative steps with respect to the collection of amounts payable in respect of the Collateral. Collateral Agent shall incur no liability to any Party as a result of any sale of any Collateral at any private sale.
(h) Collateral Agent may resign at any time by giving at least 30 days' notice thereof to the Parties and Collateral Agent may be removed as Collateral Agent at any time by Requisite Obligees. In the event of such resignation or removal of Collateral Agent, Requisite Obligees shall thereupon have the right to appoint a successor Collateral Agent. If no successor Collateral Agent shall have been so appointed by Requisite Obligees within 30 days after the resigning Collateral Agent's giving notice of its intention to resign, then the resigning Collateral Agent may appoint, on behalf of Secured Parties, a successor Collateral Agent and Company hereby agrees to pay to such successor Collateral Agent, in addition to any other amounts payable to Collateral Agent hereunder and under the Collateral Documents, such reasonable annual fees in such amounts and at such times as may be requested by such successor Collateral Agent.
(i) Upon the acceptance of any appointment as Collateral Agent hereunder by a successor Collateral Agent, such successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Collateral Agent under this Agreement and the Collateral Documents. After any retiring or removed Collateral Agent's resignation or removal hereunder as Collateral Agent, the provisions of this subsection 6.1 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Collateral Agent.
(j) In no event shall Collateral Agent or any Secured Party be liable or responsible for any funds or investments of funds held by any Loan Party.
(k) Upon the proposed sale or other disposition of any Collateral that is permitted by the Credit Agreements and is not prohibited by subsection 2.4(a) or has been consented to by Requisite Obligees in connection with an Enforcement Action, and for which a Loan Party desires to obtain a security interest release from Collateral Agent,
such Loan Party shall deliver an Officer's Certificate to Collateral Agent, Revolver Loan Agent and Term Loan Agent (i) stating that the Collateral or the Capital Stock subject to such disposition is being sold or otherwise disposed of in compliance with the terms hereof and of the Credit Agreements and (ii) specifying the Collateral or Capital Stock being sold or otherwise disposed of in the proposed transaction. Upon the receipt of such Officer's Certificate, Collateral Agent shall, at Loan Parties' joint and several expense, so long as Senior Agent has not informed Collateral Agent that it (a) has reason to believe that the facts stated in such Officer's Certificate are not true and correct and (b) if the sale or other disposition of such item of Collateral or Capital Stock constitutes an Asset Sale (as defined in each Credit Agreement) has not received evidence satisfactory to it that arrangements satisfactory to it have been made for delivery of the Net Asset Sale Proceeds (as defined in each Credit Agreement) if and as required by subsection 2.4 of the respective Credit Agreement, execute and deliver such releases of its security interest in such Collateral as may be reasonably requested by such Loan Party. In the event of any conflict or inconsistency between this subsection 6.1(k) and the terms of any other Credit Document, the terms of this Agreement shall prevail.
SECTION VII
7.1 MISCELLANEOUS.
(a) All notices and other communications provided for herein
shall be in writing and may be personally served, or sent by
telefacsimile or United States mail or courier service or electronic
mail (as further provided in this clause (a)) and shall be deemed to
have been given (i) when delivered in person or by courier service,
(ii) upon receipt of telefacsimile in complete and legible form, (iii)
three Business Days after deposit in the United States mail with
postage prepaid and properly addressed, or (iv) in the case of
electronic mail to the extent provided in this clause (a); provided
that notices to Collateral Agent shall not be effective until received.
For the purposes hereof, the addresses of the parties hereto (until
notice of a change thereof is delivered as provided in this subsection
7.1(a)) shall be as set forth under each party's name on the signature
pages (including acknowledgments) hereof. Notices and other
communications to the Lenders, Revolver Agent and Term Loan Agents
hereunder may be delivered or furnished by electronic communication
(including e-mail and Internet or intranet websites) pursuant to
procedures approved by Collateral Agent. Collateral Agent or any
Borrower may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it, provided that approval of such procedures
may be limited to particular notices or communications.
(b) Subject to Section 7.1(c), no amendment, modification, termination or waiver of any provision of this Agreement, and no consent to any departure by any Party therefrom, shall in any event be effective without the written concurrence of Requisite Revolver Lenders and Requisite Term Loan Lenders; provided that (i) no such amendment, modification, termination or waiver shall, without the consent of each Secured Party with Secured Obligations directly affected thereby, amend, modify, terminate or waive, or have the effect of amending, modifying, terminating or waiving, the definition of "Requisite Obligees" or subsection 3.1, (ii) no such amendment,
modification, termination or waiver shall, without the consent of each
Creditor Party (other than Prepetition Unsecured Claims Agent) with
Creditor Obligations directly affected thereby, amend, modify,
terminate or waive, or have the effect of amending, modifying,
terminating or waiving (A) subsection 4.1 or 4.2 or this subsection
7.1(b), or (B) any other provision of this Agreement in a manner that
would impose any additional material obligations on such Creditor Party
or prejudice any material rights or remedies of such Creditor Party,
(iii) no amendment, modification, termination or waiver of any
provision of subsection 2.1 or 2.2 or Section 5 or 6 or of any other
provision of this Agreement which, by its terms, expressly requires the
approval or concurrence of Collateral Agent shall be effective without
the written concurrence of Collateral Agent; and (iv) no such
amendment, modification, termination or waiver of this Agreement shall
materially increase or materially adversely affect obligations of any
Loan Party or adversely affect any rights of a Loan Party under the
other Credit Documents in each case without such Loan Party's prior
written consent; provided, further, that, without the prior written
consent of Prepetition Unsecured Claims Agent, no such amendment,
modification, termination or waiver shall (x) modify or otherwise alter
in any manner adverse to the holders of the Prepetition Unsecured
Claims Participation Interest the right of such holders to receive
Proceeds in the amount and order of priority and under the
circumstances described in subsections 4.1(b), 4.1(c) and 4.2(a), as in
effect on the date hereof, (y) impose any additional obligation on
Prepetition Unsecured Claims Agent or (z) amend, modify, terminate or
waive, or have the effect of amending, modifying, terminating or
waiving the rights of Prepetition Unsecured Claims Agent under this
subsection 7.1(b). To the extent (if any) the provisions of this
Agreement are inconsistent with the provisions set forth in any Credit
Agreement in any particular circumstance, then the provisions set forth
in this Agreement shall prevail to the extent necessary to eliminate or
avoid such inconsistency in such circumstance; provided further,
however, that no concurrence of any Lender or Lenders shall be required
(I) for any amendment, modification, termination or waiver of any
provision of subsection 7.1(c) or any other section or provision herein
that only affects the rights and obligations of Debenture Disbursing
Agent under this Agreement, so long as Term Loan Agents and Term Loan
Borrowers (and, after execution hereof, the Debenture Disbursing Agent)
approve such amendment, modification, termination or waiver; and (II)
for any amendment, modification, termination or waiver of any provision
of subsection 7.1(c) or any other section or provision that only
affects the rights and obligations of Allowed Class 6 Disbursing Agent
under this Agreement, so long as Term Loan Agents and Term Loan
Borrowers (and, after execution hereof, the Allowed Class 6 Disbursing
Agent) approve such amendment, modification, termination or waiver.
(c) All Term Loans that would otherwise be distributed on the Allowed Class 6 Closing Date or the Determination Date (if the Allowed Class 6 Closing Date shall have occurred prior to the Determination Date) on account of Allowed Class 6 Interests shall be held on such date by the Allowed Class 6 Disbursing Agent; and all Term Loans that would otherwise be distributed on the Debenture Closing Date or the Determination Date (if the Debenture Closing Date shall have occurred prior to the Determination Date) on account of 9.25% Debentures shall be held on such date by the Debenture Disbursing Agent. For so long as Debenture Disbursing Agent or Allowed Class 6 Disbursing Agent holds Term Loans (subject to subsection 9.25 of the Term Loan
Agreement) that would otherwise have been Term Loans deemed made directly by or distributed directly to Non-Confirming Holders, such Disbursing Agent shall be the Term Loan Lender of record with respect to such Term Loan Loans held by it (and the corresponding Term Loan Commitments and Term Loan Exposure), except that no Disbursing Agent shall be deemed a "Term Loan Lender", "Creditor Party" or "Secured Party" for purposes of voting on any matters (including the granting of any approvals, consents or waivers) with respect to this Agreement; provided, however, that this clause (c) shall not be construed as permitting, without the prior written consent of the relevant Non-Confirming Holder, (a) modification of the rights, duties or obligations under the this Agreement (other than with respect to voting on any matters) of any Disbursing Agent or of the Non-Confirming Holders for whom such Disbursing Agent serves as record Term Loan Lender, without concurrent and corresponding modification of the rights, duties and obligations of Term Loan Lenders other than such Disbursing Agent, (b) this Agreement to be modified to require that any Disbursing Agent or Non-Confirming Holder make any loan, advance or other extension of credit to, or incur any additional obligation to, any Borrower or any other Person on or after the Closing Date, other than the Term Loans and monetary obligations pursuant to the provisions of the Term Loan Documents in effect on the Closing Date, or (c) modification of the provisions of this clause (c) in a manner that is adverse in any material respect to the Disbursing Agents or the Non-Confirming Holders. For the avoidance of any doubt, the Term Loans, Term Loan Commitments and Term Loan Exposure of each Disbursing Agent shall be excluded in calculating the number or percentage of Term Loans, Term Loan Commitments, Term Loan Exposure and/or Term Loan Lenders whose votes are required and obtained (or not obtained, as the case may be) for purposes of voting on any matters with respect to this Agreement.
Any Non-Confirming Holder that executes and delivers to Collateral Agent, in accordance with subsection 9.25 of the Term Loan Agreement, an acknowledgment and counterpart, in substantially the form of Annex 2 hereto, shall cease to be a Non-Confirming Holder and shall thereupon become a "Term Loan Lender", "Creditor Party" and "Secured Party" for all purposes hereunder and such Non-Confirming Holder holding a Term Loan and Term Loan Commitments in amounts equal to the amounts so confirmed by the Debenture Disbursing Agent, the Debenture Disbursing Agent shall be deemed to have assigned such Term Loan and Term Loan Commitment to such Term Loan Lender on such date for all purposes of this Agreement (without having to execute an Assumption Agreement in the form of Annex 1 hereto notwithstanding subsection 6.1(f)).
Nothing in this Agreement, express or implied, shall be construed to confer upon any Non-Confirming Holder that does not become a Term Loan Lender any legal or equitable right, remedy or claim under or by reason of this Agreement; Collateral Agent shall not have, by reason of this Agreement, a fiduciary relationship in respect of any Disbursing Agent or any Non-Confirming Holder; and nothing in this Agreement, expressed or implied, is intended to or shall be so construed as to impose upon Collateral Agent any obligations to any Disbursing Agent or any Non-Confirming Holder in respect of this Agreement except as expressly set forth herein.
Subject to the occurrence of the Debenture Closing Date, the Debenture Disbursing Agent shall execute and deliver this Agreement and the Term Loan Agreement as the agent for the Non-Confirming Holders on account of the 9.25% Debentures under the Approved Plan of Reorganization and the Confirmation Order. Subject to the occurrence of the Allowed Class 6 Closing Date, the Allowed Class 6 Disbursing Agent shall execute and deliver this Agreement and the Term Loan Agreement as the agent for the Non-Confirming Holders on account of the Allowed Class 6 Claims under the Approved Plan of Reorganization and the Confirmation Order.
(d) Subject to the provisions of subsection 6.1(f), this Agreement shall be binding upon and inure to the benefit of Collateral Agent and each other Party and, other than with respect to the Management Services and Reimbursement Agreement Beneficiaries (except pursuant to a merger of Covanta otherwise permitted pursuant to the Credit Agreements), their respective successors and assigns, including successors to Revolver Agents and Revolver Lenders under the Revolver Loan Documents, Term Agents and Term Loan Lenders under the Term Loan Documents and Prepetition Unsecured Claims Agent.
(e) This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart.
(f) This Agreement shall become effective on the Closing Date and upon the execution of this Agreement by each Loan Party, each Term Loan Lender, each Revolver Lender, each Term Loan Agent, Revolver Agent, each Management Services and Reimbursement Agreement Beneficiary, Prepetition Unsecured Claims Agent and Collateral Agent.
(g) The Collateral Agent may deem and treat the Secured Parties as the "Secured Parties" for all purposes hereof unless and until a notice of the assignment or transfer of any interest held by such Party shall have been filed with the Collateral Agent in accordance with subsection 6.1(f). The Company agrees that it will advise the Collateral Agent of any transfer by any Secured Party of any Revolver Loan Exposure or Term Loan Exposure held by such Secured Party and will, from time to time upon request of the Collateral Agent, deliver a list to the Collateral Agent (which shall be distributed by the Collateral Agent to each Secured Party) setting forth, for the Revolver Loan Exposure, Term Loan Exposure and Management Services and Reimbursement Agreement Obligations, the unpaid principal amount and holder thereof. The Collateral Agent may rely on such list unless, after the distribution thereof, the Collateral Agent is notified by a Secured Party that such information as set forth on such list is inaccurate.
(h) ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY OF THE PARTIES ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES IRREVOCABLY (I) ACCEPTS FOR ITSELF, IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS, (II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS,
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY
SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO SUCH PARTY HERETO AT ITS ADDRESS PROVIDED IN ACCORDANCE
WITH SUBSECTION 7.1(a) HEREOF, (IV) AGREES THAT SERVICE OF PROCESS AS
PROVIDED IN CLAUSE (III) IS SUFFICIENT TO CONFER PERSONAL JURISDICTION
OVER SUCH PERSON IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND
OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT,
(V) AGREES THAT THE PARTIES HERETO RETAIN THE RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST SUCH
PARTY IN THE COURTS OF ANY OTHER JURISDICTION, AND (VI) AGREES THAT THE
PROVISIONS OF THIS SUBSECTION 7.1(h) RELATING TO JURISDICTION AND VENUE
SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE
UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.
(i) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THE INTERCREDITOR RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. Each party hereto acknowledges that this waiver is a material inducement to enter into a business relationship, that each has already relied on the waiver in entering into this Agreement, and that each will continue to rely on the waiver in their related future dealings. Each party hereto further warrants and represents that each has reviewed this waiver with its legal counsel, and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, REPLACEMENTS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.
(j) NO CLAIM MAY BE MADE BY ANY CREDITOR PARTY OR ANY OF THEIR RESPECTIVE AFFILIATES, PARTNERS, DIRECTORS, OFFICERS, EMPLOYEES, OR ATTORNEYS AGAINST ANY OTHER CREDITOR PARTY OR THEIR RESPECTIVE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, OR ATTORNEYS FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES IN RESPECT OF ANY BREACH OR WRONGFUL CONDUCT (WHETHER THE CLAIM THEREFOR IS BASED ON CONTRACT, TORT OR DUTY IMPOSED BY LAW) IN CONNECTION WITH,
ARISING OUT OF OR IN ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED AND RELATIONSHIP ESTABLISHED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH; AND EACH CREDITOR PARTY HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY SUCH CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.
(k) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER OR ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THAT WOULD REQUIRE APPLICATION OF ANOTHER LAW.
(l) All undertakings and agreements contained in this Agreement are solely for the benefit of the Creditor Parties and there are no other Persons (other than the Loan Parties to the extent expressly provided herein) who are intended to be benefited in any way by this Agreement. Each Loan Party agrees that no Creditor Party shall have any liability to any of the Loan Parties for performing its obligations and responsibilities under this Agreement with respect to the other Creditor Parties.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.
LOAN PARTIES:
COVANTA POWER INTERNATIONAL HOLDINGS, INC.
By:_______________________________________
Name:
Title:
COVANTA ENERGY AMERICAS, INC.
By:_______________________________________
Name:
Title:
Notice Address:
c/o Covanta Energy Group, Inc.
40 Lane Road
Fairfield, NJ 07007
Attn: Jeffrey Horowitz, Esq.
EACH OF THE ENTITIES NAMED ON SCHEDULE A
ANNEXED HERETO, AS REVOLVER BORROWERS,
TERM BORROWERS AND MANAGEMENT SERVICES AND
REIMBURSEMENT AGREEMENT OBLIGORS
By:_______________________________________
Name: Jeffrey Horowitz, Esq.
Authorized Officer
Notice Address for each Borrower and
Management Services Agreement Obligor:
c/o Covanta Energy Group, Inc.
40 Lane Road
Fairfield, NJ 07007
Attn: Jeffrey Horowitz, Esq.
MANAGEMENT SERVICES AND REIMBURSEMENT
AGREEMENT BENEFICIARIES:
COVANTA ENERGY CORPORATION
By:_______________________________________
Name:
Title:
Notice Address:
c/o Covanta Energy Group, Inc.
40 Lane Road
Fairfield, NJ 07007
Attn: Jeffrey Horowitz, Esq.
EACH OF THE ENTITIES NAMED ON SCHEDULE B
ANNEXED HERETO, AS MANAGEMENT SERVICES AND
REIMBURSEMENT AGREEMENT BENEFICIARIES
By:_______________________________________
Name: Jeffrey Horowitz, Esq.
Authorized Officer
Notice Address for each Management
Services Agreement Beneficiary:
c/o Covanta Energy Group, Inc.
40 Lane Road
Fairfield, NJ 07007
Attn: Jeffrey Horowitz, Esq.
AGENTS AND LENDERS:
BANK OF AMERICA, N.A.,
as Collateral Agent and Term Loan Agent
By:_______________________________________
Name:
Title:
Notice Address:
Bank of America, N.A., as
Administrative Agent
555 So. Flower Street, 17th Floor
CA9-706-17-54
Los Angeles, California 90071
Attention: David Price, Vice President
Voice: (213) 345-1300
Fax: (415) 503-5011
email: david.price@bankofamerica.com
BANK OF AMERICA, N.A.,
as a Term Loan Lender
By:_______________________________________
Name:
Title:
Notice Address:
Bank of America, N.A.
555 California Street
San Francisco, CA 94104-1503
Phone: 415-622-4438
Fax: 415-622-0234
Attention: Henry Yu
Email: henry.yu@bankofamerica.com
BANK OF AMERICA, N.A.,
as Cash Management Bank
By:_______________________________________
Name:
Title:
Notice Address:
DEUTSCHE BANK SECURITIES, INC.,
as Term Loan Documentation Agent
By:_______________________________________
Name:
Title:
By:_______________________________________
Name:
Title:
Notice Address:
Attention:
Deutsche Bank Securities, Inc.
60 Wall Street
New York, NY 10005
DEUTSCHE BANK AG, NEW YORK BRANCH,
as Revolver Agent
By:_______________________________________
Name: Keith Braun
Title: Director
By:_______________________________________
Name: Keith Braun
Title: Director
Notice Address:
Attention: Keith C. Braun
Deutsche Bank AG, New York Branch
60 Wall Street
New York, NY 10005
DEUTSCHE BANK AG, NEW YORK BRANCH,
as a Revolver Lender
By:_______________________________________
Name: Keith Braun
Title: Director
By:_______________________________________
Name: Keith Braun
Title: Director
Notice Address:
Attention: Keith C. Braun
Deutsche Bank AG, New York Branch
60 Wall Street
New York, NY 10005
BANK OF TOKYO MITSUBISHI (CANADA),
as a Term Loan Lender
By:___________________________________
Name:
Title:
BAYERISCHE HYPO-UND VEREINSBANK AG,
as a Term Loan Lender
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
BEAR STEARNS & CO. INC.,
as a Term Loan Lender
By:___________________________________
Name:
Title:
CANADIAN IMPERIAL BANK OF COMMERCE,
as a Term Loan Lender
By:___________________________________
Name:
Title:
CREDIT SUISSE FIRST BOSTON,
as a Term Loan Lender
By:___________________________________
Name:
Title:
DEUTSCHE BANK AG, NEW YORK BRANCH,
as a Term Loan Lender
By:_______________________________________
Name:
Title:
By:_______________________________________
Name:
Title:
BANC OF AMERICA SECURITIES LLC, as
Agent for BANK OF AMERICA, N.A., as a Term
Loan Lender
By:___________________________________
Name:
Title:
DRESDNER BANK A.G.,
as a Term Loan Lender
By:___________________________________
Name:
Title:
DRESDNER BANK CANADA,
as a Term Loan Lender
By:___________________________________
Name:
Title:
GOLDMAN SACHS,
as a Term Loan Lender
By:___________________________________
Name:
Title:
HSBC BANK CANADA,
as a Term Loan Lender
By:___________________________________
Name:
Title:
HSBC BANK USA,
as a Term Loan Lender
By:___________________________________
Name:
Title:
IIB BANK LIMITED,
as a Term Loan Lender
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
JPMORGAN CHASE BANK
(FORMERLY KNOWN AS THE CHASE MANHATTAN
BANK),
as a Term Loan Lender
By:___________________________________
Name:
Title:
J.P. MORGAN SECURITIES, INC.,
as a Term Loan Lender
By:___________________________________
Name:
Title:
KBC BANK NV, NEW YORK BRANCH,
as a Term Loan Lender
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
Notice Address:
Attention: Rose Pagan
KBC Bank NV, New York Branch
125 West 55th Street
New York, NY 10019
Telephone No.: (212) 541-0657
Fax No.: (212) 956-5581
LANDESBANK HESSEN-THURINGEN GIROZENTRALE,
as a Term Loan Lender
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH,
INCORPORATED,
as a Term Loan Lender
By:___________________________________
Name:
Title:
MINTO APARTMENTS LIMITED,
as a Term Loan Lender
By:___________________________________
Name:
Title:
QUANTUM PARTNERS LDC
C/O SOROS FUND MANAGEMENT LLC,
as a Term Loan Lender
By:___________________________________
Name:
Title:
SPECIAL SITUATIONS INVESTING GROUP,
as a Term Loan Lender
By:___________________________________
Name:
Title:
SUNTRUST BANK,
as a Term Loan Lender
By:___________________________________
Name:
Title:
THE BANK OF NEW YORK,
as a Term Loan Lender
By:___________________________________
Name:
Title:
THE BANK OF NOVA SCOTIA,
as a Term Loan Lender
By:___________________________________
Name:
Title:
THE TORONTO-DOMINION BANK,
as a Term Loan Lender
By:___________________________________
Name:
Title:
THE TORONTO-DOMINION BANK,
as a Term Loan Lender(1)
By:___________________________________
Name:
Title:
UBS LOAN FINANCE LLC,
as a Term Loan Lender
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
U.S. BANK NATIONAL ASSOCIATION
(FORMERLY KNOWN AS FIRSTAR BANK, N.A.),
as a Term Loan Lender
By:___________________________________
Name:
Title:
WACHOVIA BANK, NATIONAL ASSOCIATION,
as a Term Loan Lender
By:___________________________________
Name:
Title:
WESTLB AG (FORMERLY KNOWN AS WESTDEUTSCHE
LANDESBANK GIROZENTRALE), NEW YORK BRANCH,
as a Term Loan Lender
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
2005646 ONTARIO INC.,
as a Term Loan Lender
By:___________________________________
Name:
Title:
PREPETITION UNSECURED CLAIMS AGENT:
U.S. BANK NATIONAL ASSOCIATION,
AS PREPETITION UNSECURED CLAIMS
AGENT
By:_______________________________________
Name:
Title:
Notice Address:
DEBENTURE DISBURSING AGENT:
WELLS FARGO BANK, N.A., AS DEBENTURE
DISBURSING AGENT
By:_______________________________________
Name:
Title:
Notice Address:
ALLOWED CLASS 6 DISBURSING AGENT:
U.S. BANK NATIONAL ASSOCIATION, AS ALLOWED
CLASS 6 DISBURSING AGENT
By:_______________________________________
Name:
Title:
Notice Address:
Annex 1 to Intercreditor Agreement
ASSUMPTION AGREEMENT, dated as of __________, 200_, made by
_________________ (the "ADDITIONAL CREDITOR PARTY").
W I T N E S S E T H :
WHEREAS, Covanta Power International Holdings, Inc. ("COMPANY") and the Subsidiaries of Company listed on the signature pages thereof; Covanta Energy Americas, Inc., certain Persons listed on the signature pages thereof as Term Loan Lenders (together with any lenders that subsequently become party thereto, the "TERM LOAN LENDERS"); certain financial institutions listed on the signature pages thereof as Revolver Lenders (the "REVOLVER LENDERS"); Deutsche Bank AG, New York Branch, as administrative agent for Revolver Lenders, Bank of America, N.A., as administrative agent for Term Loan Lenders, as collateral agent, and cash management bank, Deutsche Bank Securities, Inc., as documentation agent for Term Loan Lenders, the companies listed on the signature pages thereof as Management Services and Reimbursement Agreement Beneficiaries, the companies listed on the signature pages thereof as Management Services and Reimbursement Agreement Obligors, U.S Bank National Association, as agent for the holders of the Prepetition Unsecured Claims Participation Interest, and Wells Fargo Bank, N.A., as Debenture Disbursing Agent, and U.S. Bank National Association, as Allowed Class 6 Disbursing Agent are parties to that certain Intercreditor Agreement dated as of March __, 2004 (as amended, supplemented or otherwise modified from time to time (the "INTERCREDITOR AGREEMENT");
WHEREAS, the Loan Parties have executed the Collateral Documents pursuant to which the Loan Parties party to each such document have granted to the Collateral Agent, for the benefit of the Secured Parties, a security interest in the Collateral to secure their respective obligations arising in connection with the Credit Document;
WHEREAS, subsection 6.1(f) of the Intercreditor Agreement requires the Additional Creditor Party to become a party to the Intercreditor Agreement; and
WHEREAS, the Additional Creditor Party has agreed to execute and deliver this Assumption Agreement in order to become a party to the Intercreditor Agreement;
NOW, THEREFORE, IT IS AGREED:
1. Defined Terms. Unless otherwise defined herein, terms defined in the Intercreditor Agreement and used herein shall have the meanings given to them in the Intercreditor Agreement.
2. Intercreditor Agreement. By executing and delivering this Assumption Agreement, the Additional Creditor Party hereby becomes a party to the Intercreditor Agreement as [Revolver Agent][Term Loan Agent][Term Loan Documentation Agent][a Revolver Lender][a Term Loan Lender][Prepetition Unsecured Claims Agent] and Secured Party thereunder with the same force and effect as if originally named therein as [Revolver
A-1-1
Agent][Term Loan Agent][Term Loan Documentation Agent][a Revolver Lender][a Term Loan Lender][Prepetition Unsecured Claims Agent] and a Secured Party and, without limiting the generality of the foregoing, hereby expressly assumes all obligations and liabilities of [Revolver Agent][Term Loan Agent][Term Loan Documentation Agent][a Revolver Lender][a Term Loan Lender][Prepetition Unsecured Claims Agent] and a Secured Party thereunder and agrees to be bound by the terms thereof.
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL CREDITOR PARTY]
By:___________________________
Name:
Title:
A-1-2
Annex 2 to Intercreditor Agreement
ACKNOWLEDGMENT AND COUNTERPART
ACKNOWLEDGMENT AND COUNTERPART (this "COUNTERPART"), dated as of _______, is entered into in connection with the Intercreditor Agreement dated as of March __, 2004 (said Intercreditor Agreement, as it may heretofore have been and as it may hereafter be further amended, restated, supplemented or otherwise modified from time to time being the "INTERCREDITOR AGREEMENT"; capitalized terms used herein not otherwise defined herein shall have the meanings ascribed therein), by and among Covanta Power International Holdings, Inc. ("COMPANY") and the Subsidiaries of Company listed on the signature pages thereof, as Borrowers; Covanta Energy Americas, Inc.; certain Persons listed on the signature pages thereof as Term Loan Lenders (together with any other lenders that subsequently become party thereto, the "TERM LOAN LENDERS"); certain financial institutions listed on the signature pages thereof as Revolver Lenders; Deutsche Bank AG, New York Branch, as administrative agent for Revolver Lenders; Bank of America, N.A., as administrative agent for Term Loan Lenders, as collateral agent, and cash management bank; Deutsche Bank Securities, Inc., as documentation agent for Term Loan Lenders; the companies listed on the signature pages thereof as Management Services and Reimbursement Agreement Beneficiaries; the companies listed on the signature pages thereof as Management Services and Reimbursement Agreement Obligors; U.S. Bank National Association, as agent for the holders of the Prepetition Unsecured Claims Participation Interest, and Wells Fargo Bank, N.A., as Debenture Disbursing Agent, and U.S. Bank National Association, as Allowed Class 6 Disbursing Agent. The undersigned, by executing and delivering this Counterpart, hereby acknowledges and agrees (a) that upon acceptance of this Counterpart by Administrative Agent it shall become party to the Intercreditor Agreement as a "Term Loan Lender" in accordance with the terms thereof and shall have the rights and obligations of a Term Loan Lender under the Intercreditor Agreement, (b) that it shall be bound by all of the terms of the Intercreditor Agreement as a Term Loan Lender, and (c) that this Counterpart may be attached to the Intercreditor Agreement. The undersigned hereby further agrees that the address and facsimile number of the undersigned for notice purposes pursuant to Section 7.1(a) of the Intercreditor Agreement shall be initially as set forth below.
[NAME OF TERM LOAN LENDER]
By: ___________________________
Name:
Title:
Notice Address:
A-2-1
EXHIBIT 4.27
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "AGREEMENT") is dated as of March __, 2004 and entered into by and among COVANTA ENERGY CORPORATION, a Delaware corporation ("COVANTA" or "COMPANY"), each of THE OTHER BORROWERS LISTED ON THE SIGNATURE PAGES HEREOF, and each ADDITIONAL BORROWER that may become a party hereto after the date hereof in accordance with Section 24 hereof (each an "ADDITIONAL GRANTOR" and collectively "ADDITIONAL GRANTORS"; Borrowers, including any Additional Grantors, are sometimes collectively referred to herein as "GRANTORS" and individually as a "GRANTOR"), and BANK OF AMERICA, N.A., in its capacity as collateral agent for and representative of the Secured Parties (as defined in the Intercreditor Agreement referred to below) (the "COLLATERAL AGENT"). All capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed thereto in the Intercreditor Agreement.
RECITALS
WHEREAS, pursuant to the Credit Agreement dated as of March __, 2004 (said Credit Agreement or any credit agreement entered into by Detroit L/C Borrowers to refinance, replace, renew or extend, in whole or in part, said Credit Agreement and the indebtedness and letters of credit issued thereunder to the extent permitted pursuant to the New L/C Facility Agreement (as defined below) and the High Yield Indenture (as defined below), as said Credit Agreement or any replacement to said Credit Agreement may be amended, restated, supplemented or otherwise modified from time to time, being the "DETROIT L/C FACILITY AGREEMENT"), by and among Grantors as borrowers, the financial institutions from time to time party thereto as lenders (the "DETROIT L/C LENDERS"), Bank of America, N.A., as administrative agent (the "DETROIT L/C FACILITY AGENT"), and Deutsche Bank Securities, Inc., as documentation agent for the Detroit L/C Lenders (in such capacity "DETROIT L/C DOCUMENTATION AGENT," and together with the Detroit L/C Facility Agent, THE "DETROIT L/C AGENTS"), the Detroit L/C Lenders have made certain commitments (each, a "DETROIT L/C COMMITMENT"), subject to the terms and conditions set forth in the Detroit L/C Facility Agreement, to extend certain letter of credit facilities (each, a "DETROIT L/C") to Grantors;
WHEREAS, pursuant to the Credit Agreement dated as of March __, 2004, (said Credit Agreement or any credit agreement entered into by New L/C Borrowers to refinance, replace, renew or extend, in whole or in part, said Credit Agreement and the indebtedness and letters of credit issued thereunder to the extent permitted pursuant to the Detroit L/C Facility Agreement and the High Yield Indenture, as said Credit Agreement or any replacement to said Credit Agreement may be amended, restated, supplemented or otherwise modified from time to time, being the "NEW L/C FACILITY AGREEMENT"), by and among Grantors as borrowers, the financial institutions listed therein as lenders (the "NEW L/C LENDERS") and Bank One, NA, as administrative agent for the New L/C Lenders (in such capacity, the "NEW L/C AGENT," and collectively with the Detroit L/C Agents, the Detroit L/C Lenders, the High Yield Trustee, the High Yield Noteholders, the New L/C Lenders and the Cash Management Bank (as defined below), the "BENEFITED PARTIES"), the New L/C Lenders have made certain commitments (each, a "NEW L/C COMMITMENT," and together with the Detroit L/C Commitments, collectively, the "COMMITMENTS"), subject to the terms and conditions set forth in the New L/C Facility Agreement, to extend certain letter of credit and revolving credit facilities (each, a "NEW L/C," and together with the Detroit L/Cs, the "LETTERS OF CREDIT") to the New L/C Borrowers;
WHEREAS, pursuant to the indenture dated as of March __, 2004 (said indenture or any replacement to said indenture entered into in connection with a refinancing, defeasance, renewal, replacement or extension of the High Yield Notes (as defined below) permitted under the Detroit L/C Facility Agreement and New L/C Facility Agreement (as defined below), as said indenture or replacement to said indenture may be amended, supplemented or otherwise modified from time to time, being the "HIGH YIELD INDENTURE") by and between Company and U.S. Bank National Association, in its capacity as trustee (the "HIGH YIELD TRUSTEE"), Company has issued $205,000,000 in aggregate initial face principal amount (accruing to $230,000,000 at stated maturity) of its 8.25% Senior Notes due 2011 (the "HIGH YIELD NOTES");
Security Agreement
WHEREAS, Grantors other than the Company (the "HIGH YIELD GUARANTORS," and together with the Company and the Grantors, each individually a "LOAN PARTY," and collectively the "LOAN PARTIES") have agreed, in favor of the holders of the High Yield Notes (the "HIGH YIELD NOTEHOLDERS"), to guarantee the prompt payment and performance when due of all obligations of Company under the High Yield Notes on the terms and conditions set forth in the High Yield Indenture;
WHEREAS, in accordance with the terms of the Credit Agreements, Borrowers are required to maintain the Cash Management System with Bank of America (in such capacity, the "CASH MANAGEMENT BANK"), and it is desired that the Cash Management Obligations be secured hereunder;
WHEREAS, Company, the Detroit L/C Borrowers, the New L/C Borrowers, DHC, the Detroit L/C Agents, the Detroit L/C Lenders, the High Yield Trustee for the benefit of the High Yield Noteholders, the New L/C Agent, the New L/C Lenders, the Cash Management Bank and Collateral Agent have entered into that certain Intercreditor Agreement dated as of March __, 2004 (as it may hereafter be amended, restated, supplemented or otherwise modified from time to time, the "INTERCREDITOR AGREEMENT"), pursuant to which the Detroit L/C Agents, the Detroit L/C Lenders, the High Yield Trustee for the benefit of the High Yield Noteholders, the New L/C Agent, the New L/C Lenders and Cash Management Bank have appointed Collateral Agent, and Collateral Agent has agreed to act, as collateral agent for the Detroit L/C Agents, the Detroit L/C Lenders, the High Yield Noteholders, the New L/C Agent , the New L/C Lenders and the Cash Management Bank hereunder; and
WHEREAS, it is a condition precedent to (i) the extension of credit by the Detroit L/C Lenders under the Detroit L/C Facility Agreement, (ii) the effectiveness of the High Yield Indenture and (iii) the extension of credit by the New L/C Lenders that the Grantors listed on the signature pages hereof shall have granted the security interest and undertaken the obligations contemplated by this Agreement;
NOW, THEREFORE, in consideration of the premises and in order to induce the Detroit L/C Lenders to make extensions of credit from time to time under the Detroit L/C Facility Agreement, the New L/C Lenders to make extensions of credit from time to time under the New L/C Facility Agreement, the High Yield Noteholders to accept the High Yield Notes issued under the High Yield Indenture, the Cash Management Bank to provide cash management services to the Grantors and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, each Grantor hereby agrees with Collateral Agent as follows:
SECTION 1. GRANT OF SECURITY.
Each Grantor hereby assigns and grants to Collateral Agent a security interest, subject to the terms of the Intercreditor Agreement (including, without limitation, the provisions regarding lien priority), in all of such Grantor's right, title and interest in and to all of such Grantor's personal property and fixture property of every kind and nature, and all proceeds and products thereof, in each case whether now or hereafter acquired and wherever the same may be located, including, without limitation, the following (the "COLLATERAL"), to secure the obligations as set forth in Section 2 herein except as provided in the penultimate paragraph to this Section 1:
(a) all equipment, in all of its forms, all parts thereof and all accessions thereto (any and all such equipment, parts and accessions being the "EQUIPMENT");
(b) all inventory in all of its forms, including but not limited to (i) all goods held by such Grantor for sale or lease or to be furnished under contracts of service or so leased or furnished, (ii) all raw materials, work in process, finished goods, and materials used or consumed in the manufacture, packing, shipping, advertising, selling, leasing, furnishing or production of such inventory or otherwise used or consumed in such Grantor's business, (iii) all goods in which such Grantor has an interest in mass or a joint or other interest or right of any kind, and (iv) all goods which are returned to or repossessed by such Grantor and all accessions thereto and products thereof (collectively the "INVENTORY") and all negotiable and non-negotiable documents of title (including without limitation, documents, warehouse receipts, dock receipts and bills of lading) issued by any Person covering any Inventory (any such negotiable document of title being a "NEGOTIABLE DOCUMENT OF TITLE");
Security Agreement
(c) all accounts, contract rights, chattel paper, documents, instruments, general intangibles, letter-of-credit rights and other rights and obligations of any kind owned by or owing to such Grantor and all rights in, to and under all security agreements, leases and other contracts securing or otherwise relating to any such accounts, contract rights, chattel paper, documents, instruments, general intangibles, letter-of-credit rights or other rights and obligations (any and all such accounts, contract rights, chattel paper, documents, instruments, general intangibles, letter of credit rights and other rights and obligations being the "ACCOUNTS," and any and all such security agreements, leases and other contracts being the "RELATED CONTRACTS").
(d) all deposit accounts, including any restricted deposit accounts established and maintained by Collateral Agent pursuant to Sections 12 and 13 hereof and all the accounts and concentration accounts which constitute the Cash Management System, together with (i) all amounts on deposit from time to time in such deposit accounts and (ii) all interest, cash, instruments, securities and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the foregoing (the "DEPOSIT ACCOUNTS");
(e) the "SECURITIES COLLATERAL," which term means:
(i) the shares of stock, partnership interests, interests in joint ventures, limited liability company interests and all other equity interests in any other Person, including all securities convertible into, and rights, warrants, options and other rights to purchase or otherwise acquire, any of the foregoing now or hereafter owned by such Grantor, including those owned on the date hereof and described on Schedule 1(e)(i), and the certificates or other instruments representing any of the foregoing and any interest of such Grantor in the entries on the books of any securities intermediary pertaining thereto (the "PLEDGED SHARES"), and all dividends, distributions, returns of capital, cash, warrants, options, rights, instruments, rights to vote or manage the business of such Person pursuant to organizational documents governing the rights and obligations of the stockholders, partners, members or other owners thereof and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such Pledged Shares;
(ii) the indebtedness from time to time owed to such Grantor by any obligor, and the instruments evidencing such indebtedness (the "PLEDGED DEBT"), and all interest, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Debt; and
(iii) all other investment property of such Grantor not otherwise included in this clause (e) or the definition of Investment Collateral below; provided, however, that the Securities Collateral shall not include (1) any shares of stock, partnership interests, interests in joint ventures, limited liability company interests or other equity interests of any Subsidiary that was not incorporated or organized under the laws of the United States, any state thereof or the District of Columbia (a "FOREIGN SUBSIDIARY") in excess of the number of shares or other such interests of such issuer possessing up to but not exceeding 65% of the voting power of all classes of capital stock or other such interests entitled to vote of such Foreign Subsidiary, or (2) any shares of stock, partnership interests, interests in joint ventures, limited liability company interests or all other equity interests of those Subsidiaries the pledge of which would constitute a violation of (A) a valid and enforceable Contractual Obligation in favor of or for the benefit of a Person other than Company or any of its Subsidiaries and their respective Affiliates for which the required consents have not been obtained, or (B) applicable law affecting such Grantor or such Subsidiary;
(f) the "INVESTMENT COLLATERAL", which term means:
(i) all securities accounts, including any restricted securities accounts established and maintained by Collateral Agent pursuant to Section 14 herein, (ii) all credit balances held from time to time in such securities accounts, (iii) any property, including any Financial Assets (as defined in the UCC) credited to any such securities account by Collateral Agent and any other property acquired by Collateral Agent as securities intermediary in exchange for, with proceeds from or distributions on, or otherwise in respect of any of the foregoing (any such property an
Security Agreement
"INVESTMENT") and any security entitlements, securities (whether certificated or uncertificated), instruments, accounts, chattel paper, general intangibles and deposits representing or evidencing any Investment, and (iv) all interest, dividends, cash, instruments, securities and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Investments.
(g) the "INTELLECTUAL PROPERTY COLLATERAL," which term means:
(i) all rights, title and interest (including rights
acquired pursuant to a license or otherwise) in and to all
trademarks, service marks, designs, logos, indicia,
tradenames, trade dress, corporate names, company names,
business names, fictitious business names, trade styles and/or
other source and/or business identifiers and applications
pertaining thereto, owned by such Grantor, or hereafter
adopted and used, in its business (including, without
limitation, the trademarks specifically identified in Schedule
1(g)(i), as the same may be amended pursuant hereto from time
to time) (collectively, the "TRADEMARKS"), all registrations
that have been or may hereafter be issued or applied for
thereon in the United States and any state thereof and in
foreign countries (including, without limitation, the
registrations and applications specifically identified in
Schedule 1(g)(i), as the same may be amended pursuant hereto
from time to time) (the "TRADEMARK REGISTRATIONS"), all common
law and other rights in and to the Trademarks in the United
States and any state thereof and in foreign countries (the
"TRADEMARK RIGHTS"), and all goodwill of such Grantor's
business symbolized by the Trademarks and associated therewith
(the "ASSOCIATED GOODWILL");
(ii) all rights, title and interest (including rights acquired pursuant to a license or otherwise) in and to all patents and patent applications and rights and interests in patents and patent applications under any domestic or foreign law that are presently, or in the future may be, owned or held by such Grantor and all patents and patent applications and rights, title and interests in patents and patent applications under any domestic or foreign law that are presently, or in the future may be, owned by such Grantor in whole or in part (including, without limitation, the patents and patent applications listed in Schedule 1(g)(ii)(A), as the same may be amended pursuant hereto from time to time, but excluding those listed in Schedule 1(g)(ii)(B)), all rights corresponding thereto (including, without limitation, the right, exercisable only upon the occurrence and during the continuation of an Event of Default, to sue for past, present and future infringements in the name of such Grantor or in the name of Collateral Agent, the Detroit L/C Lenders, the High Yield Noteholders or the New L/C Lenders and/or any other Benefited Parties), and all re-issues, divisions, continuations, renewals, extensions and continuations-in-part thereof (all of the foregoing being collectively referred to as the "PATENTS"); it being understood that the rights and interests included in the Intellectual Property Collateral hereby shall include, without limitation, all rights and interests pursuant to licensing or other contracts in favor of such Grantor pertaining to patent applications and patents presently or in the future owned or used by third parties but, in the case of third parties which are not Affiliates of such Grantor, only to the extent permitted by such licensing or other contracts and, if not so permitted, only with the consent of such third parties; and
(iii) all rights, title and interest (including rights acquired pursuant to a license or otherwise) under copyright in various published and unpublished works of authorship including, without limitation, computer programs, computer data bases, other computer software, layouts, trade dress, drawings, designs, writings, and formulas owned by such Grantor (including, without limitation, the works listed on Schedule 1(g)(iii), as the same may be amended pursuant hereto from time to time) (collectively, the "COPYRIGHTS"), all copyright registrations issued to such Grantor and applications for copyright registration that have been or may hereafter be issued or applied for thereon by such Grantor in the United States and any state thereof and in foreign countries (including, without limitation, the registrations listed on Schedule 1(g)(iii), as the same may be amended pursuant hereto from time to time) (collectively, the "COPYRIGHT REGISTRATIONS"), all common law and other rights in and to the Copyrights in the United States and any state thereof and in foreign countries including all copyright licenses (but with respect to
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such copyright licenses, only to the extent permitted by such licensing arrangements) (the "COPYRIGHT RIGHTS"), including, without limitation, each of the Copyrights, rights, titles and interests in and to the Copyrights, all derivative works and other works protectable by copyright, which are presently, or in the future may be, owned, created (as a work for hire for the benefit of such Grantor), authored (as a work for hire for the benefit of such Grantor), or acquired by such Grantor, in whole or in part, and all Copyright Rights with respect thereto and all Copyright Registrations therefor, heretofore or hereafter granted or applied for, and all renewals and extensions thereof, throughout the world, including all proceeds thereof (such as, by way of example and not by limitation, license royalties and proceeds of infringement suits), the right to renew and extend such Copyright Registrations and Copyright Rights and to register works protectable by copyright and the right to sue for past, present and future infringements of the Copyrights and Copyright Rights;
(h) all information used or useful or arising from the business including all goodwill, trade secrets, trade secret rights, know-how, customer lists, processes of production, ideas, confidential business information, techniques, processes, formulas, and all other proprietary information;
(i) all licenses, contracts and agreements, as each such license, contract and agreement may be amended, restated, supplemented or otherwise modified from time to time (said agreements, as so amended, restated, supplemented or otherwise modified, being referred to herein individually as an "ASSIGNED AGREEMENT" and collectively as the "ASSIGNED AGREEMENTS"), including, without limitation, (i) all rights of such Grantor to receive moneys due or to become due under or pursuant to the Assigned Agreements, (ii) all rights of such Grantor to receive proceeds of any insurance, indemnity, warranty or guaranty with respect to the Assigned Agreements, (iii) all claims of such Grantor for damages arising out of any breach of or default under the Assigned Agreements, and (iv) all rights of such Grantor to terminate, amend, supplement, modify or exercise rights or options under the Assigned Agreements, to perform thereunder and to compel performance and otherwise exercise all remedies thereunder;
(j) to the extent not included in any other paragraph of this
Section 1, each Grantor's commercial tort claims (as defined under Article 9 of
the UCC), potential claims, causes of action and potential causes of action,
including, but not limited to, those listed on Schedule 1(j) (collectively, the
"COMMERCIAL TORT CLAIMS"), and all general intangibles (including, without
limitation, tax refunds, payment intangibles, other rights to payment or
performance, choses in action, software and judgments taken on any rights or
claims included in the Collateral);
(k) all plant fixtures, business fixtures and other fixtures, and storage and office facilities, and all accessions thereto and products thereof;
(l) all books, records, ledger cards, files, correspondence, computer programs, tapes, disks and related data processing software that at any time evidence or contain information relating to any of the Collateral or are otherwise necessary or helpful in the collection thereof or realization thereupon; and
(m) all proceeds, products, rents and profits of or from any and all of the foregoing Collateral and, to the extent not otherwise included, all payments under insurance related to the Collateral (whether or not Collateral Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral. For purposes of this Agreement, the term "PROCEEDS" includes whatever is receivable or received when Collateral or proceeds are sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary.
Notwithstanding anything herein to the contrary, (i) in no event shall the Collateral include, and no Grantor shall be deemed to have granted a security interest in (x) any of such Grantor's rights or interests in any license, contract or agreement to which such Grantor is a party or any of its rights or interests thereunder, to the extent, but only to the extent, that such a grant would, under the terms of such license, contract or agreement or otherwise, result in a breach of the terms of, or constitute a default under the provisions of any license, contract or agreement to which such Grantor is a party on the date hereof (other than to the extent that any such provision would be rendered ineffective pursuant to the UCC or any other applicable law (including the Bankruptcy Code) or principles of equity); provided, that immediately upon the ineffectiveness, lapse or termination of any such
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provision, the Collateral shall include, and such Grantor shall be deemed to have granted a security interest to Collateral Agent in, all such rights and interests as if such provision had never been in effect; provided, further that if the assignment of proceeds of such license, contract or agreement would not result in a breach of the terms of, or constitute a default under the provisions of such license, contract or agreement, such proceeds shall be included in the Collateral, (y) any real property leasehold, unless a Grantor has executed a leasehold mortgage or leasehold deed of trust covering such real property leasehold, or (z) any amounts in Deposit Accounts that are reserves or escrow arrangements established in accordance with the Approved Plan of Reorganization, and (ii) in no event shall DSS Environmental, Inc., a New York corporation, be deemed to have granted a security interest to the Collateral Agent for the benefit of the High Yield Noteholders.
Each item of Collateral listed in this Section 1 that is defined in Articles 8 or 9 of the UCC shall also include the meanings set forth in the UCC, it being the intention of the Grantors that the description of the Collateral set forth above be construed to include the broadest possible range of assets.
SECTION 2. SECURITY FOR OBLIGATIONS.
This Agreement secures, and the Collateral assigned by each Grantor is collateral security for, the Secured Obligations.
SECTION 3. GRANTORS REMAIN LIABLE.
Anything contained herein to the contrary notwithstanding, (a) each Grantor shall remain liable under any contracts, licenses and agreements included in the Collateral, to the extent set forth therein, to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by Collateral Agent of any of its rights hereunder shall not release any Grantor from any of its duties or obligations under the contracts, licenses and agreements included in the Collateral, and (c) Collateral Agent shall not have any obligation or liability under any contracts, licenses, and agreements included in the Collateral by reason of this Agreement, nor shall Collateral Agent be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.
SECTION 4. REPRESENTATIONS AND WARRANTIES.
Each Grantor represents and warrants as follows:
(a) OWNERSHIP OF COLLATERAL. Except as expressly permitted by the Credit Documents, such Grantor owns the Collateral owned by such Grantor free and clear of any Lien. Except as expressly permitted by the Credit Documents and such as may have been filed in favor of Collateral Agent in connection with this Agreement, no effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any filing or recording office.
(b) LOCATIONS OF EQUIPMENT AND INVENTORY. All of the Equipment
and Inventory having a value in excess of $500,000 is, as of the date hereof, or
in the case of an Additional Grantor, the date of the applicable counterpart
entered into pursuant to Section 24 hereof (each, a "COUNTERPART") located at
the places specified in Schedule 4(b), except for Equipment that is temporarily
moved from places specified in Schedule 4(b) to undergo repair or Inventory
which, in the ordinary course of business, is in transit either (i) from a
supplier to a Grantor, (ii) between the locations specified in Schedule 4(b), or
(iii) to customers of a Grantor.
(c) NEGOTIABLE DOCUMENTS OF TITLE. Except as set forth on Schedule 4(c), no Negotiable Documents of Title are outstanding with respect to any of the Inventory with a value in excess of $100,000.
(d) OFFICE LOCATIONS; TYPE AND JURISDICTION OF ORGANIZATION. The chief place of business, the chief executive office and the office where such Grantor keeps its records regarding the Accounts and all originals of all chattel paper that evidence Accounts are, as of the date hereof, and, except as described on Schedule 4(d), have been for the four-month period preceding the date hereof, or, in the case of an Additional Grantor, the date of the applicable Counterpart, located at the locations described on Schedule 4(d); such Grantor's type (i.e.,
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corporation, limited partnership, etc.) and jurisdiction of organization are listed on Schedule 4(d); and no Grantor is an unregistered entity.
(e) NAMES. No Grantor (or predecessor by merger or otherwise of such Grantor) has, within the four-month period preceding the date hereof, or, in the case of an Additional Grantor, the date of the applicable Counterpart, had a different name from the name of such Grantor listed on the signature pages hereof, except the names listed in Schedule 4(e) annexed hereto.
(f) DELIVERY OF CERTAIN COLLATERAL. All certificates or instruments (excluding checks) evidencing, comprising or representing the Collateral (including, without limitation, the Securities Collateral) have been or, when required pursuant to this Agreement will be, delivered to Collateral Agent duly endorsed or accompanied by duly executed instruments of transfer or assignment in blank.
(g) SECURITIES COLLATERAL. (i) All of the Pledged Shares described on Schedule 1(e)(i) have been duly authorized and validly issued in compliance with all applicable federal and state securities laws and, in the case of capital stock, are fully paid and non-assessable; (ii) all of the Pledged Debt issued by Company or any of its Subsidiaries has been duly authorized, authenticated or issued, and delivered and is the legal, valid and binding obligation of the issuers thereof and is not in default; (iii) except as described more fully on Schedule 1(e)(i), the Pledged Shares constitute all of the issued and outstanding shares of stock or other equity interests of each issuer thereof (subject to the proviso to Section 1(e)(iii) with respect to shares of a Foreign Subsidiary), and there are no outstanding warrants, options or other rights to purchase, or other agreements outstanding with respect to, or property that is now or hereafter convertible into, or that requires the issuance or sale of, any Pledged Shares, except pursuant to any Contractual Obligation set forth on Schedule 4(g); (iv) the Pledged Debt issued by Company or any of its Subsidiaries constitutes all of the issued and outstanding intercompany indebtedness evidenced by a promissory note; and (v) Schedule 1(e)(i) sets forth all of the Pledged Shares owned by each Grantor on the date hereof, or in the case of an Additional Grantor, the date of the applicable Counterpart.
(h) INTELLECTUAL PROPERTY COLLATERAL.
(i) a true and complete list of all Trademark Registrations and Trademark applications owned, held (whether pursuant to a license or otherwise) or used by such Grantor, in whole or in part, is set forth in Schedule 1(g)(i);
(ii) a true and complete list of all Patents owned, held (whether pursuant to a license or otherwise) or used by such Grantor, in whole or in part, is set forth in Schedule 1(g)(ii);
(iii) a true and complete list of all Copyright
Registrations and applications for Copyright Registrations
held (whether pursuant to a license or otherwise) by such
Grantor, in whole or in part, is set forth in Schedule
1(g)(iii);
(iv) after reasonable inquiry, such Grantor is not aware of any pending or threatened claim by any third party that any of the Intellectual Property Collateral owned, held or used by such Grantor is invalid or unenforceable; and
(v) except as expressly permitted by each Credit Document, no effective security interest or other Lien covering all or any part of the Intellectual Property Collateral is on file in the United States Patent and Trademark Office or the United States Copyright Office.
(i) PERFECTION. The security interest in the Collateral is granted to Collateral Agent on the basis described in Section 2 hereof and constitutes a valid security interest (except for the security interest purported to be granted in commercial tort claims other than those listed on Schedule 1(j)), to the extent the UCC or United States patent, trademark or copyright statutes are applicable thereto, securing the payment of the applicable Secured Obligations. Upon (i) the filing of UCC financing statements naming each Grantor as "debtor," naming Collateral Agent as "secured party" and describing the Collateral in the filing office with respect to such Grantor set forth on Schedule 4(i), (ii) in the case of the Securities Collateral consisting of certificated securities or evidenced by
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instruments, delivery of the certificates representing such certificated securities and delivery of such instruments to Collateral Agent, in each case duly endorsed or accompanied by duly executed instruments of assignment or transfer in blank, and (iii) in the case of the Intellectual Property Collateral listed on Schedules 1g(i), (ii) and (iii) hereto, excluding the Intellectual Property held under foreign law, in addition to the filing of such UCC financing statements, the filing of a Grant of Trademark Security Interest, substantially in the form of Exhibit I, and a Grant of Patent Security Interest, substantially in the form of Exhibit II, with the United States Patent and Trademark Office and the filing of a Grant of Copyright Security Interest, substantially in the form of Exhibit III, with the United States Copyright Office (each such Grant of Trademark Security Interest, Grant of Patent Security Interest and Grant of Copyright Security Interest being referred to herein as a "GRANT"), the security interest in the Collateral referred to in the immediately preceding sentence in each case will constitute a perfected security interest therein (except for the security interest purported to be granted in commercial tort claims other than those listed on Schedule 1(j)), to the extent the UCC or United States patent, trademark or copyright statutes are applicable thereto, prior to all other Liens (except for Liens otherwise permitted under any Credit Document to the extent such Liens are permitted to be senior in priority to the Liens in favor of the Collateral Agent, the Cash Management Bank, the Detroit L/C Agents and the Detroit L/C Lenders, the New L/C Agent and the New L/C Lenders or the High Yield Noteholders, as the case may be), and all filings and other actions in the United States necessary or desirable to perfect and protect such security interest have been duly made or taken. In the case of Intellectual Property held under foreign law, after the occurrence of an Event of Default, all actions necessary or desirable to perfect and protect such security interest shall be taken.
(j) COMMERCIAL TORT CLAIMS. Schedule 1(j) identifies with specificity each claim or cause of action that any Grantor may have, which arises in tort, for which a related action, suit, proceeding (whether administrative, judicial or otherwise), governmental investigation or arbitration ("PROCEEDING") has been initiated by any Person.
(k) ROLLING STOCK. The rolling stock of the Grantors (collectively) as of the date hereof has an aggregate book value of less than $1,500,000.00.
SECTION 5. FURTHER ASSURANCES.
(a) GENERALLY. Each Grantor agrees that from time to time, at the expense of Grantors, such Grantor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that Collateral Agent may reasonably request, in order to perfect and protect the security interest granted or purported to be granted hereby under the UCC or United States patent, trademark or copyright statutes or to enable Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, each Grantor will: (i) at the request of Collateral Agent, upon the occurrence and continuation of an Event of Default, mark conspicuously each item of chattel paper included in the Accounts, each Related Contract and, at the request of Collateral Agent, each of its records pertaining to the Collateral, with a legend, in form and substance satisfactory to Collateral Agent, indicating that such Collateral is subject to the security interest granted hereby, (ii) at the request of Collateral Agent, upon the occurrence and continuation of an Event of Default, deliver and pledge to Collateral Agent hereunder all instruments (including checks) and all original counterparts of chattel paper constituting Collateral, duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to Collateral Agent, (iii) execute and file such financing or continuation statements, or amendments thereto, and execute and deliver such agreements establishing that Collateral Agent has control of specified items of Collateral and such other instruments or notices, as may be necessary, or as Collateral Agent may reasonably request, in order to perfect and preserve the security interest granted or purported to be granted hereby under the UCC or United States patent, trademark or copyright statutes, (iv) furnish to Collateral Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Collateral Agent may reasonably request, all in reasonable detail, (v) upon the reasonable request of Collateral Agent, execute and file with the registrar of motor vehicles or other appropriate authority in such jurisdiction an application or other document requesting the notation or other indication of the security interest created hereunder on such certificate of title or any item of Equipment that is covered by a certificate of title under a statute of any jurisdiction under the law of which indication of a security interest on such certificate is required as a condition of perfection thereof, (vi) at any time during normal business hours, upon reasonable request by Collateral Agent, exhibit the Collateral in its existing location to, and allow inspection of the Collateral by, Collateral Agent, or
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persons designated by Collateral Agent, (vii) at Collateral Agent's request, appear in and defend any action or proceeding that may affect such Grantor's title to, or Collateral Agent's security interest in all or any material part of, the Collateral, except for Intellectual Property Collateral; provided, however, that the foregoing exception for Intellectual Property Collateral shall not apply if such Intellectual Property is of material value as determined by Collateral Agent in its sole and absolute discretion; (viii) use commercially reasonable efforts to obtain any necessary consents of third parties to the assignment and perfection of a security interest to Collateral Agent with respect to any Collateral, and (ix) at Collateral Agent's reasonable request, Grantors shall promptly deliver, execute and file any and all documents, instruments and certificates that Collateral Agent deems necessary or desirable, and in each case in form and substance satisfactory to Collateral Agent. Notwithstanding the foregoing sentence, no Grantor shall be required to amend or otherwise modify the description of the Collateral to provide a description of any claim or cause of action which arises in tort unless and until a Proceeding relating to such claim or cause of action has been initiated by any Person. Each Grantor hereby authorizes Collateral Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of any Grantor. Each Grantor agrees that a carbon, photographic or other reproduction of this Agreement or of a financing statement signed or authenticated by such Grantor shall be sufficient authorization to file a financing statement and may be filed as a financing statement in any and all jurisdictions.
(b) SECURITIES COLLATERAL. Without limiting the generality of the foregoing Section 5(a), each Grantor agrees that it will, upon obtaining any additional shares of stock or other equity or debt securities required to be pledged hereunder, immediately (and in any event within five (5) Business Days) deliver to Collateral Agent a Pledge Supplement, duly executed by such Grantor, in substantially the form of Exhibit IV (a "PLEDGE SUPPLEMENT"), in respect of the additional Pledged Shares or Pledged Debt (to the extent issued by Company or any of its Subsidiaries) to be pledged pursuant to this Agreement. Upon each delivery of a Pledge Supplement to Collateral Agent, the representations and warranties contained in clauses (i)-(iv) of Section 4(g) hereof shall be deemed to have been made by such Grantor as to the Securities Collateral described in such Pledge Supplement as of the date thereof. Each Grantor hereby authorizes Collateral Agent to attach each Pledge Supplement to this Agreement and agrees that all Pledged Shares or Pledged Debt of such Grantor listed on any Pledge Supplement shall for all purposes hereunder be considered Collateral of such Grantor; provided that the failure of any Grantor to execute a Pledge Supplement with respect to any additional Pledged Shares or Pledged Debt pledged pursuant to this Agreement shall not impair the security interest of Collateral Agent therein or otherwise adversely affect the rights and remedies of Collateral Agent hereunder with respect thereto.
(c) INTELLECTUAL PROPERTY COLLATERAL. Without limiting the
generality of the foregoing Section 5(a), each Grantor shall execute and deliver
to Collateral Agent contemporaneous with its execution and delivery of this
Agreement or a counterpart hereto (i) with respect to all of such Grantor's
Trademark Collateral, a Grant of Trademark Security Interest, substantially in
the form of Exhibit I, (ii) with respect to all of such Grantor's Patent
Collateral, a Grant of Patent Security Interest, substantially in the form of
Exhibit II, and (iii) with respect to all of such Grantor's Copyright
Collateral, a Grant of Copyright Security Interest, substantially in the form of
Exhibit III. In addition, if any Grantor shall hereafter obtain rights to any
new Intellectual Property Collateral or become entitled to the benefit of (i)
any patent application or patent or any reissue, division, continuation,
renewal, extension or continuation-in-part of any Patent or any improvement of
any Patent or (ii) any material Copyright Registration, application for
Copyright Registration or renewals or extension of any material Copyright, then
in any such case, the provisions of this Agreement shall automatically apply
thereto. Each Grantor shall promptly notify Collateral Agent in writing of any
of the foregoing rights acquired by such Grantor after the date hereof and of
(i) any Trademark Registrations issued or application for a Trademark
Registration or application for a Patent made, and (ii) any Copyright
Registrations issued or applications for Copyright Registration made, in any
such case, after the date hereof. Promptly after the filing of an application
for any material (1) Trademark Registration; (2) Patent; or (3) Copyright
Registration, each Grantor shall execute and deliver to Collateral Agent and
record in all places where a Grant is recorded an IP Supplement, substantially
in the form of Exhibit V (an "IP SUPPLEMENT"), pursuant to which such Grantor
shall grant to Collateral Agent a security interest to the extent of its
interest in such Intellectual Property Collateral; provided, if, in the
reasonable judgment of such Grantor, after due inquiry, granting such interest
would result in the grant of a Trademark Registration or Copyright Registration
in the name of Collateral Agent, such Grantor shall give written notice to
Collateral Agent as soon as reasonably practicable and the filing shall instead
be undertaken as soon as practicable but in no case later than immediately
following the grant of the applicable Trademark Registration or Copyright
Registration, as the case may be. Upon delivery to Collateral Agent of an IP
Supplement, Schedules 1(g)(i), 1(g)(ii), and 1(g)(iii) hereto and Schedule A to
each Grant, as
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applicable, shall be deemed modified to include reference to any right, title or interest in any existing Intellectual Property Collateral or any Intellectual Property Collateral included on Schedule A to such IP Supplement. Each Grantor hereby authorizes Collateral Agent to modify this Agreement without the signature or consent of any Grantor by attaching Schedules 1(g)(i), 1(g)(ii), and 1(g)(iii), as applicable, that have been modified to include such Intellectual Property Collateral or to delete any reference to any right, title or interest in any Intellectual Property Collateral in which any Grantor no longer has or claims any right, title or interest; provided, the failure of any Grantor to execute an IP Supplement with respect to any additional Intellectual Property Collateral pledged pursuant to this Agreement shall not impair the security interest of Collateral Agent therein or otherwise adversely affect the rights and remedies of Collateral Agent hereunder with respect thereto.
SECTION 6. CERTAIN COVENANTS OF GRANTORS.
Each Grantor shall:
(a) not use or permit any material Collateral under its control to be used unlawfully or in violation of any provision of this Agreement or any applicable statute, regulation or ordinance or any policy of insurance covering the Collateral;
(b) notify Collateral Agent of any change in such Grantor's name, identity or corporate structure within 15 days of such change;
(c) give Collateral Agent 30 days' prior written notice of (i) any change in such Grantor's chief place of business, chief executive office or offices where such Grantor keeps its records regarding the Accounts and all originals of all chattel paper that evidence Accounts or (ii) reincorporation, reorganization or other action that results in a change of the jurisdiction of organization, incorporation, formation or "location" of such Grantor under the UCC;
(d) if Collateral Agent gives value to enable such Grantor to acquire rights in or the use of any Collateral, use such value for such purposes;
(e) except as expressly permitted by each Credit Document, pay
promptly when due all property and other taxes, assessments and governmental
charges or levies imposed upon, and all claims (including claims for labor,
services, materials and supplies) against, the Collateral; provided that no such
tax, assessment, charge, levy or claim need be paid if it is being contested in
good faith by appropriate proceedings promptly instituted and diligently
conducted, so long as (i) such reserve or other appropriate provision, if any,
as shall be required in conformity with GAAP shall have been made therefor and
(ii) in the case of a tax, assessment, charge, levy or claim which has or may
become a Lien against any of the Collateral, such proceedings conclusively
operate to stay the sale of any portion of the Collateral to satisfy such charge
or claim; provided however, that notwithstanding the foregoing proviso, such
Grantor shall in any event pay such taxes, assessments, charges, levies or
claims not later than five days prior to the date of any proposed sale under any
judgment, writ or warrant of attachment entered or filed against such Grantor or
any of the Collateral as a result of the failure to make such payment; and
(f) after the date hereof, give Collateral Agent prompt notice with sufficient particularity of any claim or cause of action of any Grantor arising in tort and not otherwise identified on Schedule 1(j) relating to a Proceeding that has been initiated by any Person.
SECTION 7. SPECIAL COVENANTS WITH RESPECT TO EQUIPMENT AND INVENTORY.
Each Grantor shall:
(a) keep the items of Equipment and Inventory owned by such Grantor having a value in excess of $500,000 at its main place of business or the places therefor specified on Schedule 4(b) or, upon 30 days' prior written notice to Collateral Agent, at such other places in jurisdictions where all action that may be necessary or desirable, or that Collateral Agent may reasonably request, in order to perfect and protect the security interest
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granted or purported to be granted hereby, or to enable Collateral Agent to exercise and enforce its rights and remedies hereunder, with respect to such Equipment and Inventory shall have been taken;
(b) promptly furnish to Collateral Agent a statement respecting any material loss or damage to any of the material Equipment owned by such Grantor;
(c) keep correct and accurate records of Inventory owned by such Grantor, in accordance with such Grantor's customary practices;
(d) if any Inventory is in possession or control of any of such Grantor's agents or processors, if the aggregate book value of all such Inventory exceeds $500,000, and in any event upon the occurrence of an Event of Default, instruct such agent or processor to hold all such Inventory for the account of Collateral Agent and subject to the instructions of Collateral Agent;
(e) after an Event of Default has occurred and is continuing, promptly upon the issuance and delivery to such Grantor of any Negotiable Document of Title, deliver such Negotiable Document of Title to Collateral Agent; and
(f) at its own expense, maintain insurance with respect to the Equipment and Inventory in accordance with the terms of the Credit Documents.
SECTION 8. SPECIAL COVENANTS WITH RESPECT TO ACCOUNTS AND RELATED CONTRACTS.
(a) Each Grantor shall keep its chief place of business and chief executive office and the office where it keeps its records concerning the Accounts and Related Contracts, and all originals of all chattel paper in such Grantor's possession that evidence Accounts, at the locations therefor set forth on Schedule 4(d) or upon 30 days' prior written notice to Collateral Agent, at such other location in a jurisdiction where all action that may be necessary, or that Collateral Agent may reasonably request, in order to perfect and protect the security interest granted or purported to be granted hereby, or to enable Collateral Agent to exercise and enforce its rights and remedies hereunder, with respect to such Accounts and Related Contracts shall have been taken. Each Grantor will hold and preserve such records and chattel paper and will permit representatives of Collateral Agent, upon reasonable notice during normal business hours, to inspect and make abstracts from such records and chattel paper, and each Grantor agrees to render to Collateral Agent, at Grantor's cost and expense, such clerical and other assistance as may be reasonably requested with regard thereto. Promptly upon the reasonable request of Collateral Agent, each Grantor shall deliver to Collateral Agent complete and correct copies of each Related Contract.
(b) Each Grantor shall maintain (i) complete records of each Account, in accordance with its customary business practices, including records of all payments received, credits granted and merchandise returned, and (ii) all documentation relating thereto.
(c) Except as otherwise provided in this subsection (c), each Grantor shall continue to collect, at its own expense, all amounts due or to become due to such Grantor under the Accounts and Related Contracts. In connection with such collections, each Grantor may take (and, upon the occurrence and during the continuance of an Event of Default at Collateral Agent's direction, shall take) such action as such Grantor or Collateral Agent may deem necessary or advisable to enforce collection of amounts due or to become due under the Accounts; provided, however, that Collateral Agent shall have the right at any time, upon the occurrence and during the continuation of an Event of Default and upon written notice to such Grantor of its intention to do so, to notify the account debtors or obligors under any Accounts of the assignment of such Accounts to Collateral Agent and, to the extent such Grantor is not legally or contractually prohibited from doing so and such contractual prohibitions are enforceable under applicable law, to direct such account debtors or obligors to make payment of all amounts due or to become due to such Grantor thereunder directly to Collateral Agent, to notify each Person maintaining a lockbox or similar arrangement to which account debtors or obligors under any Accounts have been directed to make payment to remit all amounts representing collections on checks and other payment items from time to time sent to or deposited in such lockbox or other arrangement directly to Collateral Agent and, upon such notification and at the expense of Grantors, to enforce collection of any such Accounts and to adjust, settle or compromise the amount or payment
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thereof, in the same manner and to the same extent as such Grantor might have done. After receipt by such Grantor of the notice from Collateral Agent referred to in the proviso to the preceding sentence, (i) all amounts and proceeds (including checks and other instruments) received by such Grantor in respect of the Accounts and the Related Contracts shall be received in trust for the benefit of Collateral Agent hereunder, shall be segregated from other funds of such Grantor and shall be forthwith paid over or delivered to Collateral Agent in the same form as so received (with any necessary endorsement) to be held as cash Collateral and applied as provided by Section 20 hereof, and (ii) such Grantor shall not adjust, settle or compromise the amount or payment of any Account, or release wholly or partly any account debtor or obligor thereof, or allow any credit or discount thereon.
SECTION 9. SPECIAL COVENANTS WITH RESPECT TO THE SECURITIES COLLATERAL.
(a) DELIVERY. Each Grantor agrees that all certificates or instruments representing or evidencing the Securities Collateral shall be delivered to and held by or on behalf of Collateral Agent pursuant hereto and shall be in suitable form for transfer by delivery or, as applicable, shall be accompanied by such Grantor's endorsement, where necessary, or duly executed instruments of transfer or assignment in blank, all in form and substance reasonably satisfactory to Collateral Agent. Collateral Agent shall have the right at any time to exchange certificates or instruments representing or evidencing such Securities Collateral for certificates or instruments of smaller or larger denominations. Nothing in this Section 9(a) shall apply to Pledged Shares held by a Grantor in a Person in whom Borrowers in the aggregate hold less than 10% (whether in voting power or economic value or both) of the shares of stock or other equity interests.
(b) COVENANTS. Each Grantor shall (i) not, except as expressly permitted by each of the Credit Documents, permit any issuer of Pledged Shares that is a Subsidiary or an Affiliate of any Grantor to merge or consolidate unless all the outstanding capital stock or other equity interests of the surviving or resulting Person is, upon such merger or consolidation, pledged hereunder and no cash, securities or other property is distributed in respect of the outstanding shares of any other constituent corporation; provided, if the surviving or resulting Person upon any such merger or consolidation involving an issuer of Pledged Shares which is a Foreign Subsidiary is a Foreign Subsidiary then such Grantor shall only be required to pledge outstanding capital stock of such surviving or resulting Person possessing up to but not exceeding 65% of the voting power of all classes of capital stock or other equity interests of such issuer entitled to vote; (ii) to the extent legally able to do so, cause each issuer of Pledged Shares that is controlled by such Grantor not to issue any stock, other equity interests or other securities in addition to or in substitution for the Pledged Shares issued by such issuer, except to such Grantor or unless such stock, equity interests or securities received by the Grantor are pledged hereunder; (iii) pledge hereunder, and deliver to Collateral Agent as soon as practicable (but in no event later than three Business Days) upon its acquisition (directly or indirectly) thereof, any and all additional shares of stock, other equity interests or other securities of each issuer of Pledged Shares; (iv) pledge hereunder, and deliver to Collateral Agent as soon as practicable (but in no event later than three Business Days) upon its acquisition (directly or indirectly) thereof, any and all shares of stock or other equity interests of any Person that, after the date of this Agreement, becomes, as a result of any occurrence, a direct Subsidiary of such Grantor; provided that, notwithstanding anything contained in this clause (iv) to the contrary, such Grantor shall only be required to pledge the outstanding capital stock or other equity interests of a Foreign Subsidiary up to but not exceeding 65% of the voting power of all classes of capital stock or other equity interests of such Foreign Subsidiary entitled to vote; (v) pledge hereunder, as soon as practicable (but in no event later than five Business Days) upon their issuance, any and all instruments or other evidences of additional indebtedness from time to time owed to such Grantor by any obligor on the Pledged Debt (to the extent issued by Company or any of its Subsidiaries); (vi) pledge hereunder, as soon as practicable (but in no event later than five Business Days) upon their issuance, any and all instruments or other evidences of indebtedness from time to time owed to such Grantor by any Person that after the date of this Agreement becomes, as a result of any occurrence, a direct or indirect Subsidiary of such Grantor; and (vii) at the request of Collateral Agent, promptly execute and deliver to Collateral Agent an agreement providing for the control, as that term is defined in the UCC, by Collateral Agent of all securities entitlements and securities accounts of such Grantor; provided, however, that nothing in this Section 9(b) shall be construed as a waiver of the prohibitions and restrictions on the Grantors with respect to investments as set forth in any applicable Credit Document.
(c) VOTING AND DISTRIBUTIONS. So long as no Event of Default shall have occurred and be continuing, (i) each Grantor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Securities Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement, the
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Detroit L/C Facility Agreement, the New L/C Facility Agreement or the High Yield Indenture; provided, no Grantor shall exercise or refrain from exercising any such right if Collateral Agent shall have notified such Grantor that, in Collateral Agent's judgment, such action would have a material adverse effect on the value of the Securities Collateral or any part thereof; and provided further, such Grantor shall give Collateral Agent at least five Business Days' prior written notice of the manner in which it intends to exercise, or the reasons for refraining from exercising, any such right if exercising, or refraining from exercising, such right would reasonably be expected to have a material adverse effect on the value of the Securities Collateral or any part thereof (it being understood, however, that neither (among other things) (A) the voting by such Grantor of any Pledged Shares for or such Grantor's consent to the election of directors or other members of a governing body of an issuer of Pledged Shares at a regularly scheduled annual or other meeting of stockholders or holders of equity interests or with respect to incidental matters at any such meeting, nor (B) such Grantor's consent to or approval of any action otherwise permitted under this Agreement, the Detroit L/C Facility Agreement, the New L/C Facility Agreement or the High Yield Indenture shall be deemed inconsistent with the terms of this Agreement, the Detroit L/C Facility Agreement, the New L/C Facility Agreement or the High Yield Indenture, respectively, within the meaning of this Section 9(c), and no notice of any such voting or consent need be given to Collateral Agent) and (ii) each Grantor shall be entitled to receive and retain, and to utilize any and all dividends, other distributions and interest paid in respect of the Securities Collateral to the extent permitted under the Credit Documents; provided, that except as otherwise provided in the Credit Documents, any and all (A) dividends, distributions and interest paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Securities Collateral, (B) dividends and other distributions paid or payable in cash in respect of any Securities Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus, and (C) cash paid, payable or otherwise distributed in respect of principal or in redemption of or in exchange for any Securities Collateral, shall be, and shall forthwith be delivered to Collateral Agent to hold as, Securities Collateral and shall, if received by such Grantor, be received in trust for the benefit of Collateral Agent, be segregated from the other property or funds of such Grantor and be forthwith delivered to Collateral Agent as Securities Collateral in the same form as so received (with all necessary endorsements).
Upon the occurrence and during the continuation of an Event of Default, (x) all rights of such Grantor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant hereto shall cease, and all such rights shall thereupon become vested in Collateral Agent who shall thereupon have the sole right to exercise such voting and other consensual rights; (y) all rights of such Grantor to receive the dividends, other distributions and interest payments which it would otherwise be authorized to receive and retain pursuant hereto shall cease, and all such rights shall thereupon become vested in Collateral Agent who shall thereupon have the sole right to receive and hold as Securities Collateral such dividends, other distributions and interest payments; and (z) all dividends, principal, interest payments and other distributions which are received by such Grantor contrary to the provisions of clause (ii) of the immediately preceding paragraph or clause (y) above shall be received in trust for the benefit of Collateral Agent, shall be segregated from other funds of such Grantor and shall forthwith be paid over to Collateral Agent as Securities Collateral in the same form as so received (with any necessary endorsements).
(d) IRREVOCABLE PROXY. In order to permit Collateral Agent to
exercise the voting and other consensual rights which it may be entitled to
exercise pursuant hereto and to receive all dividends, principal or interest
payments and other distributions which it may be entitled to receive hereunder,
(I) each Grantor shall promptly execute and deliver (or cause to be executed and
delivered) to Collateral Agent all such proxies, dividend payment orders and
other instruments as Collateral Agent may from time to time request, and (II)
without limiting the effect of clause (I) above, each Grantor hereby grants to
Collateral Agent an IRREVOCABLE PROXY to vote the Pledged Shares and to exercise
all other rights, powers, privileges and remedies to which a holder of the
Pledged Shares would be entitled (including giving or withholding written
consents of shareholders or other holders of equity interests, calling special
meetings of shareholders or other holders of equity interests and voting at such
meetings), which proxy shall be effective, automatically and without the
necessity of any action (including any transfer of any Pledged Shares on the
record books of the issuer thereof) by any other Person (including the issuer of
the Pledged Shares or any officer or agent thereof), upon the occurrence and
during the continuance of an Event of Default and which proxy shall only
terminate upon the Payment in Full of all Secured Obligations.
SECTION 10. SPECIAL COVENANTS WITH RESPECT TO THE INTELLECTUAL PROPERTY COLLATERAL.
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(a) Each Grantor shall:
(i) use commercially reasonable efforts so as not to permit the inclusion in any contract to which it hereafter becomes a party of any provision that could or might in any way impair or prevent the creation of a security interest in, or the assignment of, such Grantor's rights and interests in any property that is material Intellectual Property Collateral acquired under such contracts; and
(ii) furnish to Collateral Agent from time to time at Collateral Agent's reasonable request statements and schedules further identifying and describing any material Intellectual Property Collateral and such other reports in connection with such Collateral, all in reasonable detail.
(b) Except as otherwise provided in this Section 10, each
Grantor shall continue to collect in accordance with its customary business
practice, at its own expense, all amounts due or to become due to such Grantor
in respect of the material Intellectual Property Collateral or any portion
thereof. In connection with such collections, each Grantor may take (and, after
the occurrence and during the continuance of any Event of Default at Collateral
Agent's reasonable direction, shall take) such action as such Grantor or
Collateral Agent may deem reasonably necessary or advisable to enforce
collection of such amounts; provided, Collateral Agent shall have the right (but
not the obligation) at any time, upon the occurrence and during the continuation
of an Event of Default, to notify the obligors with respect to any such amounts
of the existence of the security interest created hereby and to direct such
obligors to make payment of all such amounts directly to Collateral Agent, and,
upon such notification and at the expense of such Grantor, to enforce collection
of any such amounts and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as such Grantor might have
done. Upon the occurrence and during the continuation of any Event of Default,
(i) all amounts and proceeds (including checks and other instruments) received
by each Grantor in respect of amounts due to such Grantor in respect of the
Intellectual Property Collateral or any portion thereof shall be received in
trust for the benefit of Collateral Agent hereunder, shall be segregated from
other funds of such Grantor and shall be forthwith paid over or delivered to
Collateral Agent in the same form as so received (with any necessary
endorsement) to be held as cash Collateral and applied as provided by Section 20
herein, and (ii) such Grantor shall not adjust, settle or compromise the amount
or payment of any such amount or release wholly or partly any obligor with
respect thereto or allow any credit or discount thereon.
(c) Each Grantor shall give Collateral Agent 10 Business Days prior written notice of any abandonment of any material Intellectual Property Collateral (it being understood that no such notice needs to be given by such Grantor of the abandonment of non-material Intellectual Property) or any pending patent application or any Patent.
(d) Except as provided herein, each Grantor shall have the right to commence and prosecute in its own name, as real party in interest, for its own benefit and at its own expense, such suits, proceedings or other actions for infringement, unfair competition, dilution, misappropriation or other damage, or reexamination or reissue proceedings as are necessary to protect the Intellectual Property Collateral. Each Grantor shall promptly, following its becoming aware thereof, notify Collateral Agent of the institution of, or of any adverse determination in, any proceeding (whether in the United States Patent and Trademark Office, the United States Copyright Office or any federal, state, local or foreign court) regarding such Grantor's ownership, right to use, or interest in any material Intellectual Property Collateral. Each Grantor shall provide to Collateral Agent any information with respect thereto requested by Collateral Agent.
(e) In addition to, and not by way of limitation of, the granting of a security interest in the Collateral pursuant hereto, each Grantor, effective upon the occurrence and during the continuation of an Event of Default, hereby assigns, transfers and conveys to Collateral Agent the nonexclusive right and license to use all trademarks, tradenames, copyrights, patents or technical processes (including, without limitation, the Intellectual Property Collateral) owned or used by such Grantor that relate to the Collateral and any other collateral granted by such Grantor as security for the Secured Obligations, together with any goodwill associated therewith, all to the extent necessary to enable Collateral Agent to realize on the Collateral in accordance with this Agreement and to enable any transferee or assignee of the Collateral to enjoy the benefits of the Collateral. This right shall inure to the
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benefit of all successors, assigns and transferees of Collateral Agent and its successors, assigns and transferees, whether by voluntary conveyance, operation of law, assignment, transfer, foreclosure, deed in lieu of foreclosure or otherwise. Such right and license shall be granted free of charge, without requirement that any monetary payment whatsoever be made to such Grantor.
SECTION 11. SPECIAL PROVISIONS WITH RESPECT TO THE ASSIGNED AGREEMENTS.
(a) Each Grantor shall at its expense:
(i) if consistent with sound business practices, perform and observe all terms and provisions of the Assigned Agreements to be performed or observed by it, maintain the Assigned Agreements in full force and effect, enforce the Assigned Agreements in accordance with such Grantor's customary business practice; and
(ii) after the occurrence and during the continuation of an Event of Default and upon the request of Collateral Agent, furnish to Collateral Agent, promptly upon receipt thereof, copies of all notices, requests and other material documents received by such Grantor under or pursuant to the Assigned Agreements, and from time to time (A) furnish to Collateral Agent such information and reports regarding the Assigned Agreements as Collateral Agent may reasonably request and (B) upon request of Collateral Agent make to the parties to such Assigned Agreements such demands and requests for information and reports or for action as such Grantor is entitled to make under the Assigned Agreements.
(b) Upon the occurrence and during the continuance of an Event of Default, no Grantor shall:
(i) cancel or terminate any of the Assigned Agreements or consent to or accept any cancellation or termination thereof;
(ii) amend or otherwise modify the Assigned Agreements or give any consent, waiver or approval thereunder;
(iii) waive any default under or breach of the Assigned Agreements;
(iv) consent to or permit or accept any prepayment of amounts to become due under or in connection with the Assigned Agreements, except as expressly provided therein; or
(v) take any other action in connection with the Assigned Agreements that could reasonably be expected to materially impair the value of the interest or rights of such Grantor thereunder or that could reasonably be expected to materially impair the interest or rights of Collateral Agent.
SECTION 12. DETROIT L/C COLLATERAL ACCOUNT.
(a) Collateral Agent is hereby authorized to establish and maintain, as a blocked account in the name of the Company and under the sole dominion and control of Collateral Agent a restricted Deposit Account designated as "Covanta Energy Corporation/Detroit L/C Collateral Account" (hereinafter referred to as the "DETROIT L/C COLLATERAL ACCOUNT"). The Company hereby acknowledges and the Company and Collateral Agent hereby agree that the dominion and control exercised by the Collateral Agent in respect of the Detroit L/C Collateral Account shall constitute control for the purposes Section 9-104 of the UCC.
(b) All funds to be applied in respect of the Detroit L/C Obligations pursuant to Sections 4.1 and 4.2 of the Intercreditor Agreement shall be deposited into the Detroit L/C Collateral Account. Funds deposited into the Detroit L/C Collateral Account shall not be withdrawn or transferred except as set forth in clause (c) below, and as otherwise set forth in, and in accordance with, the Intercreditor Agreement. Each of the parties hereto hereby
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acknowledges that amounts on deposit in the Detroit L/C Collateral Account shall be released from time to time in accordance with the Intercreditor Agreement.
(c) If an Event of Default (as defined in the Detroit L/C
Facility Agreement) has occurred and is continuing and, in accordance with
Section 8 of the Detroit L/C Facility Agreement, the Grantors are required to
pay to Collateral Agent an amount (the "AGGREGATE AVAILABLE AMOUNT") equal to
105% of the maximum amount that may at any time be drawn under all Detroit L/Cs
then outstanding under the Detroit L/C Facility Agreement, the Grantors shall
deliver funds in such an amount for deposit in the Detroit L/C Collateral
Account. If for any reason the aggregate amount delivered by the Grantors for
deposit in the Detroit L/C Collateral Account as aforesaid is less than the
Aggregate Available Amount, the aggregate amount so delivered by Company shall
be apportioned among all outstanding Detroit L/Cs for purposes of this clause
(c) in accordance with the ratio of the maximum amount available for drawing
under each such Detroit L/C (as to such Detroit L/C, the "MAXIMUM AVAILABLE
AMOUNT") to the Aggregate Available Amount. Upon any drawing under any
outstanding Detroit L/C, Collateral Agent may apply the amount apportioned to
such Detroit L/C to reimburse the Detroit L/C Lender that issued such Detroit
L/C for the amount of such drawing. In the event of cancellation or expiration
of any Detroit L/C in respect of which Company has deposited in the Detroit L/C
Collateral Account any amounts described above, or in the event of any reduction
in the Maximum Available Amount under such Detroit L/C, Collateral Agent shall
apply the amount then on deposit in the Detroit L/C Collateral Account in
respect of such Detroit L/C (less, in the case of such a reduction, the Maximum
Available Amount under such Detroit L/C immediately after such reduction),
first, to the cash collateralization pursuant to the terms of this Agreement of
any outstanding Detroit L/Cs in respect of which the Grantors have failed to pay
all or a portion of the amounts described above (such cash collateralization to
be apportioned among all such Detroit L/Cs in the manner described above),
second, to the extent of any excess, to the payment of any other outstanding
Detroit L/C Obligations, third, to the extent of any further excess, to the
payment of any other outstanding Secured Obligations in accordance with Section
20 hereof and fourth, to the extent of any further excess, to the payment to
whomsoever shall be lawfully entitled to receive such funds.
SECTION 13. NEW L/C COLLATERAL ACCOUNT.
(a) Collateral Agent is hereby authorized to establish and maintain, as a blocked account in the name of the Company and under the sole dominion and control of Collateral Agent a restricted Deposit Account designated as "Covanta Energy Corporation/New L/C Collateral Account" (hereinafter referred to as the "NEW L/C COLLATERAL ACCOUNT"). The Company hereby acknowledges and the Company and Collateral Agent hereby agree that the dominion and control exercised by the Collateral Agent in respect of the New L/C Collateral Account shall constitute control for the purposes Section 9-104 of the UCC.
(b) All funds to be applied in respect of the New L/C Obligations pursuant to Sections 4.1 and 4.2 of the Intercreditor Agreement shall be deposited into the New L/C Collateral Account. Funds deposited into the New L/C Collateral Account shall not be withdrawn or transferred except as set forth in clause (c) below, and as otherwise set forth in, and in accordance with, the Intercreditor Agreement. Each of the parties hereto hereby acknowledges that amounts on deposit in the New L/C Collateral Account shall be released from time to time in accordance with the Intercreditor Agreement.
(c) If an Event of Default (as defined in the New L/C Facility Agreement) has occurred and is continuing and, in accordance with Section 8 of the New L/C Facility Agreement, the Grantors are required to pay to Collateral Agent an amount (the "NEW L/C AGGREGATE AVAILABLE AMOUNT") equal to 105% of the maximum amount that may at any time be drawn under all New L/Cs then outstanding under the New L/C Facility Agreement, the Grantors shall deliver funds in such an amount for deposit in the New L/C Collateral Account. If for any reason the aggregate amount delivered by the Grantors for deposit in the New L/C Collateral Account as aforesaid is less than the New L/C Aggregate Available Amount, the aggregate amount so delivered by Company shall be apportioned among all outstanding New L/Cs for purposes of this clause (c) in accordance with the ratio of the aggregate maximum amount available for drawing under each such New L/C (as to such New L/C, the "NEW L/C MAXIMUM AVAILABLE AMOUNT") to the New L/C Aggregate Available Amount. Upon any drawing under any outstanding New L/C, Collateral Agent may apply the amount apportioned to such New L/C to reimburse the New L/C Lender that issued such New L/C for the amount of such drawing. In the event of cancellation or expiration of any New L/C in respect of which Company has deposited in the New L/C Collateral Account any amounts described above, or in the event of any reduction in the New L/C Maximum Available Amount under such New L/C, Collateral Agent shall apply the amount then on deposit in the New L/C Collateral Account in respect of such New L/C (less, in the case of such a reduction, the New L/C Maximum Available Amount under such New L/C
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immediately after such reduction), first, to the cash collateralization pursuant to the terms of this Agreement of any outstanding New L/Cs in respect of which the Grantors have failed to pay all or a portion of the amounts described above (such cash collateralization to be apportioned among all such New L/Cs in the manner described above), second, to the extent of any excess, to the payment of any other outstanding New L/C Obligations, third, to the extent of any further excess, to the payment of any other outstanding Secured Obligations in accordance with Section 20 hereof and fourth, to the extent of any further excess, to the payment to whomsoever shall be lawfully entitled to receive such funds.
SECTION 14. SPECIAL PROVISIONS WITH RESPECT TO THE COLLATERAL ACCOUNTS.
Collateral Agent is hereby authorized to establish and maintain at its offices restricted deposit accounts and restricted securities accounts which shall be in the names of Grantors, jointly or each individually, and under the sole dominion and control of Collateral Agent. Each Grantor agrees that from time to time, at the expense of Grantors, such Grantor will promptly execute and deliver account control agreements in form and substance satisfactory to Collateral Agent and take all further action that may be necessary or desirable, or that Collateral Agent may reasonably request, in order to perfect and protect the security interest granted or purported to be granted hereby in such accounts or to enable Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any such accounts.
SECTION 15. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT.
Each Grantor hereby irrevocably appoints Collateral Agent as such Grantor's attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor, Collateral Agent or otherwise, from time to time in Collateral Agent's discretion to take any action and to execute any instrument that Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including without limitation:
(a) upon the occurrence and during the continuance of an Event of Default, to obtain and adjust insurance required to be maintained by such Grantor or paid to Collateral Agent pursuant to Section 7 hereof;
(b) upon the occurrence and during the continuance of an Event of Default, to ask for, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral;
(c) upon the occurrence and during the continuance of an Event of Default, to receive, endorse and collect any drafts or other instruments, documents and chattel paper in connection with clauses (a) and (b) above;
(d) upon the occurrence and during the continuance of an Event of Default, to file any claims or take any action or institute any proceedings that Collateral Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of Collateral Agent with respect to any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens permitted under this Agreement or each of the Credit Documents) levied or placed upon the Collateral, the legality or validity thereof and the amounts necessary to discharge the same to be determined by Collateral Agent in its sole discretion, any such payments made by Collateral Agent to become obligations of such Grantor to Collateral Agent, due and payable immediately without demand;
(f) upon the occurrence and during the continuance of an Event of Default, to sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications and notices in connection with Accounts and other documents relating to the Collateral; and
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(g) upon the occurrence and during the continuance of an Event of Default, generally to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though Collateral Agent were the absolute owner thereof for all purposes, and to do, at Collateral Agent's option and Grantors' expense, at any time or from time to time, all acts and things that Collateral Agent reasonably deems necessary to protect, preserve or realize upon the Collateral and Collateral Agent's security interest therein in order to effect the intent of this Agreement, all as fully and effectively as such Grantor might do.
SECTION 16. COLLATERAL AGENT MAY PERFORM.
If any Grantor fails to perform any agreement contained herein, Collateral Agent may itself perform, or cause performance of (but shall not be obligated to perform or cause the performance of), such agreement, and the expenses of Collateral Agent incurred in connection therewith shall be payable by Grantors under Section 21(b) hereof.
SECTION 17. STANDARD OF CARE.
The powers conferred on Collateral Agent hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the exercise of reasonable care in the custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, Collateral Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of Collateral in its possession if such Collateral is accorded treatment substantially equal to that which Collateral Agent accords its own property.
SECTION 18. REMEDIES.
(a) GENERALLY. Subject to the terms of the Intercreditor Agreement, if any Event of Default shall have occurred and be continuing, Collateral Agent may exercise in respect of the Collateral, in addition to all other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the UCC (whether or not the UCC applies to the affected Collateral), and also may (i) require each Grantor to, and each Grantor hereby agrees that it will at its expense and upon request of Collateral Agent forthwith, assemble all or part of the Collateral as directed by Collateral Agent and make it available to Collateral Agent at a place to be designated by Collateral Agent that is reasonably convenient to both parties, (ii) enter onto the property where any Collateral is located and take possession thereof with or without judicial process, (iii) prior to the disposition of the Collateral, store, process, repair or recondition the Collateral or otherwise prepare the Collateral for disposition in any manner to the extent Collateral Agent reasonably deems appropriate, (iv) take possession of any Grantor's premises or place custodians in exclusive control thereof, remain on such premises and use the same and any of such Grantor's equipment for the purpose of completing any work in process, taking any actions described in the preceding clause (iii) and collecting any Secured Obligation, (v) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of Collateral Agent's offices or elsewhere, for cash, on credit or for future delivery, at such time or times and at such price or prices and upon such other terms as Collateral Agent may deem commercially reasonable, (vi) exercise dominion and control over and refuse to permit further withdrawals from any Deposit Account maintained with Collateral Agent or any Benefited Party and provide instructions directing the disposition of funds in Deposit Accounts not maintained with Collateral Agent or any Benefited Party and (vii) provide entitlement orders with respect to securities entitlements and other investment property constituting a part of the Collateral and with notice to the relevant Grantor, transfer to or register in the name of Collateral Agent or any of its nominees any or all of the Securities Collateral. Collateral Agent or any Benefited Party (subject to the terms of the Intercreditor Agreement) may be the purchaser of any or all of the Collateral at any such sale and Collateral Agent, as agent for and representative of the Benefited Parties (but not any Benefited Party in its individual capacity unless Requisite Obligees shall otherwise agree in writing), shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Secured Obligations as a credit on account of the purchase price for any Collateral payable by Collateral Agent at such sale. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of
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law or statute now existing or hereafter enacted. Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. To the extent permitted by applicable law, each Grantor hereby waives any claims against Collateral Agent arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if Collateral Agent accepts the first offer received and does not offer such Collateral to more than one offeree. If the proceeds of any sale or other disposition of the Collateral are insufficient to pay all the Secured Obligations, Grantors shall be jointly and severally liable for the deficiency and the fees of any attorneys employed by Collateral Agent to collect such deficiency. Each Grantor further agrees that a breach of any of the covenants contained in this Section will cause irreparable injury to Collateral Agent, that Collateral Agent has no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against such Grantor, and each Grantor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no default has occurred giving rise to the Secured Obligations becoming due and payable prior to their stated maturities.
(b) SECURITIES COLLATERAL.
(i) Each Grantor recognizes that, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws, Collateral Agent may be compelled, with respect to any sale of all or any part of the Securities Collateral conducted without prior registration or qualification of such Securities Collateral under the Securities Act and/or such state securities laws, to limit purchasers to those who will agree, among other things, to acquire the Securities Collateral for their own account, for investment and not with a view to the distribution or resale thereof. Each Grantor acknowledges that any such private sales may be at prices and on terms less favorable than those obtainable through a public sale without such restrictions (including a public offering made pursuant to a registration statement under the Securities Act) and, notwithstanding such circumstances and the registration rights granted to Collateral Agent by such Grantor pursuant hereto and notwithstanding the provisions of Section 9-610(c) of the UCC, which each Grantor hereby waives to the extent permitted by applicable law, each Grantor agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that Collateral Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any Securities Collateral for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would, or should, agree to so register it. If Collateral Agent determines to exercise its right to sell any or all of the Securities Collateral, upon written request, each Grantor shall and shall cause each issuer of any Pledged Shares to be sold hereunder from time to time to furnish to Collateral Agent all such information as Collateral Agent may request in order to determine the number of shares and other instruments included in the Securities Collateral which may be sold by Collateral Agent in exempt transactions under the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder, as the same are from time to time in effect and to otherwise comply with the Securities Act and such rules and regulations in connection with such sale.
(ii) If Collateral Agent shall determine to exercise its right to sell all or any of the Securities Collateral pursuant to this Section, each Grantor agrees that, upon request of Collateral Agent (which request may be made by Collateral Agent in its sole discretion), such Grantor will, at its own expense (A) execute and deliver, and cause each issuer of the Securities Collateral contemplated to be sold and the directors and officers thereof to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or, in the opinion of Collateral Agent, advisable to register such Securities Collateral under the provisions of the Securities Act and to cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be
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furnished, and to make all amendments and supplements thereto and to the related prospectus which, in the opinion of Collateral Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto; (B) use its best efforts to qualify the Securities Collateral under all applicable state securities or "Blue Sky" laws and to obtain all necessary governmental approvals for the sale of the Securities Collateral, as requested by Collateral Agent; (C) cause each such issuer to make available to its security holders, as soon as practicable, an earnings statement which will satisfy the provisions of Section 11(a) of the Securities Act; (D) do or cause to be done all such other acts and things as may be necessary to make such sale of the Securities Collateral or any part thereof valid and binding and in compliance with applicable law; and (E) bear all costs and expenses, including reasonable attorneys' fees, of carrying out its obligations under this Section.
(iii) Without limiting the generality of those provisions of the Detroit L/C Facility Agreement (or any successor provisions thereto), the New L/C Facility Agreement (or any successor provisions thereto) and the High Yield Indenture (or any successor provisions thereto) that require one or more of the Grantors to reimburse expenses of or indemnify the Collateral Agent or any Benefited Party in the event of any public sale described herein, each Grantor agrees to indemnify and hold harmless Collateral Agent and the Benefited Parties and each of their respective directors, officers, employees and agents from and against any loss, fee, cost, expense, damage, liability or claim, joint or several, to which any such Persons may become subject or for which any of them may be liable, under the Securities Act or otherwise, insofar as such losses, fees, costs, expenses, damages, liabilities or claims (or any litigation commenced or threatened in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, registration statement, prospectus or other such document published or filed in connection with such public sale, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse Collateral Agent and such other Persons for any legal or other expenses reasonably incurred by Collateral Agent and such other Persons in connection with any litigation, of any nature whatsoever, commenced or threatened in respect thereof (including any and all fees, costs and expenses whatsoever reasonably incurred by Collateral Agent and such other Persons and counsel for Collateral Agent and such other Persons in investigating, preparing for, defending against or providing evidence, producing documents or taking any other action in respect of, any such commenced or threatened litigation or any claims asserted). This indemnity shall be in addition to any liability which any Grantor may otherwise have and shall extend upon the same terms and conditions to each Person, if any, that controls Collateral Agent or such Persons within the meaning of the Securities Act.
(c) REMEDIES WITH RESPECT TO BORROWERS. Furthermore, upon the occurrence and during the continuance of any Event of Default, Collateral Agent may revoke each Grantor's rights to use cash collateral in which Collateral Agent has an interest; provided that, any other provision of this Agreement or any other Credit Document to the contrary notwithstanding, with respect to the foregoing, Collateral Agent shall give each Loan Party five Business Days prior written notice (which notice shall be delivered by facsimile or overnight courier) of the exercise of its rights and remedies with respect to the Collateral. The enumeration of the foregoing rights and remedies is not intended to be exhaustive and the exercise of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative and not alternative. Each Grantor hereby waives (i) presentment, demand and protest and notice of presentment, dishonor, notice of intent to accelerate, notice of acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all commercial paper, accounts, contract rights, documents, instruments, chattel paper and guaranties or other property at any time held by Collateral Agent and any Benefited Party on which Loan Parties may in any way be liable and hereby ratify and confirm whatever Collateral Agent and the Benefited Parties may lawfully do in this regard, (ii) subject to the notice provisions of the preceding paragraph, all rights to notice and hearing prior to Collateral Agent's taking possession or control of, or to the reply of Collateral Agent or any Benefited Party, attachment or levy upon, the Collateral, or any bond or security which might be required by any court prior to allowing Collateral Agent or any Benefited Party to exercise any of their remedies, and (iii) the benefit of all
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valuation, appraisal and exemption laws. Each Grantor acknowledges they have been advised by counsel of their choice with respect to the effect of the foregoing waivers and this Agreement, the Credit Documents and the transactions evidenced by this Agreement and the Credit Documents.
SECTION 19. ADDITIONAL REMEDIES FOR INTELLECTUAL PROPERTY COLLATERAL.
(a) Anything contained herein to the contrary notwithstanding,
upon the occurrence and during the continuation of an Event of Default, (i)
Collateral Agent shall have the right (but not the obligation) to bring suit, in
the name of any Grantor, Collateral Agent or otherwise, to enforce any
Intellectual Property Collateral, in which event each Grantor shall, at the
request of Collateral Agent, do any and all lawful acts and execute any and all
documents required by Collateral Agent in aid of such enforcement and each
Grantor shall promptly, upon demand, reimburse and indemnify Collateral Agent as
provided in those provisions of the Detroit L/C Facility Agreement (or any
successor provisions thereto), the New L/C Facility Agreement (or any successor
provisions thereto) and the High Yield Indenture (or any successor provisions
thereto) that require one or more of the Grantors to reimburse expenses of or
indemnify the Collateral Agent or the Benefited Parties and as provided in
Section 21 hereof, as applicable, in connection with the exercise of its rights
under this Section, and, to the extent that Collateral Agent shall elect not to
bring suit to enforce any Intellectual Property Collateral as provided in this
Section, each Grantor agrees to use all reasonable measures, whether by action,
suit, proceeding or otherwise, to prevent the infringement of any of the
Intellectual Property Collateral by others and for that purpose agrees to use
its commercially reasonable judgment in maintaining any action, suit or
proceeding against any Person so infringing reasonably necessary to prevent such
infringement; (ii) upon written demand from Collateral Agent, each Grantor shall
execute and deliver to Collateral Agent an assignment or assignments of the
Intellectual Property Collateral and such other documents as are necessary or
appropriate to carry out the intent and purposes of this Agreement; (iii) each
Grantor agrees that such an assignment and/or recording shall be applied to
reduce the Secured Obligations outstanding only to the extent that Collateral
Agent (or any Detroit L/C Lender, New L/C Lender or High Yield Noteholder,
subject to the terms of the Intercreditor Agreement) receives cash proceeds in
respect of the sale of, or other realization upon, the Intellectual Property
Collateral; and (iv) within five Business Days after written notice from
Collateral Agent, each Grantor shall make available to Collateral Agent, to the
extent within such Grantor's power and authority, such personnel in such
Grantor's employ on the date of such Event of Default as Collateral Agent may
reasonably designate, by name, title or job responsibility, to permit such
Grantor to continue, directly or indirectly, to produce, advertise and sell the
products and services sold or delivered by such Grantor under or in connection
with the Trademarks, Trademark Registrations and Trademark Rights, such persons
to be available to perform their prior functions on Collateral Agent's behalf
and to be compensated by Collateral Agent at such Grantor's expense on a per
diem, pro-rata basis consistent with the salary and benefit structure applicable
to each as of the date of such Event of Default.
(b) If (i) an Event of Default shall have occurred and, by reason of cure, waiver, modification, amendment or otherwise, no longer be continuing, (ii) no other Event of Default shall have occurred and be continuing, (iii) an assignment to Collateral Agent of any rights, title and interests in and to the Intellectual Property Collateral shall have been previously made, and (iv) the Secured Obligations shall not have become immediately due and payable, upon the written request of any Grantor, Collateral Agent shall promptly execute and deliver to such Grantor, at such Grantor's cost and expense, such assignments as may be necessary to reassign to such Grantor any such rights, title and interests as may have been assigned to Collateral Agent as aforesaid, subject to any disposition thereof that may have been made by Collateral Agent; provided, after giving effect to such reassignment, Collateral Agent's security interest granted pursuant hereto, as well as all other rights and remedies of Collateral Agent granted hereunder, shall continue to be in full force and effect; and provided further, the rights, title and interests so reassigned shall be free and clear of all Liens other than Liens (if any) encumbering such rights, title and interest at the time of their assignment to Collateral Agent and Liens permitted under the relevant provisions of the Credit Documents.
SECTION 20. APPLICATION OF PROCEEDS.
Except as expressly provided in Sections 12 and 13 hereof and elsewhere in this Agreement, all proceeds received by Collateral Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied in accordance with the Intercreditor Agreement. In furtherance of, and without limiting the foregoing, in the event that (i) the Detroit L/C Commitments and the obligation of the Detroit L/C
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Lenders to issue and maintain Detroit L/Cs have terminated and all Detroit L/C Obligations have been Paid in Full, and (ii) the New L/C Commitments and the obligation of the New L/C Lenders to issue and maintain New L/Cs have terminated and the New L/C Obligations have been Paid in Full, then in each case, any cash collateral held by Collateral Agent in each of the Detroit L/C Collateral Account and the New L/C Collateral Account shall be applied in accordance with the Intercreditor Agreement.
SECTION 21. INDEMNITY AND EXPENSES.
(a) Grantors jointly and severally agree to indemnify Collateral Agent, each Detroit L/C Agent, each Detroit L/C Lender, the New L/C Agent, each New L/C Lender, each High Yield Noteholder and each other Benefited Party from and against any and all claims, losses and liabilities in any way relating to, growing out of or resulting from this Agreement and the transactions contemplated hereby (including without limitation enforcement of this Agreement), except to the extent such claims, losses or liabilities result solely from Collateral Agent's or such Detroit L/C Agent's, Detroit L/C Lender's, New L/C Agent's, New L/C Lender's, High Yield Noteholder's or Benefited Party's gross negligence or willful misconduct as finally determined by a court of competent jurisdiction.
(b) Grantors jointly and severally agree to pay to Collateral
Agent upon demand the amount of any and all costs and expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents, that
Collateral Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral, (iii) the
exercise or enforcement of any of the rights of Collateral Agent hereunder, or
(iv) the failure by any Grantor to perform or observe any of the provisions
hereof.
(c) The obligations of Grantors in this Section 21 shall survive the termination of this Agreement and the discharge of Grantors' other obligations under this Agreement, the Detroit L/C Facility Agreement, the New L/C Facility Agreement and the High Yield Indenture (subject to the terms of the Intercreditor Agreement).
SECTION 22. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS; TERMINATION\ AND RELEASE.
(a) This Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect until the Payment in Full of all Secured Obligations, (ii) be binding upon Grantors and their respective successors and assigns, and (iii) inure, together with the rights and remedies of Collateral Agent hereunder, to the benefit of Collateral Agent and its successors, transferees and assigns. Without limiting the generality of the foregoing clause (iii), but subject to the relevant assignment provisions set forth in each of the Credit Documents and the Intercreditor Agreement, (A) any Detroit L/C Agent or Detroit L/C Lender may assign or otherwise transfer its rights under the Detroit L/C Facility Agreement to any other Person, and in each case such other Person shall thereupon become vested with all the benefits in respect thereof granted to Detroit L/C Agents or Detroit L/C Lenders, as applicable, herein or otherwise (subject to the terms of the Intercreditor Agreement), (B) the New L/C Agent and any New L/C Lender may assign or otherwise transfer its rights under the New L/C Facility Agreement to any other Person, and in each case such other Person shall thereupon become vested with all the benefits in respect thereof granted to the New L/C Agent or such New L/C Lender, as applicable, herein or otherwise (subject to the terms of the Intercreditor Agreement) and (C) any High Yield Noteholder may assign or otherwise transfer any High Yield Note to any other Person in accordance with the High Yield Indenture, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to High Yield Noteholders herein or otherwise (subject to the terms of the Intercreditor Agreement).
(b) Upon the Payment in Full of all Secured Obligations, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to the applicable Grantors. Upon any such termination Collateral Agent will, at Grantors' expense, execute and deliver to Grantors such documents as Grantors shall reasonably request to evidence such termination. In addition, upon the proposed sale, transfer or other disposition of any Collateral by a Grantor in accordance with the relevant provisions of each Credit Document for which such Grantor desires to obtain a security interest release from Collateral Agent, such Grantor shall deliver an Officer's Certificate (x) stating that the Collateral subject to such disposition is being sold, transferred or otherwise disposed of in compliance with the terms of the Credit Documents and (y) specifying the Collateral being sold, transferred or otherwise disposed of in the proposed transaction. Upon the receipt of such Officer's Certificate and so long as no Event of Default has occurred and is continuing or would result from the proposed disposition of the Collateral and
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so long as the proceeds from such disposition are applied in accordance with the Credit Documents, Collateral Agent shall, at Grantor's expense, so long as Collateral Agent believes in good faith that the Officer's Certificate delivered by such Grantor with respect to such sale is true, correct and complete, execute and deliver such releases of its security interest in such Collateral which is to be so sold, transferred or disposed of, as may be reasonably requested by such Grantor.
SECTION 23. COLLATERAL AGENT AS AGENT.
(a) Collateral Agent has been appointed to act as Collateral Agent hereunder by the Detroit L/C Agents, the Detroit L/C Lenders, the New L/C Agent, the New L/C Lenders, the High Yield Trustee on behalf of the High Yield Noteholders and the Cash Management Bank. Collateral Agent shall be obligated, and shall have the right hereunder, to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking any action (including without limitation the release or substitution of Collateral), solely in accordance with this Agreement and the Credit Documents.
(b) Collateral Agent shall at all times be the same Person that is the Collateral Agent under the Intercreditor Agreement. Written notice of resignation by Collateral Agent pursuant to subsections 6.1(h) or (i) of the Intercreditor Agreement shall also constitute notice of resignation as Collateral Agent under this Agreement; removal of Collateral Agent pursuant to subsections 6.1(h) or (i) of the Intercreditor Agreement shall also constitute removal as Collateral Agent under this Agreement; and appointment of a successor Collateral Agent pursuant to subsections 6.1(h) or (i) of the Intercreditor Agreement shall also constitute appointment of a successor Collateral Agent under this Agreement. Upon the acceptance of any appointment as Collateral Agent under subsections 6.1(h) or (i) of the Intercreditor Agreement by a successor Collateral Agent, that successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Collateral Agent under this Agreement, and the retiring or removed Collateral Agent under this Agreement shall promptly (i) transfer to such successor Collateral Agent all sums, securities and other items of Collateral held hereunder, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Collateral Agent under this Agreement, and (ii) execute and deliver to such successor Collateral Agent such amendments to financing statements, and take such other actions, as may be necessary or appropriate in connection with the assignment to such successor Collateral Agent of the security interest created hereunder, whereupon such retiring or removed Collateral Agent shall be discharged from its duties and obligations under this Agreement. After any retiring or removed Collateral Agent's resignation or removal hereunder as Collateral Agent, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was Collateral Agent hereunder.
SECTION 24. ADDITIONAL GRANTORS.
Any Subsidiary of Company that is party to any of the Credit Documents but is not a party hereto may become a party hereto as an additional Grantor by executing a Counterpart substantially in the form of Exhibit VI annexed hereto, whereupon such Subsidiary shall become a Grantor hereunder and such Subsidiary shall also execute a Counterpart substantially in the form of Annex 2 to the Intercreditor Agreement pursuant to Section 6.1(l) of the Intercreditor Agreement, whereupon such Subsidiary shall become a Detroit L/C Borrower or New L/C Borrower, as applicable, under the Intercreditor Agreement. Upon delivery of any such Counterpart to Collateral Agent, notice of which is hereby waived by Grantors, each such Additional Grantor shall be a Grantor and shall be as fully a party hereto as if such Additional Grantor were an original signatory hereto. Each Grantor expressly agrees that its obligations arising hereunder shall not be affected or diminished by the addition or release of any other Grantor hereunder, nor by any election of Collateral Agent not to cause any Subsidiary of Company to become an Additional Grantor hereunder. This Agreement shall be fully effective as to any Grantor that is or becomes a party hereto regardless of whether any other Person becomes or fails to become or ceases to be a Grantor hereunder.
SECTION 25. AMENDMENTS; ETC.
No amendment, modification, termination or waiver of any provision of this Agreement, and no consent to any departure by any Grantor therefrom, shall in any event be effective unless the same shall be in writing and signed by Collateral Agent and, in the case of any such amendment or modification, by Grantors; provided that this Agreement may be modified by the execution of a Counterpart by an Additional Grantor in accordance with
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Section 24 hereof and Grantors hereby waive any requirement of notice of or consent to any such amendment. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. In the event of any refinancing, replacement or extension of the New L/C Facility Agreement or Detroit L/C Facility Agreement, references in this Agreement to sections or subsections of the New L/C Facility Agreement and Detroit L/C Facility Agreement shall refer to the functionally equivalent sections or subsections in such refinanced, replaced or extended agreement as the context requires.
SECTION 26. NOTICES.
Any notice or other communication herein required or permitted to be given shall be in writing and may be personally served or sent by telefacsimile or United States mail or courier service and shall be deemed to have been given when delivered in person or by courier service, upon receipt of telefacsimile, or three Business Days after depositing it in the United States mail with postage prepaid and properly addressed; provided that notices to Collateral Agent shall not be effective until received. For the purposes hereof, the address of each party hereto shall be as set forth under such party's name on the signature page hereof or such other address as shall be designated by such party in a written notice delivered to the other parties hereto. Electronic mail and Internet and intranet websites may be used to distribute routine communications, provided, however, that no signature with respect to any notice, request, agreement, waiver, amendment or other document or any notice that is intended to have a binding effect may be sent by electronic mail.
SECTION 27. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of Collateral Agent in the exercise of any power, right or privilege hereunder shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude any other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.
SECTION 28. SEVERABILITY.
In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 29. HEADINGS.
Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect.
SECTION 30. GOVERNING LAW; TERMS; RULES OF CONSTRUCTION.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE UCC PROVIDES THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein or in the Credit Documents, terms used in Articles 8 and 9 of the UCC are used herein as therein defined. The rules of construction set forth in subsection 1.3 of the Detroit L/C Facility Agreement shall be applicable to this Agreement mutatis mutandis.
SECTION 31. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
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ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GRANTOR ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH GRANTOR, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO SUCH GRANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 26 HEREOF; (IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH GRANTOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; (V) AGREES THAT COLLATERAL AGENT RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST SUCH GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION; AND (VI) AGREES THAT THE PROVISIONS OF THIS SECTION 31 RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.
SECTION 32. WAIVER OF JURY TRIAL.
GRANTORS AND COLLATERAL AGENT HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including without limitation contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. Each Grantor and Collateral Agent acknowledge that this waiver is a material inducement for Grantors and Collateral Agent to enter into a business relationship, that Grantors and Collateral Agent have already relied on this waiver in entering into this Agreement and that each will continue to rely on this waiver in their related future dealings. Each Grantor and Collateral Agent further warrant and represent that each has reviewed this waiver with its legal counsel, and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 32 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.
SECTION 33. COUNTERPARTS.
This Agreement may be executed in one or more counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. Delivery of an executed counterpart of a signature page to this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart thereof.
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IN WITNESS WHEREOF, Grantors and Collateral Agent have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.
GRANTORS:
COVANTA ENERGY CORPORATION
Notice Address:
40 Lane Road
Fairfield, New Jersey 07007
Attn: Jeffrey Horowitz, Esq.
EACH OF THE ENTITIES LISTED ON SCHEDULE A ANNEXED
HERETO
Name: Anthony Orlando Title: President and Chief Executive Officer
Notice Address:
40 Lane Road
Fairfield, New Jersey 07007
Attn: Jeffrey Horowitz, Esq.
Security Agreement
BANK OF AMERICA, N.A.,
as Collateral Agent
Title:
Notice Address:
Bank of America, N.A., as Collateral Agent
555 So. Flower Street, 17th Floor
CA9-706-17-54
Los Angeles, California 90071
Attention: David Price, Vice President
Voice: (213) 345-1300
Fax: (415) 503-5011
email: david.price@bankofamerica.com
Security Agreement
SCHEDULE A
OTHER GRANTORS
1. AMOR 14 Corporation
2. Covanta Acquisition, Inc.
3. Covanta Bessemer, Inc.
4. Covanta Cunningham Environmental Support, Inc.
5. Covanta Energy Americas, Inc.
6. Covanta Energy Construction, Inc.
7. Covanta Energy Corporation
8. Covanta Energy Group, Inc.
9. Covanta Energy International, Inc.
10. Covanta Energy Resource Corp.
11. Covanta Energy Services, Inc.
12. Covanta Energy West, Inc.
13. Covanta Engineering Services, Inc.
14. Covanta Geothermal Operations Holdings, Inc.
15. Covanta Geothermal Operations, Inc.
16. Covanta Haverhill Properties, Inc.
17. Covanta Heber Field Energy, Inc.
18. Covanta Hennepin Energy Resource Co., Limited Partnership
19. Covanta Hillsborough, Inc.
20. Covanta Huntsville, Inc.
21. Covanta Hydro Energy, Inc.
22. Covanta Hydro Operations West, Inc.
23. Covanta Hydro Operations, Inc.
24. Covanta Imperial Power Services, Inc.
25. Covanta Kent, Inc.
26. Covanta Lancaster, Inc.
27. Covanta Lee, Inc.
28. Covanta Long Island, Inc.
29. Covanta Marion Land Corp.
30. Covanta Mid-Conn, Inc.
31. Covanta Montgomery, Inc.
32. Covanta New Martinsville Hydroelectric Corporation
33. Covanta New Martinsville Hydro-Operations Corporation
34. Covanta Oahu Waste Energy Recovery, Inc.
Security Agreement
35. Covanta Onondaga Operations, Inc.
36. Covanta Operations of Union, LLC
37. Covanta OPW Associates, Inc.
38. Covanta OPWH, Inc.
39. Covanta Pasco, Inc.
40. Covanta Plant Services of New Jersey, Inc.
41. Covanta Power Equity Corporation
42. Covanta Power Pacific, Inc.
43. Covanta Power Plant Operations
44. Covanta Projects of Hawaii, Inc.
45. Covanta Projects, Inc.
46. Covanta RRS Holdings, Inc.
47. Covanta Secure Services, Inc.
48. Covanta SIGC Energy, Inc.
49. Covanta SIGC Energy II, Inc.
50. Covanta SIGC Geothermal Operations, Inc.
51. Covanta Systems, LLC
52. Covanta Wallingford Associates, Inc.
53. Covanta Waste to Energy , LLC
54. Covanta Water Holdings, Inc.
55. Covanta Water Systems, Inc.
56. Covanta Water Treatment Services, Inc.
57. DSS Environmental, Inc.
58. ERC Energy II, Inc.
59. ERC Energy, Inc.
60. Heber Field Energy II, Inc.
61. Heber Loan Partners
62. LMI, Inc.
63. Mammoth Geothermal Company
64. Mammoth Power Company
65. Mt. Lassen Power
66. Pacific Geothermal Company
67. Pacific Oroville Power, Inc.
68. Pacific Wood Fuels Company
69. Pacific Wood Services Company
70. Three Mountain Operations, Inc.
71. Three Mountain Power, LLC
Security Agreement
SCHEDULE 1(e)(i) TO
SECURITY AGREEMENT
PLEDGED SHARES
CLASS OF PERCENTAGE OF
ISSUER OF PLEDGED PLEDGED PAR NUMBER OF OUTSTANDING
SHARES SHARES CERTIFICATE NOS. VALUE PLEDGED SHARES PLEDGED SHARES
----------------- -------- ---------------- ----- -------------- --------------
------------------ --------------- ---------------- ------------ --------------- ---------------
------------------ --------------- ---------------- ------------ --------------- ---------------
------------------ --------------- ---------------- ------------ --------------- ---------------
------------------ --------------- ---------------- ------------ --------------- ---------------
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Security Agreement
SCHEDULE 1(g)(i) TO
SECURITY AGREEMENT
U.S. TRADEMARKS:
Trademark Registration Registration
Registered Owner Description Number Date
---------------------------- ------------------ ------------ ------------
|
FOREIGN TRADEMARKS:
Trademark Registration Registration
Registered Owner Description Number Date
---------------------------- ------------------ ------------ ------------
|
Security Agreement
1(g)(i)-1
SCHEDULE 1(g)(ii)(A) TO
SECURITY AGREEMENT
U.S. PATENTS ISSUED:
Patent No. Issue Date Invention Inventor
------------------------- ----------------- -------------- -------------
|
U.S. PATENTS PENDING:
Applicant's Date Application
Name Filed Number Invention Inventor
----------------------- ----------- ---------------- ----------- -----------
|
Security Agreement
1(g)(ii)(A)-1
SCHEDULE 1(g)(ii)(B) TO
SECURITY AGREEMENT
FOREIGN PATENTS ISSUED:
Patent No. Issue Date Invention Inventor
------------------------- ----------------- -------------- -------------
|
FOREIGN PATENTS PENDING:
Applicant's Date Application
Name Filed Number Invention Inventor
----------------------- ----------- ---------------- ----------- -----------
|
Security Agreement
1(g)(ii)(B)-1
SCHEDULE 1(g)(iii) TO
SECURITY AGREEMENT
U.S. COPYRIGHTS:
Title Registration No. Date of Issue Registered Owner ----- ---------------- ------------- ---------------- |
FOREIGN COPYRIGHT REGISTRATIONS:
Country Title Registration No. Date of Issue ------- ----- ---------------- ------------- |
PENDING U.S. COPYRIGHT REGISTRATIONS & APPLICATIONS:
Title Reference No. Date of Application Copyright Claimant ----- ------------- ------------------- ------------------ |
PENDING FOREIGN COPYRIGHT REGISTRATIONS & APPLICATIONS:
Country Title Registration No. Date of Issue -------------- ---------------- ------------- |
Security Agreement
1(g)(ii)(B)-1
SCHEDULE 1(J)
TO
SECURITY AGREEMENT
COMMERCIAL TORT CLAIMS
Security Agreement
1(j)-1
SCHEDULE 4(b)
TO
SECURITY AGREEMENT
LOCATIONS OF EQUIPMENT AND INVENTORY
NAME OF GRANTOR LOCATIONS OF EQUIPMENT AND INVENTORY
Security Agreement
4(b)-1
SCHEDULE 4(d)
TO
SECURITY AGREEMENT
OFFICE LOCATIONS, TYPE AND JURISDICTION OF ORGANIZATION
JURISDICTION OF
NAME OF GRANTOR TYPE OF ORGANIZATION OFFICE LOCATIONS ORGANIZATION
--------------- -------------------- ---------------- ---------------
|
Security Agreement
4(d)-1
SCHEDULE 4(e)
TO
SECURITY AGREEMENT
OTHER NAMES
NAME OF GRANTOR OTHER NAMES
Security Agreement
4(e)-1
SCHEDULE 4(g)
TO
SECURITY AGREEMENT
CERTAIN CONTRACTUAL OBLIGATIONS
4(g)-1
Security Agreement
SCHEDULE 4(i)
TO
SECURITY AGREEMENT
FILING OFFICES
Grantor Filing Offices
Security Agreement
4(i)-1
EXHIBIT I TO
SECURITY AGREEMENT
[FORM OF GRANT OF TRADEMARK SECURITY INTEREST]
GRANT OF TRADEMARK SECURITY INTEREST
WHEREAS, [NAME OF GRANTOR], a ___________ corporation ("GRANTOR"), owns and uses in its business, and will in the future adopt and so use, various intangible assets, including the Trademark Collateral (as defined below);
WHEREAS, COVANTA ENERGY CORPORATION, a Delaware corporation ("COMPANY") and the Subsidiaries of Company listed on the signature pages thereof (collectively, Company and such Subsidiaries of Company are "BORROWERS" and each a "BORROWER") have entered into certain Credit Agreement dated as of March __, 2004 (said Credit Agreement or any credit agreement entered into by Detroit L/C Borrowers to refinance, replace, renew or extend, in whole or in part, said Credit Agreement and the indebtedness and letters of credit issued thereunder, as said Credit Agreement or any replacement to said Credit Agreement may be amended, restated, supplemented or otherwise modified from time to time, being the "DETROIT L/C FACILITY AGREEMENT") with the financial institutions listed on the signature pages thereof as Lenders (collectively, together with their respective successors and assigns party to the Detroit L/C Facility Agreement from time to time, the "DETROIT L/C LENDERS"), DEUTSCHE BANK SECURITIES, INC., as Documentation Agent for the Detroit L/C Lenders (in such capacity, the "DETROIT L/C DOCUMENTATION AGENT"), and BANK OF AMERICA, N.A., as Administrative Agent for the Detroit L/C Lenders (in such capacity, the "DETROIT L/C FACILITY AGENT," and together with the Detroit L/C Documentation Agent, the "DETROIT L/C AGENTS"), pursuant to which the Detroit L/C Lenders have made certain commitments, subject to the terms and conditions set forth in the Detroit L/C Facility Agreement, to extend certain letter of credit facilities to Borrowers;
WHEREAS, Borrowers have entered into certain Credit Agreement dated as of March __, 2004 (said Credit Agreement or any credit agreement entered into by New L/C Borrowers to refinance, replace, renew or extend, in whole or in part, said Credit Agreement and the indebtedness and letters of credit issued thereunder, as said Credit Agreement or any replacement to said Credit Agreement may be amended, restated, supplemented or otherwise modified from time to time, being the "NEW L/C FACILITY AGREEMENT") with the financial institutions listed on the signature pages thereof as Lenders (collectively, together with their respective successors and assigns party to the Detroit L/C Facility Agreement from time to time, the "NEW L/C LENDERS"), and Bank One, NA, as Administrative Agent for the New L/C Lenders (in such capacity, the "NEW L/C FACILITY AGENT"), pursuant to which the New L/C Lenders have made certain commitments, subject to the terms and conditions set forth in the New L/C Facility Agreement, to extend certain letter of credit facilities to Borrowers;
WHEREAS, Company has issued $205,000,000 in aggregate face principal amount accruing to $230,000,000 at stated maturity of its 8.25% Senior Notes due 2011 (said notes or any replacement to said notes pursuant to a refinancing, defeasance, renewal, replacement or extension of such notes, being the "HIGH YIELD NOTES");
WHEREAS, Borrowers other than the Company have agreed, in favor of the holders of the High Yield Notes, to guarantee the prompt payment and performance when due of all obligations of Company under the High Yield Notes;
WHEREAS, Borrowers are required to maintain the Cash Management System (as defined in the New L/C Facility Agreement and the Detroit L/C Facility Agreement) with Collateral Agent (in such capacity, the "CASH MANAGEMENT BANK") and the obligations of Borrowers to the Cash Management Bank arising from or relating to the Cash Management System are secured under the Security Agreement (as defined below); and
WHEREAS, pursuant to the terms of a Security Agreement dated as of March __, 2004 (as it may heretofore have been and as it may from time to time hereafter be amended, restated, supplemented or otherwise
Security Agreement
I-S-1
modified, the "SECURITY AGREEMENT"), among Grantor, the other grantors named therein and Bank of America, N.A., in its capacity as collateral agent for and representative of the Secured Parties (as defined in the Intercreditor Agreement referred to below), (the "COLLATERAL AGENT"), Grantor has granted in favor of Collateral Agent a secured and protected interest in, and Collateral Agent has agreed to become a secured creditor with respect to, the Trademark Collateral;
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, subject to the terms and conditions of the Security Agreement, Grantor hereby grants to Collateral Agent a security interest, (subject to the terms of the Intercreditor Agreement (as defined in the Security Agreement) (including, without limitation, the provisions regarding lien priority)), in all of Grantor's right, title and interest in and to the following, in each case whether now or hereafter existing or in which Grantor now has or hereafter acquires an interest and wherever the same may be located (the "TRADEMARK COLLATERAL"):
(i) all rights, title and interest (including rights acquired pursuant to a license or otherwise but only to the extent permitted by agreements governing such license or other use) in and to all trademarks, service marks, designs, logos, indicia, tradenames, trade dress, corporate names, company names, business names, fictitious business names, trade styles and/or other source and/or business identifiers and applications pertaining thereto, owned by such Grantor, or hereafter adopted and used, in its business (including, without limitation, the trademarks specifically identified in Schedule A) (collectively, the "TRADEMARKS"), all registrations that have been or may hereafter be issued or applied for thereon in the United States and any state thereof and in foreign countries (including, without limitation, the registrations and applications specifically identified in Schedule A) (the "TRADEMARK REGISTRATIONS"), all common law and other rights (but in no event any of the obligations) in and to the Trademarks in the United States and any state thereof and in foreign countries (the "TRADEMARK RIGHTS"), and all goodwill of such Grantor's business symbolized by the Trademarks and associated therewith (the "ASSOCIATED GOODWILL"); and
(ii) all proceeds, products, rents and profits of or from any and all of the foregoing Trademark Collateral and, to the extent not otherwise included, all payments under insurance (whether or not Collateral Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Trademark Collateral. For purposes of this Grant of Trademark Security Interest, the term "PROCEEDS" includes whatever is receivable or received when Trademark Collateral or proceeds are sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary.
Notwithstanding anything herein to the contrary, in no event shall the Trademark Collateral include, and Grantor shall be not deemed to have granted a security interest in, any of Grantor's rights or interests in any license, contract or agreement to which Grantor is a party or any of its rights or interests thereunder, to the extent, but only to the extent, that such a grant would, under the terms of such license, contract or agreement or otherwise, result in a breach of the terms of, or constitute a default under any license, contract or agreement to which Grantor is a party on the date hereof (other than to the extent that any such provision would be rendered ineffective pursuant to the UCC or any other applicable law (including the Bankruptcy Code (as defined in the Intercreditor Agreement) or principles of equity); provided, that immediately upon the ineffectiveness, lapse or termination of any such provision, the Trademark Collateral shall include, and Grantor shall be deemed to have granted a security interest to Collateral Agent in, all such rights and interests as if such provision had never been in effect; provided, further that if the assignment of proceeds of such license, contract or agreement would not result in a breach of the terms of, or constitute a default under the provisions of such license, contract or agreement, such proceeds shall be included in the Trademark Collateral.
Grantor does hereby further acknowledge and affirm that the rights and remedies of Collateral Agent with respect to the security interests in the Trademark Collateral granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein.
Security Agreement
I-S-2
IN WITNESS WHEREOF, Grantor has caused this Grant of Trademark Security Interest to be duly executed and delivered by its officer thereunto duly authorized as of the __ day of _______, 200__.
[NAME OF GRANTOR]
I-S-3
SCHEDULE A
TO
GRANT OF TRADEMARK SECURITY INTEREST
United States
Trademark Registration Registration
Registered Owner Description Number Date
---------------- -------------- ------------- -------------
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Security Agreement
I-A-1
EXHIBIT II TO
SECURITY AGREEMENT
[FORM OF GRANT OF PATENT SECURITY INTEREST]
GRANT OF PATENT SECURITY INTEREST
WHEREAS, [NAME OF GRANTOR], a ___________ corporation ("GRANTOR"), owns and uses in its business, and will in the future adopt and so use, various intangible assets, including the Patent Collateral (as defined below);
WHEREAS, COVANTA ENERGY CORPORATION, a Delaware corporation ("COMPANY") and the Subsidiaries of Company listed on the signature pages thereof (collectively, Company and such Subsidiaries of Company are "BORROWERS" and each a "BORROWER") have entered into certain Credit Agreement dated as of March __, 2004 (said Credit Agreement or any credit agreement entered into by Detroit L/C Borrowers to refinance, replace, renew or extend, in whole or in part, said Credit Agreement and the indebtedness and letters of credit issued thereunder, as said Credit Agreement or any replacement to said Credit Agreement may be amended, restated, supplemented or otherwise modified from time to time, being the "DETROIT L/C FACILITY AGREEMENT") with the financial institutions listed on the signature pages thereof as Lenders (collectively, together with their respective successors and assigns party to the Detroit L/C Facility Agreement from time to time, the "DETROIT L/C LENDERS"), DEUTSCHE BANK SECURITIES, INC., as Documentation Agent for the Detroit L/C Lenders (in such capacity, the "DETROIT L/C DOCUMENTATION AGENT"), and BANK OF AMERICA, N.A., as Administrative Agent for the Detroit L/C Lenders (in such capacity, the "DETROIT L/C FACILITY AGENT," and together with the Detroit L/C Documentation Agent, the "DETROIT L/C AGENTS"), pursuant to which the Detroit L/C Lenders have made certain commitments, subject to the terms and conditions set forth in the Detroit L/C Facility Agreement, to extend certain letter of credit facilities to Borrowers;
WHEREAS, Borrowers have entered into certain Credit Agreement dated as of March __, 2004 (said Credit Agreement or any credit agreement entered into by New L/C Borrowers to refinance, replace, renew or extend, in whole or in part, said Credit Agreement and the indebtedness and letters of credit issued thereunder, as said Credit Agreement or any replacement to said Credit Agreement may be amended, restated, supplemented or otherwise modified from time to time, being the "NEW L/C FACILITY AGREEMENT") with the financial institutions listed on the signature pages thereof as Lenders (collectively, together with their respective successors and assigns party to the Detroit L/C Facility Agreement from time to time, the "NEW L/C LENDERS"), and Bank One, NA, as Administrative Agent for the New L/C Lenders (in such capacity, the "NEW L/C FACILITY AGENT"), pursuant to which the New L/C Lenders have made certain commitments, subject to the terms and conditions set forth in the New L/C Facility Agreement, to extend certain letter of credit facilities to Borrowers;
WHEREAS, Company has issued $205,000,000 in aggregate face principal amount accruing to $230,000,000 at stated maturity of its 8.25% Senior Notes due 2011 (said notes or any replacement to said notes pursuant to a refinancing, defeasance, renewal, replacement or extension of such notes, being the "HIGH YIELD NOTES");
WHEREAS, Borrowers other than the Company have agreed, in favor of the holders of the High Yield Notes, to guarantee the prompt payment and performance when due of all obligations of Company under the High Yield Notes;
WHEREAS, Borrowers are required to maintain the Cash Management System (as defined in the New L/C Facility Agreement and the Detroit L/C Facility Agreement) with Collateral Agent (in such capacity, the "CASH MANAGEMENT BANK") and the obligations of Borrowers to the Cash Management Bank arising from or relating to the Cash Management System are secured under the Security Agreement (as defined below); and
WHEREAS, pursuant to the terms of a Security Agreement dated as of March __, 2004 (as it may heretofore have been and as it may from time to time hereafter be amended, restated, supplemented or otherwise
Security Agreement
II-1
modified, the "SECURITY AGREEMENT"), among Grantor, the other grantors named therein and Bank of America, N.A., in its capacity as collateral agent for and representative of the Secured Parties (as defined in the Intercreditor Agreement referred to below), (the "COLLATERAL AGENT"), Grantor has granted in favor of Collateral Agent a secured and protected interest in, and Collateral Agent has agreed to become a secured creditor with respect to, the Patent Collateral;
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, subject to the terms and conditions of the Security Agreement, Grantor hereby grants to Collateral Agent a security interest, (subject to the terms of the Intercreditor Agreement (as defined in the Security Agreement) (including, without limitation, the provisions regarding lien priority)), in all of Grantor's right, title and interest in and to the following, in each case whether now or hereafter existing or in which Grantor now has or hereafter acquires an interest and wherever the same may be located (the "PATENT COLLATERAL"):
(i) all rights, title and interest (including rights acquired pursuant to a license or otherwise but only to the extent permitted by agreements governing such license or other use) in and to all patents and patent applications and rights and interests in patents and patent applications under any domestic or foreign law that are presently, or in the future may be, owned or held by such Grantor and all patents and patent applications and rights, title and interests in patents and patent applications under any domestic or foreign law that are presently, or in the future may be, owned by such Grantor in whole or in part (including, without limitation, the patents and patent applications listed in Schedule A), all rights (but not obligations) corresponding thereto to sue for past, present and future infringements and all re-issues, divisions, continuations, renewals, extensions and continuations-in-part thereof (all of the foregoing being collectively referred to as the "PATENTS"); and
(ii) all proceeds, products, rents and profits of or from any and all of the foregoing Patent Collateral and, to the extent not otherwise included, all payments under insurance (whether or not Collateral Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Patent Collateral. For purposes of this Grant of Patent Security Interest, the term "PROCEEDS" includes whatever is receivable or received when Patent Collateral or proceeds are sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary.
Notwithstanding anything herein to the contrary, in no event shall the Patent Collateral include, and Grantor shall be not deemed to have granted a security interest in, any of Grantor's rights or interests in any license, contract or agreement to which Grantor is a party or any of its rights or interests thereunder, to the extent, but only to the extent, that such a grant would, under the terms of such license, contract or agreement or otherwise, result in a breach of the terms of, or constitute a default under any license, contract or agreement to which Grantor is a party on the date hereof (other than to the extent that any such provision would be rendered ineffective pursuant to the UCC or any other applicable law (including the Bankruptcy Code (as defined in the Intercreditor Agreement) or principles of equity); provided, that immediately upon the ineffectiveness, lapse or termination of any such provision, the Patent Collateral shall include, and Grantor shall be deemed to have granted a security interest to Collateral Agent in, all such rights and interests as if such provision had never been in effect; provided, further that if the assignment of proceeds of such license, contract or agreement would not result in a breach of the terms of, or constitute a default under the provisions of such license, contract or agreement, such proceeds shall be included in the Patent Collateral.
Grantor does hereby further acknowledge and affirm that the rights and remedies of Collateral Agent with respect to the security interest in the Patent Collateral granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein.
[The remainder of this page intentionally left blank.]
Security Agreement
II-2
IN WITNESS WHEREOF, Grantor has caused this Grant of Patent Security Interest to be duly executed and delivered by its officer thereunto duly authorized as of the ___ day of ____________, 200__.
[NAME OF GRANTOR]
Security Agreement
II-S-1
SCHEDULE A
TO
GRANT OF PATENT SECURITY INTEREST
PATENTS ISSUED:
Patent No. Issue Date Invention Inventor ---------- ---------- --------- -------- |
PATENTS PENDING:
Applicant's Date Application Name Filed Number Invention Inventor ----------- ----- ------------ --------- -------- |
Security Agreement
II-A-1
EXHIBIT III TO
SECURITY AGREEMENT
[FORM OF GRANT OF COPYRIGHT SECURITY INTEREST]
GRANT OF COPYRIGHT SECURITY INTEREST
WHEREAS, [NAME OF GRANTOR], a ___________ corporation ("GRANTOR"), owns and uses in its business, and will in the future adopt and so use, various intangible assets, including the Copyright Collateral (as defined below);
WHEREAS, COVANTA ENERGY CORPORATION, a Delaware corporation ("COMPANY") and the Subsidiaries of Company listed on the signature pages thereof (collectively, Company and such Subsidiaries of Company are "BORROWERS" and each a "BORROWER") have entered into certain Credit Agreement dated as of March __, 2004 (said Credit Agreement or any credit agreement entered into by Detroit L/C Borrowers to refinance, replace, renew or extend, in whole or in part, said Credit Agreement and the indebtedness and letters of credit issued thereunder, as said Credit Agreement or any replacement to said Credit Agreement may be amended, restated, supplemented or otherwise modified from time to time, being the "DETROIT L/C FACILITY AGREEMENT") with the financial institutions listed on the signature pages thereof as Lenders (collectively, together with their respective successors and assigns party to the Detroit L/C Facility Agreement from time to time, the "DETROIT L/C LENDERS"), DEUTSCHE BANK SECURITIES, INC., as Documentation Agent for the Detroit L/C Lenders (in such capacity, the "DETROIT L/C DOCUMENTATION AGENT"), and BANK OF AMERICA, N.A., as Administrative Agent for the Detroit L/C Lenders (in such capacity, the "DETROIT L/C FACILITY AGENT," and together with the Detroit L/C Documentation Agent, the "DETROIT L/C AGENTS"), pursuant to which the Detroit L/C Lenders have made certain commitments, subject to the terms and conditions set forth in the Detroit L/C Facility Agreement, to extend certain letter of credit facilities to Borrowers;
WHEREAS, Borrowers have entered into certain Credit Agreement dated as of March __, 2004 (said Credit Agreement or any credit agreement entered into by New L/C Borrowers to refinance, replace, renew or extend, in whole or in part, said Credit Agreement and the indebtedness and letters of credit issued thereunder, as said Credit Agreement or any replacement to said Credit Agreement may be amended, restated, supplemented or otherwise modified from time to time, being the "NEW L/C FACILITY AGREEMENT") with the financial institutions listed on the signature pages thereof as Lenders (collectively, together with their respective successors and assigns party to the Detroit L/C Facility Agreement from time to time, the "NEW L/C LENDERS"), and Bank One, NA, as Administrative Agent for the New L/C Lenders (in such capacity, the "NEW L/C FACILITY AGENT"), pursuant to which the New L/C Lenders have made certain commitments, subject to the terms and conditions set forth in the New L/C Facility Agreement, to extend certain letter of credit facilities to Borrowers;
WHEREAS, Company has issued $205,000,000 in aggregate face principal amount accruing to $230,000,000 at stated maturity of its 8.25% Senior Notes due 2011 (said notes or any replacement to said notes pursuant to a refinancing, defeasance, renewal, replacement or extension of such notes, being the "HIGH YIELD NOTES");
WHEREAS, Borrowers other than the Company have agreed, in favor of the holders of the High Yield Notes, to guarantee the prompt payment and performance when due of all obligations of Company under the High Yield Notes;
WHEREAS, Borrowers are required to maintain the Cash Management System (as defined in the New L/C Facility Agreement and the Detroit L/C Facility Agreement) with Collateral Agent (in such capacity, the "CASH MANAGEMENT BANK") and the obligations of Borrowers to the Cash Management Bank arising from or relating to the Cash Management System are secured under the Security Agreement (as defined below); and
WHEREAS, pursuant to the terms of a Security Agreement dated as of March __, 2004 (as it may heretofore have been and as it may from time to time hereafter be amended, restated, supplemented or otherwise
Security Agreement
III-1
modified, the "SECURITY AGREEMENT"), among Grantor, the other grantors named therein and Bank of America, N.A., in its capacity as collateral agent for and representative of the Secured Parties (as defined in the Intercreditor Agreement referred to below), (the "COLLATERAL AGENT"), Grantor has granted in favor of Collateral Agent a secured and protected interest in, and Collateral Agent has agreed to become a secured creditor with respect to, the Copyright Collateral;
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, subject to the terms and conditions of the Security Agreement, Grantor hereby grants to Collateral Agent a security interest, (subject to the terms of the Intercreditor Agreement (as defined in the Security Agreement) (including, without limitation, the provisions regarding lien priority)), in all of Grantor's right, title and interest in and to the following, in each case whether now or hereafter existing or in which Grantor now has or hereafter acquires an interest and wherever the same may be located (the "COPYRIGHT COLLATERAL"):
(i) all rights, title and interest (including rights acquired pursuant to a license or otherwise but only to the extent permitted by agreements governing such license or other use) under copyright in various published and unpublished works of authorship including, without limitation, computer programs, computer data bases, other computer software layouts, trade dress, drawings, designs, writings, and formulas (including, without limitation, the works listed on Schedule A, as the same may be amended pursuant hereto from time to time) (collectively, the "COPYRIGHTS"), all copyright registrations issued to Grantor and applications for copyright registration that have been or may hereafter be issued or applied for thereon in the United States and any state thereof and in foreign countries (including, without limitation, the registrations listed on Schedule A, as the same may be amended pursuant hereto from time to time) (collectively, the "COPYRIGHT REGISTRATIONS"), all common law and other rights in and to the Copyrights in the United States and any state thereof and in foreign countries including all copyright licenses (but with respect to such copyright licenses, only to the extent permitted by such licensing arrangements) (the "COPYRIGHT RIGHTS"), including, without limitation, each of the Copyrights, rights, titles and interests in and to the Copyrights, all derivative works and other works protectable by copyright, which are presently, or in the future may be, owned, created (as a work for hire for the benefit of Grantor), authored (as a work for hire for the benefit of Grantor), or acquired by Grantor, in whole or in part, and all Copyright Rights with respect thereto and all Copyright Registrations therefor, heretofore or hereafter granted or applied for, and all renewals and extensions thereof, throughout the world, including all proceeds thereof (such as, by way of example and not by limitation, license royalties and proceeds of infringement suits), the right (but not the obligation) to renew and extend such Copyright Registrations and Copyright Rights and to register works protectable by copyright and the right (but not the obligation) to sue in the name of such Grantor or in the name of Collateral Agent or Lenders for past, present and future infringements of the Copyrights and Copyright Rights; and
(ii) all proceeds, products, rents and profits of or from any and all of the foregoing Copyright Collateral and, to the extent not otherwise included, all payments under insurance (whether or not Collateral Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Copyright Collateral. For purposes of this Grant of Copyright Security Interest, the term "PROCEEDS" includes whatever is receivable or received when Copyright Collateral or proceeds are sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary.
Notwithstanding anything herein to the contrary, in no event shall the Copyright Collateral include, and Grantor shall be not deemed to have granted a security interest in, any of Grantor's rights or interests in any license, contract or agreement to which Grantor is a party or any of its rights or interests thereunder, to the extent, but only to the extent, that such a grant would, under the terms of such license, contract or agreement or otherwise, result in a breach of the terms of, or constitute a default under any license, contract or agreement to which Grantor is a party on the date hereof (other than to the extent that any such provision would be rendered ineffective pursuant to the UCC or any other applicable law (including the Bankruptcy Code (as defined in the Intercreditor Agreement) or principles of equity); provided, that immediately upon the ineffectiveness, lapse or termination of any such provision, the Copyright Collateral shall include, and Grantor shall be deemed to have granted a security interest to Collateral Agent in, all such rights and interests as if such provision had never been in effect; provided, further that if the assignment of proceeds of such license, contract or agreement would not result in a breach of the
Security Agreement
III-2
terms of, or constitute a default under the provisions of such license, contract or agreement, such proceeds shall be included in the Copyright Collateral.
Grantor does hereby further acknowledge and affirm that the rights and remedies of Collateral Agent with respect to the security interest in the Copyright Collateral granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein.
[The remainder of this page intentionally left blank.]
Security Agreement
III-3
IN WITNESS WHEREOF, Grantor has caused this Grant of Copyright Security Interest to be duly executed and delivered by its officer thereunto duly authorized as of the ___ day of ___________, 200__.
[NAME OF GRANTOR]
Security Agreement
III-S-1
SCHEDULE A
TO
GRANT OF COPYRIGHT SECURITY INTEREST
U.S. COPYRIGHTS:
Title Registration No. Date of Issue Registered Owner ----- --------------- ------------- ---------------- |
PENDING U.S. COPYRIGHT REGISTRATIONS & APPLICATIONS:
Title Reference No. Date of Application Copyright Claimant ----- ------------- ------------------- ------------------ |
Security Agreement
III-A-1
EXHIBIT IV TO
SECURITY AGREEMENT
PLEDGE SUPPLEMENT
This Pledge Supplement, dated as of _________________, 200__ is delivered pursuant to the Security Agreement, dated as of March __, 2004 among ____________, a ____________ ("GRANTOR"), the other Grantors named therein, and Bank of America, N.A., as Collateral Agent (as it may heretofore have been and as it may from time to time hereafter be amended, restated, supplemented or otherwise modified, the "SECURITY AGREEMENT"). Capitalized terms used herein not otherwise defined herein shall have the meanings ascribed thereto in the Security Agreement.
Grantor hereby agrees that the [Pledged Shares] [Pledged Debt]
listed on the schedule attached hereto shall be deemed to be part of the
[Pledged Shares] [Pledged Debt] and shall become part of the Securities
Collateral and shall secure all Secured Obligations.
IN WITNESS WHEREOF, Grantor has caused this Amendment to be duly executed and delivered by its duly authorized officer as of _______________, 200__.
[GRANTOR]
Security Agreement
IV-1
EXHIBIT V TO
SECURITY AGREEMENT
IP SUPPLEMENT
This IP SUPPLEMENT, dated as of ____________, 200__ is
delivered pursuant to and supplements (i) the Security Agreement, dated as of
March __, 2004 (as it may heretofore have been and as it may from time to time
hereafter be amended, restated, supplemented or otherwise modified, the
"SECURITY AGREEMENT"), among _______________ ("GRANTOR"), the other Grantors
named therein, and Bank of America, N.A., as Collateral Agent, and (ii) the
[Grant of Trademark Security Interest] [Grant of Patent Security Interest]
[Grant of Copyright Security Interest] dated as of ___________, 200__ (the
"GRANT") executed by Grantor. Capitalized terms used herein not otherwise
defined herein shall have the meanings ascribed thereto in the Grant.
Grantor grants to Collateral Agent a security interest (as set forth in the Security Agreement) in all of Grantor's right, title and interest in and to the [Trademark Collateral] [Patent Collateral] [Copyright Collateral] listed on Schedule A attached hereto. All such [Trademark Collateral] [Patent Collateral] [Copyright Collateral] shall be deemed to be part of the [Trademark Collateral] [Patent Collateral] [Copyright Collateral] and shall be hereafter subject to each of the terms and conditions of the Security Agreement and the Grant.
IN WITNESS WHEREOF, Grantor has caused this Supplement to be duly executed and delivered by its duly authorized officer as of ______________, 200__.
[GRANTOR]
[Attach Schedule A]
Security Agreement
EXHIBIT VI TO
SECURITY AGREEMENT
[FORM OF COUNTERPART]
COUNTERPART (this "COUNTERPART"), dated as of __________, 200__ is delivered pursuant to Section 24 of the Security Agreement referred to below. The undersigned hereby agrees that this Counterpart may be attached to the Security Agreement, dated as of March __, 2004 (as it may heretofore have been and as it may from time to time hereafter be amended, restated, supplemented or otherwise modified, the "SECURITY AGREEMENT"; capitalized terms used herein not otherwise defined herein shall have the meanings ascribed therein), among Covanta Energy Corporation, the other Grantors named therein, and Bank of America, N.A., as Collateral Agent. The undersigned by executing and delivering this Counterpart hereby becomes a Grantor under the Security Agreement in accordance with Section 24 thereof and agrees to be bound by all of the terms thereof. Without limiting the generality of the foregoing, the undersigned hereby:
(i) agrees that all Collateral of the undersigned, including the items of property described on the Schedules attached hereto, shall become part of the Collateral and shall secure all Secured Obligations, and hereby grants to the Collateral Agent for the benefit of the Lenders a continuing security interest (as set forth in the Security Agreement) in all such Collateral of the undersigned;
(ii) authorizes the Collateral Agent to add the information set forth on the Schedules to this Counterpart to the correlative Schedules attached to the Security Agreement(1);
(iii) agrees that it hereby becomes a party to the Security Agreement as a Grantor and hereafter has the rights and obligations of a Grantor thereunder and is bound by all of the provisions thereof as fully as if the undersigned were one of the original parties thereto;
(iv) makes the representations and warranties set forth in the Security Agreement, as amended hereby, to the extent relating to the undersigned; and
(v) agrees that the address and facsimile number of the undersigned for notice purposes pursuant to Section 26 of the Security Agreement shall be initially as set forth below.
[NAME OF ADDITIONAL GRANTOR]
Notice Address:
Security Agreement
EXHIBIT 4.28
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "AGREEMENT") is dated as of March __, 2004 and entered into by and among COVANTA POWER INTERNATIONAL HOLDINGS, INC., a Delaware corporation ("CPIH" or "COMPANY"), each of THE OTHER BORROWERS LISTED ON THE SIGNATURE PAGES HEREOF (Borrowers are sometimes collectively referred to herein as "GRANTORS" and individually as a "GRANTOR") and BANK OF AMERICA, N.A., in its capacity as collateral agent for and representative of the Secured Parties (as defined in the Intercreditor Agreement referred to below) (the "COLLATERAL AGENT"). All capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed thereto in the Intercreditor Agreement.
RECITALS
WHEREAS, pursuant to the Credit Agreement dated as of March __, 2004 (said Credit Agreement or any credit agreement entered into by Revolver Borrowers to refinance, replace, renew or extend, in whole or in part, said Credit Agreement and the indebtedness thereunder to the extent permitted pursuant to the Term Loan Agreement (as defined below), as said Credit Agreement or any replacement to said Credit Agreement may be amended, restated, supplemented or otherwise modified from time to time, being the "REVOLVER CREDIT AGREEMENT"), by and among Grantors as borrowers, the financial institutions from time to time party thereto as lenders (the "REVOLVER LENDERS") and Deutsche Bank AG, New York Branch, as administrative agent for the Revolver Lenders (the "REVOLVER AGENT"), the Revolver Lenders have made certain commitments (each, a "REVOLVER COMMITMENT"), subject to the terms and conditions set forth in the Revolver Credit Agreement, to extend certain revolving credit facilities (each, a "REVOLVER LOAN") to Grantors;
WHEREAS, pursuant to the Credit Agreement dated as of March __, 2004, (said Credit Agreement or any credit agreement entered into by Term Loan Borrowers to refinance, replace, renew or extend, in whole or in part, said Credit Agreement and the indebtedness thereunder to the extent permitted pursuant to the Revolver Credit Agreement, as said Credit Agreement or any replacement to said Credit Agreement may be amended, restated, supplemented or otherwise modified from time to time, being the " TERM LOAN AGREEMENT"), by and among Grantors as borrowers, the financial institutions listed therein as lenders (the "TERM LOAN LENDERS"), Bank of America, N.A., as administrative agent (in such capacity, the "TERM LOAN FACILITY AGENT") and Deutsche Bank Securities, Inc., as documentation agent for the Term Loan Lenders (in such capacity "TERM LOAN DOCUMENTATION AGENT," and together with the Term Loan Facility Agent, the "TERM LOAN AGENTS" and collectively with the Revolver Agent, the Revolver Lenders, the Term Loan Lenders and the Cash Management Bank (as defined below), the "BENEFITED PARTIES"), the Term Loan Lenders have made certain commitments (each, a "TERM LOAN COMMITMENT," and together with the Revolver Commitments, collectively, the "COMMITMENTS"), subject to the terms and conditions set forth in the Term Loan Agreement, to extend certain term loan facilities (each, a "TERM LOAN," and together with the Revolver Loans, the "LOANS") to the Term Loan Borrowers;
WHEREAS, in accordance with the terms of the Credit Agreements, Borrowers are required to maintain the Cash Management System with Bank of America (in such capacity, the "CASH MANAGEMENT BANK"), and it is desired that the Cash Management Obligations be secured hereunder;
WHEREAS, Company, the Revolver Borrowers, the Term Loan Borrowers, CEA, the Revolver Agent, the Revolver Lenders, the Term Loan Agents, the Term Loan Lenders, the Cash Management Bank and Collateral Agent have entered into that certain Intercreditor Agreement dated as of March __, 2004 (as it may hereafter be amended, restated, supplemented or otherwise modified from time to time, the "INTERCREDITOR AGREEMENT"), pursuant to which the Revolver Agent, the Revolver Lenders, the Term Loan Agents, the Term Loan Lenders and Cash Management Bank have appointed Collateral Agent, and Collateral Agent has agreed to act, as collateral agent for the Revolver Agent, the Revolver Lenders, the Term Loan Agents, the Term Loan Lenders and the Cash Management Bank hereunder; and
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WHEREAS, it is a condition precedent to (i) the extension of credit by the Revolver Lenders under the Revolver Credit Agreement and (ii) the extension of credit by the Term Loan Lenders that the Grantors listed on the signature pages hereof shall have granted the security interests and undertaken the obligations contemplated by this Agreement;
NOW, THEREFORE, in consideration of the premises and in order to induce the Revolver Lenders to make extensions of credit from time to time under the Revolver Credit Agreement, the Term Loan Lenders to continue to make extensions of credit from time to time under the Term Loan Agreement, the Cash Management Bank to provide cash management services to the Grantors and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, each Grantor hereby agrees with Collateral Agent as follows:
SECTION 1. GRANT OF SECURITY.
Each Grantor hereby assigns and grants to Collateral Agent a security interest, subject to the terms of the Intercreditor Agreement (including, without limitation, the provisions regarding lien priority), in all of such Grantor's right, title and interest in and to all of such Grantor's personal property and fixture property of every kind and nature, and all proceeds and products thereof, in each case whether now or hereafter acquired and wherever the same may be located, including, without limitation, the following (the "COLLATERAL"), to secure the obligations as set forth in Section 2 herein except as provided in the penultimate paragraph to this Section 1:
(a) all equipment, in all of its forms, all parts thereof and all accessions thereto (any and all such equipment, parts and accessions being the "EQUIPMENT");
(b) all inventory in all of its forms, including but not limited to (i) all goods held by such Grantor for sale or lease or to be furnished under contracts of service or so leased or furnished, (ii) all raw materials, work in process, finished goods, and materials used or consumed in the manufacture, packing, shipping, advertising, selling, leasing, furnishing or production of such inventory or otherwise used or consumed in such Grantor's business, (iii) all goods in which such Grantor has an interest in mass or a joint or other interest or right of any kind, and (iv) all goods which are returned to or repossessed by such Grantor and all accessions thereto and products thereof (collectively the "INVENTORY") and all negotiable and non-negotiable documents of title (including without limitation, documents, warehouse receipts, dock receipts and bills of lading) issued by any Person covering any Inventory (any such negotiable document of title being a "NEGOTIABLE DOCUMENT OF TITLE");
(c) all accounts, contract rights, chattel paper, documents, instruments, general intangibles, letter-of-credit rights and other rights and obligations of any kind owned by or owing to such Grantor and all rights in, to and under all security agreements, leases and other contracts securing or otherwise relating to any such accounts, contract rights, chattel paper, documents, instruments, general intangibles, letter-of-credit rights or other rights and obligations (any and all such accounts, contract rights, chattel paper, documents, instruments, general intangibles, letter of credit rights and other rights and obligations being the "ACCOUNTS," and any and all such security agreements, leases and other contracts being the "RELATED CONTRACTS").
(d) all deposit accounts and all the accounts and
concentration accounts which constitute the Cash Management System, together
with (i) all amounts on deposit from time to time in such deposit accounts and
(ii) all interest, cash, instruments, securities and other property from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of the foregoing (the "DEPOSIT ACCOUNTS");
(e) the "SECURITIES COLLATERAL," which term means:
(i) the shares of stock, partnership interests, interests in joint ventures, limited liability company interests and all other equity interests in any other Person, including all securities convertible into, and rights, warrants, options and other rights to purchase or otherwise acquire, any of the foregoing now or hereafter owned by such Grantor, including those owned on the date hereof and described on Schedule 1(e)(i), and the certificates or other instruments representing any of the foregoing and any interest of such Grantor in the entries on the books of
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any securities intermediary pertaining thereto (the "PLEDGED SHARES"), and all dividends, distributions, returns of capital, cash, warrants, options, rights, instruments, rights to vote or manage the business of such Person pursuant to organizational documents governing the rights and obligations of the stockholders, partners, members or other owners thereof and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such Pledged Shares;
(ii) the indebtedness from time to time owed to such Grantor by any obligor, and the instruments evidencing such indebtedness (the "PLEDGED DEBT"), and all interest, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Debt; and
(iii) all other investment property of such Grantor not otherwise included in this clause (e) or the definition of Investment Collateral below; provided, however, that the Securities Collateral shall not include (1) any shares of stock, partnership interests, interests in joint ventures, limited liability company interests or other equity interests of any Subsidiary that was not incorporated or organized under the laws of the United States, any state thereof or the District of Columbia (a "FOREIGN SUBSIDIARY") in excess of the number of shares or other such interests of such issuer possessing up to but not exceeding 65% of the voting power of all classes of capital stock or other such interests entitled to vote of such Foreign Subsidiary, or (2) any shares of stock, partnership interests, interests in joint ventures, limited liability company interests or all other equity interests of those Subsidiaries the pledge of which would constitute a violation of (A) a valid and enforceable Contractual Obligation in favor of or for the benefit of a Person other than Company or any of its Subsidiaries and their respective Affiliates for which the required consents have not been obtained, or (B) applicable law affecting such Grantor or such Subsidiary;
(f) the "INVESTMENT COLLATERAL", which term means:
(i) all securities accounts, including any restricted securities accounts established and maintained by Collateral Agent pursuant to Section 14 herein, (ii) all credit balances held from time to time in such securities accounts, (iii) any property, including any Financial Assets (as defined in the UCC) credited to any such securities account by Collateral Agent and any other property acquired by Collateral Agent as securities intermediary in exchange for, with proceeds from or distributions on, or otherwise in respect of any of the foregoing (any such property an "INVESTMENT") and any security entitlements, securities (whether certificated or uncertificated), instruments, accounts, chattel paper, general intangibles and deposits representing or evidencing any Investment, and (iv) all interest, dividends, cash, instruments, securities and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Investments.
(g) the "INTELLECTUAL PROPERTY COLLATERAL," which term means:
(i) all rights, title and interest (including rights
acquired pursuant to a license or otherwise) in and to all
trademarks, service marks, designs, logos, indicia,
tradenames, trade dress, corporate names, company names,
business names, fictitious business names, trade styles and/or
other source and/or business identifiers and applications
pertaining thereto, owned by such Grantor, or hereafter
adopted and used, in its business (including, without
limitation, the trademarks specifically identified in Schedule
1(g)(i), as the same may be amended pursuant hereto from time
to time) (collectively, the "TRADEMARKS"), all registrations
that have been or may hereafter be issued or applied for
thereon in the United States and any state thereof and in
foreign countries (including, without limitation, the
registrations and applications specifically identified in
Schedule 1(g)(i), as the same may be amended pursuant hereto
from time to time) (the "TRADEMARK REGISTRATIONS"), all common
law and other rights in and to the Trademarks in the United
States and any state thereof and in foreign countries (the
"TRADEMARK RIGHTS"), and all goodwill of such Grantor's
business symbolized by the Trademarks and associated therewith
(the "ASSOCIATED GOODWILL");
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(ii) all rights, title and interest (including rights acquired pursuant to a license or otherwise) in and to all patents and patent applications and rights and interests in patents and patent applications under any domestic or foreign law that are presently, or in the future may be, owned or held by such Grantor and all patents and patent applications and rights, title and interests in patents and patent applications under any domestic or foreign law that are presently, or in the future may be, owned by such Grantor in whole or in part (including, without limitation, the patents and patent applications listed in Schedule 1(g)(ii), as the same may be amended pursuant hereto from time to time), all rights corresponding thereto (including, without limitation, the right, exercisable only upon the occurrence and during the continuation of an Event of Default, to sue for past, present and future infringements in the name of such Grantor or in the name of Collateral Agent, the Revolver Lenders or the Term Loan Lenders and/or any other Benefited Parties), and all re-issues, divisions, continuations, renewals, extensions and continuations-in-part thereof (all of the foregoing being collectively referred to as the "PATENTS"); it being understood that the rights and interests included in the Intellectual Property Collateral hereby shall include, without limitation, all rights and interests pursuant to licensing or other contracts in favor of such Grantor pertaining to patent applications and patents presently or in the future owned or used by third parties but, in the case of third parties which are not Affiliates of such Grantor, only to the extent permitted by such licensing or other contracts and, if not so permitted, only with the consent of such third parties; and
(iii) all rights, title and interest (including rights acquired pursuant to a license or otherwise) under copyright in various published and unpublished works of authorship including, without limitation, computer programs, computer data bases, other computer software, layouts, trade dress, drawings, designs, writings, and formulas owned by such Grantor (including, without limitation, the works listed on Schedule 1(g)(iii), as the same may be amended pursuant hereto from time to time) (collectively, the "COPYRIGHTS"), all copyright registrations issued to such Grantor and applications for copyright registration that have been or may hereafter be issued or applied for thereon by such Grantor in the United States and any state thereof and in foreign countries (including, without limitation, the registrations listed on Schedule 1(g)(iii), as the same may be amended pursuant hereto from time to time) (collectively, the "COPYRIGHT REGISTRATIONS"), all common law and other rights in and to the Copyrights in the United States and any state thereof and in foreign countries including all copyright licenses (but with respect to such copyright licenses, only to the extent permitted by such licensing arrangements) (the "COPYRIGHT RIGHTS"), including, without limitation, each of the Copyrights, rights, titles and interests in and to the Copyrights, all derivative works and other works protectable by copyright, which are presently, or in the future may be, owned, created (as a work for hire for the benefit of such Grantor), authored (as a work for hire for the benefit of such Grantor), or acquired by such Grantor, in whole or in part, and all Copyright Rights with respect thereto and all Copyright Registrations therefor, heretofore or hereafter granted or applied for, and all renewals and extensions thereof, throughout the world, including all proceeds thereof (such as, by way of example and not by limitation, license royalties and proceeds of infringement suits), the right to renew and extend such Copyright Registrations and Copyright Rights and to register works protectable by copyright and the right to sue for past, present and future infringements of the Copyrights and Copyright Rights;
(h) all information used or useful or arising from the business including all goodwill, trade secrets, trade secret rights, know-how, customer lists, processes of production, ideas, confidential business information, techniques, processes, formulas, and all other proprietary information;
(i) all licenses, contracts and agreements, as each such license, contract and agreement may be amended, restated, supplemented or otherwise modified from time to time (said agreements, as so amended, restated, supplemented or otherwise modified, being referred to herein individually as an "ASSIGNED AGREEMENT" and collectively as the "ASSIGNED AGREEMENTS"), including, without limitation, (i) all rights of such Grantor to receive moneys due or to become due under or pursuant to the Assigned Agreements, (ii) all rights of such Grantor to receive proceeds of any insurance, indemnity, warranty or guaranty with respect to the Assigned Agreements, (iii) all claims of such Grantor for damages arising out of any breach of or default under the Assigned Agreements,
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and (iv) all rights of such Grantor to terminate, amend, supplement, modify or exercise rights or options under the Assigned Agreements, to perform thereunder and to compel performance and otherwise exercise all remedies thereunder;
(j) to the extent not included in any other paragraph of this
Section 1, each Grantor's commercial tort claims (as defined under Article 9 of
the UCC), potential claims, causes of action and potential causes of action,
including, but not limited to, those listed on Schedule 1(j) (collectively, the
"COMMERCIAL TORT CLAIMS"), and all general intangibles (including, without
limitation, tax refunds, payment intangibles, other rights to payment or
performance, choses in action, software and judgments taken on any rights or
claims included in the Collateral);
(k) all plant fixtures, business fixtures and other fixtures, and storage and office facilities, and all accessions thereto and products thereof;
(l) all books, records, ledger cards, files, correspondence, computer programs, tapes, disks and related data processing software that at any time evidence or contain information relating to any of the Collateral or are otherwise necessary or helpful in the collection thereof or realization thereupon; and
(m) all proceeds, products, rents and profits of or from any and all of the foregoing Collateral and, to the extent not otherwise included, all payments under insurance related to the Collateral (whether or not Collateral Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral. For purposes of this Agreement, the term "PROCEEDS" includes whatever is receivable or received when Collateral or proceeds are sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary.
Notwithstanding anything herein to the contrary, in no event shall the Collateral include, and no Grantor shall be deemed to have granted a security interest in (i) any of such Grantor's rights or interests in any license, contract or agreement to which such Grantor is a party or any of its rights or interests thereunder, to the extent, but only to the extent, that such a grant would, under the terms of such license, contract or agreement or otherwise, result in a breach of the terms of, or constitute a default under the provisions of any license, contract or agreement to which such Grantor is a party on the date hereof (other than to the extent that any such provision would be rendered ineffective pursuant to the UCC or any other applicable law (including the Bankruptcy Code) or principles of equity); provided, that immediately upon the ineffectiveness, lapse or termination of any such provision, the Collateral shall include, and such Grantor shall be deemed to have granted a security interest to Collateral Agent in, all such rights and interests as if such provision had never been in effect; provided, further that if the assignment of proceeds of such license, contract or agreement would not result in a breach of the terms of, or constitute a default under the provisions of such license, contract or agreement, such proceeds shall be included in the Collateral, or (ii) any real property leasehold, unless a Grantor has executed a leasehold mortgage or leasehold deed of trust covering such real property leasehold.
Each item of Collateral listed in this Section 1 that is defined in Articles 8 or 9 of the UCC shall also include the meanings set forth in the UCC, it being the intention of the Grantors that the description of the Collateral set forth above be construed to include the broadest possible range of assets.
SECTION 2. SECURITY FOR OBLIGATIONS.
This Agreement secures, and the Collateral assigned by each Grantor is collateral security for, the Secured Obligations.
SECTION 3. GRANTORS REMAIN LIABLE.
Anything contained herein to the contrary notwithstanding, (a) each Grantor shall remain liable under any contracts, licenses and agreements included in the Collateral, to the extent set forth therein, to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by Collateral Agent of any of its rights hereunder shall not release any Grantor from any of its duties or obligations under the contracts, licenses and agreements included in the Collateral, and (c) Collateral Agent shall not
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have any obligation or liability under any contracts, licenses, and agreements included in the Collateral by reason of this Agreement, nor shall Collateral Agent be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.
SECTION 4. REPRESENTATIONS AND WARRANTIES.
Each Grantor represents and warrants as follows:
(a) OWNERSHIP OF COLLATERAL. Except as expressly permitted by the Credit Documents, such Grantor owns the Collateral owned by such Grantor free and clear of any Lien. Except as expressly permitted by the Credit Documents and such as may have been filed in favor of Collateral Agent in connection with this Agreement, no effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any filing or recording office.
(b) LOCATIONS OF EQUIPMENT AND INVENTORY. All of the Equipment
and Inventory having a value in excess of $500,000 is, as of the date hereof,
located at the places specified in Schedule 4(b), except for Equipment that is
temporarily moved from places specified in Schedule 4(b) to undergo repair or
Inventory which, in the ordinary course of business, is in transit either (i)
from a supplier to a Grantor, (ii) between the locations specified in Schedule
4(b), or (iii) to customers of a Grantor.
(c) NEGOTIABLE DOCUMENTS OF TITLE. Except as set forth on Schedule 4(c), no Negotiable Documents of Title are outstanding with respect to any of the Inventory with a value in excess of $50,000.
(d) OFFICE LOCATIONS; TYPE AND JURISDICTION OF ORGANIZATION. The chief place of business, the chief executive office and the office where such Grantor keeps its records regarding the Accounts and all originals of all chattel paper that evidence Accounts are, as of the date hereof, and, except as described on Schedule 4(d), have been for the four-month period preceding the date hereof, located at the locations described on Schedule 4(d); such Grantor's type (i.e., corporation, limited partnership, etc.) and jurisdiction of organization are listed on Schedule 4(d); and no Grantor is an unregistered entity.
(e) NAMES. No Grantor (or predecessor by merger or otherwise of such Grantor) has, within the four-month period preceding the date hereof, had a different name from the name of such Grantor listed on the signature pages hereof, except the names listed in Schedule 4(e) annexed hereto.
(f) DELIVERY OF CERTAIN COLLATERAL. All certificates or instruments (excluding checks) evidencing, comprising or representing the Collateral (including, without limitation, the Securities Collateral) have been or, when required pursuant to this Agreement will be, delivered to Collateral Agent duly endorsed or accompanied by duly executed instruments of transfer or assignment in blank.
(g) SECURITIES COLLATERAL. (i) All of the Pledged Shares described on Schedule 1(e)(i) have been duly authorized and validly issued in compliance with all applicable federal and state securities laws and, in the case of capital stock, are fully paid and non-assessable; (ii) all of the Pledged Debt issued by Company or any of its Subsidiaries has been duly authorized, authenticated or issued, and delivered and is the legal, valid and binding obligation of the issuers thereof and is not in default; (iii) except as described more fully on Schedule 1(e)(i), the Pledged Shares constitute all of the issued and outstanding shares of stock or other equity interests of each issuer thereof (subject to the proviso to Section 1(e)(iii) with respect to shares of a Foreign Subsidiary), and there are no outstanding warrants, options or other rights to purchase, or other agreements outstanding with respect to, or property that is now or hereafter convertible into, or that requires the issuance or sale of, any Pledged Shares, except pursuant to any Contractual Obligation set forth on Schedule 4(g); (iv) the Pledged Debt issued by Company or any of its Subsidiaries constitutes all of the issued and outstanding intercompany indebtedness evidenced by a promissory note; and (v) Schedule 1(e)(i) sets forth all of the Pledged Shares owned by each Grantor on the date hereof.
(h) INTELLECTUAL PROPERTY COLLATERAL.
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(i) a true and complete list of all Trademark Registrations and Trademark applications owned, held (whether pursuant to a license or otherwise) or used by such Grantor, in whole or in part, is set forth in Schedule 1(g)(i);
(ii) a true and complete list of all Patents owned, held (whether pursuant to a license or otherwise) or used by such Grantor, in whole or in part, is set forth in Schedule 1(g)(ii);
(iii) a true and complete list of all Copyright
Registrations and applications for Copyright Registrations
held (whether pursuant to a license or otherwise) by such
Grantor, in whole or in part, is set forth in Schedule
1(g)(iii);
(iv) after reasonable inquiry, such Grantor is not aware of any pending or threatened claim by any third party that any of the Intellectual Property Collateral owned, held or used by such Grantor is invalid or unenforceable; and
(v) except as expressly permitted by each Credit Document, no effective security interest or other Lien covering all or any part of the Intellectual Property Collateral is on file in the United States Patent and Trademark Office or the United States Copyright Office.
(i) PERFECTION. The security interest in the Collateral is
granted to Collateral Agent on the basis described in Section 2 hereof and
constitutes a valid security interest (except for the security interest
purported to be granted in commercial tort claims other than those listed on
Schedule 1(j)), to the extent the UCC or United States patent, trademark or
copyright statutes are applicable thereto, securing the payment of the
applicable Secured Obligations. Upon (i) the filing of UCC financing statements
naming each Grantor as "debtor," naming Collateral Agent as "secured party" and
describing the Collateral in the filing office with respect to such Grantor set
forth on Schedule 4(i), (ii) in the case of the Securities Collateral consisting
of certificated securities or evidenced by instruments, delivery of the
certificates representing such certificated securities and delivery of such
instruments to Collateral Agent, in each case duly endorsed or accompanied by
duly executed instruments of assignment or transfer in blank, and (iii) in the
case of the Intellectual Property Collateral listed on Schedules 1g(i), (ii) and
(iii) hereto, excluding the Intellectual Property held under foreign law, in
addition to the filing of such UCC financing statements, the filing of a Grant
of Trademark Security Interest, substantially in the form of Exhibit I, and a
Grant of Patent Security Interest, substantially in the form of Exhibit II, with
the United States Patent and Trademark Office and the filing of a Grant of
Copyright Security Interest, substantially in the form of Exhibit III, with the
United States Copyright Office (each such Grant of Trademark Security Interest,
Grant of Patent Security Interest and Grant of Copyright Security Interest being
referred to herein as a "GRANT"), the security interest in the Collateral
referred to in the immediately preceding sentence in each case will constitute a
perfected security interest therein (except for the security interest purported
to be granted in commercial tort claims other than those listed on Schedule
1(j)), to the extent the UCC or United States patent, trademark or copyright
statutes are applicable thereto, prior to all other Liens (except for Liens
otherwise permitted under any Credit Document to the extent such Liens are
permitted to be senior in priority to the Liens in favor of the Collateral
Agent, the Cash Management Bank, the Revolver Agent and the Revolver Lenders,
the Term Loan Agents and the Term Loan Lenders, as the case may be), and all
filings and other actions in the United States necessary or desirable to perfect
and protect such security interest have been duly made or taken. In the case of
Intellectual Property held under foreign law, after the occurrence of an Event
of Default, all actions necessary or desirable to perfect and protect such
security interest shall be taken.
(j) COMMERCIAL TORT CLAIMS. Schedule 1(j) identifies with specificity each claim or cause of action that any Grantor may have, which arises in tort, for which a related action, suit, proceeding (whether administrative, judicial or otherwise), governmental investigation or arbitration ("PROCEEDING") has been initiated by any Person.
(k) ROLLING STOCK. The rolling stock of the Grantors (collectively) as of the date hereof has an aggregate book value of less than $500,000.00.
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SECTION 5. FURTHER ASSURANCES.
(a) GENERALLY. Each Grantor agrees that from time to time, at
the expense of Grantors, such Grantor will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, or that Collateral Agent may reasonably request, in
order to perfect and protect the security interest granted or purported to be
granted hereby under the UCC or United States patent, trademark or copyright
statutes or to enable Collateral Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, each Grantor will: (i) at the request of Collateral
Agent, upon the occurrence and continuation of an Event of Default, mark
conspicuously each item of chattel paper included in the Accounts, each Related
Contract and, at the request of Collateral Agent, each of its records pertaining
to the Collateral, with a legend, in form and substance satisfactory to
Collateral Agent, indicating that such Collateral is subject to the security
interests granted hereby, (ii) at the request of Collateral Agent, upon the
occurrence and continuation of an Event of Default, deliver and pledge to
Collateral Agent hereunder all instruments (including checks) and all original
counterparts of chattel paper constituting Collateral, duly endorsed and
accompanied by duly executed instruments of transfer or assignment, all in form
and substance satisfactory to Collateral Agent, (iii) execute and file such
financing or continuation statements, or amendments thereto, and execute and
deliver such agreements establishing that Collateral Agent has control of
specified items of Collateral and such other instruments or notices, as may be
necessary, or as Collateral Agent may reasonably request, in order to perfect
and preserve the security interests granted or purported to be granted hereby
under the UCC or United States patent, trademark or copyright statutes, (iv)
furnish to Collateral Agent from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as Collateral Agent may reasonably request, all in
reasonable detail, (v) upon the reasonable request of Collateral Agent, execute
and file with the registrar of motor vehicles or other appropriate authority in
such jurisdiction an application or other document requesting the notation or
other indication of the security interest created hereunder on such certificate
of title or any item of Equipment that is covered by a certificate of title
under a statute of any jurisdiction under the law of which indication of a
security interest on such certificate is required as a condition of perfection
thereof, (vi) at any time during normal business hours, upon reasonable request
by Collateral Agent, exhibit the Collateral in its existing location to, and
allow inspection of the Collateral by, Collateral Agent, or persons designated
by Collateral Agent, (vii) at Collateral Agent's request, appear in and defend
any action or proceeding that may affect such Grantor's title to, or Collateral
Agent's security interest in all or any material part of, the Collateral, except
for Intellectual Property Collateral; provided, however, that the foregoing
exception for Intellectual Property Collateral shall not apply if such
Intellectual Property is of material value as determined by Collateral Agent in
its sole and absolute discretion; (viii) use commercially reasonable efforts to
obtain any necessary consents of third parties to the assignment and perfection
of a security interest to Collateral Agent with respect to any Collateral, and
(ix) at Collateral Agent's reasonable request, Grantors shall promptly deliver,
execute and file any and all documents, instruments and certificates that
Collateral Agent deems necessary or desirable, and in each case in form and
substance satisfactory to Collateral Agent. Notwithstanding the foregoing
sentence, no Grantor shall be required to amend or otherwise modify the
description of the Collateral to provide a description of any claim or cause of
action which arises in tort unless and until a Proceeding relating to such claim
or cause of action has been initiated by any Person. Each Grantor hereby
authorizes Collateral Agent to file one or more financing or continuation
statements, and amendments thereto, relative to all or any part of the
Collateral without the signature of any Grantor. Each Grantor agrees that a
carbon, photographic or other reproduction of this Agreement or of a financing
statement signed or authenticated by such Grantor shall be sufficient
authorization to file a financing statement and may be filed as a financing
statement in any and all jurisdictions.
(b) SECURITIES COLLATERAL. Without limiting the generality of the foregoing Section 5(a), each Grantor agrees that it will, upon obtaining any additional shares of stock or other equity or debt securities required to be pledged hereunder, immediately (and in any event within five (5) Business Days) deliver to Collateral Agent a Pledge Supplement, duly executed by such Grantor, in substantially the form of Exhibit IV (a "PLEDGE SUPPLEMENT"), in respect of the additional Pledged Shares or Pledged Debt (to the extent issued by Company or any of its Subsidiaries) to be pledged pursuant to this Agreement. Upon each delivery of a Pledge Supplement to Collateral Agent, the representations and warranties contained in clauses (i)-(iv) of Section 4(g) hereof shall be deemed to have been made by such Grantor as to the Securities Collateral described in such Pledge Supplement as of the date thereof. Each Grantor hereby authorizes Collateral Agent to attach each Pledge Supplement to this Agreement and agrees that all Pledged Shares or Pledged Debt of such Grantor listed on any Pledge Supplement shall for all purposes hereunder be considered Collateral of such Grantor; provided that the failure of any Grantor to
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execute a Pledge Supplement with respect to any additional Pledged Shares or Pledged Debt pledged pursuant to this Agreement shall not impair the security interest of Collateral Agent therein or otherwise adversely affect the rights and remedies of Collateral Agent hereunder with respect thereto.
(c) INTELLECTUAL PROPERTY COLLATERAL. Without limiting the
generality of the foregoing Section 5(a), each Grantor shall execute and deliver
to Collateral Agent contemporaneous with its execution and delivery of this
Agreement (i) with respect to all of such Grantor's Trademark Collateral, a
Grant of Trademark Security Interest, substantially in the form of Exhibit I,
(ii) with respect to all of such Grantor's Patent Collateral, a Grant of Patent
Security Interest, substantially in the form of Exhibit II, and (iii) with
respect to all of such Grantor's Copyright Collateral, a Grant of Copyright
Security Interest, substantially in the form of Exhibit III. In addition, if any
Grantor shall hereafter obtain rights to any new Intellectual Property
Collateral or become entitled to the benefit of (i) any patent application or
patent or any reissue, division, continuation, renewal, extension or
continuation-in-part of any Patent or any improvement of any Patent or (ii) any
material Copyright Registration, application for Copyright Registration or
renewals or extension of any material Copyright, then in any such case, the
provisions of this Agreement shall automatically apply thereto. Each Grantor
shall promptly notify Collateral Agent in writing of any of the foregoing rights
acquired by such Grantor after the date hereof and of (i) any Trademark
Registrations issued or application for a Trademark Registration or application
for a Patent made, and (ii) any Copyright Registrations issued or applications
for Copyright Registration made, in any such case, after the date hereof.
Promptly after the filing of an application for any material (1) Trademark
Registration; (2) Patent; or (3) Copyright Registration, each Grantor shall
execute and deliver to Collateral Agent and record in all places where a Grant
is recorded an IP Supplement, substantially in the form of Exhibit V (an "IP
SUPPLEMENT"), pursuant to which such Grantor shall grant to Collateral Agent a
security interest to the extent of its interest in such Intellectual Property
Collateral; provided, if, in the reasonable judgment of such Grantor, after due
inquiry, granting such interest would result in the grant of a Trademark
Registration or Copyright Registration in the name of Collateral Agent, such
Grantor shall give written notice to Collateral Agent as soon as reasonably
practicable and the filing shall instead be undertaken as soon as practicable
but in no case later than immediately following the grant of the applicable
Trademark Registration or Copyright Registration, as the case may be. Upon
delivery to Collateral Agent of an IP Supplement, Schedules 1(g)(i), 1(g)(ii),
and 1(g)(iii) hereto and Schedule A to each Grant, as applicable, shall be
deemed modified to include reference to any right, title or interest in any
existing Intellectual Property Collateral or any Intellectual Property
Collateral included on Schedule A to such IP Supplement. Each Grantor hereby
authorizes Collateral Agent to modify this Agreement without the signature or
consent of any Grantor by attaching Schedules 1(g)(i), 1(g)(ii), and 1(g)(iii),
as applicable, that have been modified to include such Intellectual Property
Collateral or to delete any reference to any right, title or interest in any
Intellectual Property Collateral in which any Grantor no longer has or claims
any right, title or interest; provided, the failure of any Grantor to execute an
IP Supplement with respect to any additional Intellectual Property Collateral
pledged pursuant to this Agreement shall not impair the security interests of
Collateral Agent therein or otherwise adversely affect the rights and remedies
of Collateral Agent hereunder with respect thereto.
SECTION 6. CERTAIN COVENANTS OF GRANTORS.
Each Grantor shall:
(a) not use or permit any material Collateral under its control to be used unlawfully or in violation of any provision of this Agreement or any applicable statute, regulation or ordinance or any policy of insurance covering the Collateral;
(b) notify Collateral Agent of any change in such Grantor's name, identity or corporate structure within 15 days of such change;
(c) give Collateral Agent 30 days' prior written notice of (i) any change in such Grantor's chief place of business, chief executive office or offices where such Grantor keeps its records regarding the Accounts and all originals of all chattel paper that evidence Accounts or (ii) reincorporation, reorganization or other action that results in a change of the jurisdiction of organization, incorporation, formation or "location" of such Grantor under the UCC;
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(d) if Collateral Agent gives value to enable such Grantor to acquire rights in or the use of any Collateral, use such value for such purposes;
(e) except as expressly permitted by each Credit Document, pay
promptly when due all property and other taxes, assessments and governmental
charges or levies imposed upon, and all claims (including claims for labor,
services, materials and supplies) against, the Collateral; provided that no such
tax, assessment, charge, levy or claim need be paid if it is being contested in
good faith by appropriate proceedings promptly instituted and diligently
conducted, so long as (i) such reserve or other appropriate provision, if any,
as shall be required in conformity with GAAP shall have been made therefor and
(ii) in the case of a tax, assessment, charge, levy or claim which has or may
become a Lien against any of the Collateral, such proceedings conclusively
operate to stay the sale of any portion of the Collateral to satisfy such charge
or claim; provided however, that notwithstanding the foregoing proviso, such
Grantor shall in any event pay such taxes, assessments, charges, levies or
claims not later than five days prior to the date of any proposed sale under any
judgment, writ or warrant of attachment entered or filed against such Grantor or
any of the Collateral as a result of the failure to make such payment; and
(f) after the date hereof, give Collateral Agent prompt notice with sufficient particularity of any claim or cause of action of any Grantor arising in tort and not otherwise identified on Schedule 1(j) relating to a Proceeding that has been initiated by any Person.
SECTION 7. SPECIAL COVENANTS WITH RESPECT TO EQUIPMENT AND INVENTORY.
Each Grantor shall:
(a) keep the items of Equipment and Inventory owned by such Grantor having a value in excess of $500,000 at its main place of business or the places therefor specified on Schedule 4(b) or, upon 30 days' prior written notice to Collateral Agent, at such other places in jurisdictions where all action that may be necessary or desirable, or that Collateral Agent may reasonably request, in order to perfect and protect the security interest granted or purported to be granted hereby, or to enable Collateral Agent to exercise and enforce its rights and remedies hereunder, with respect to such Equipment and Inventory shall have been taken;
(b) promptly furnish to Collateral Agent a statement respecting any material loss or damage to any of the material Equipment owned by such Grantor;
(c) keep correct and accurate records of Inventory owned by such Grantor, in accordance with such Grantor's customary practices;
(d) if any Inventory is in possession or control of any of such Grantor's agents or processors, if the aggregate book value of all such Inventory exceeds $250,000, and in any event upon the occurrence of an Event of Default, instruct such agent or processor to hold all such Inventory for the account of Collateral Agent and subject to the instructions of Collateral Agent;
(e) after an Event of Default has occurred and is continuing, promptly upon the issuance and delivery to such Grantor of any Negotiable Document of Title, deliver such Negotiable Document of Title to Collateral Agent; and
(f) at its own expense, maintain insurance with respect to the Equipment and Inventory in accordance with the terms of the Credit Documents.
SECTION 8. SPECIAL COVENANTS WITH RESPECT TO ACCOUNTS AND RELATED CONTRACTS.
(a) Each Grantor shall keep its chief place of business and chief executive office and the office where it keeps its records concerning the Accounts and Related Contracts, and all originals of all chattel paper in such Grantor's possession that evidence Accounts, at the locations therefor set forth on Schedule 4(d) or upon 30 days' prior written notice to Collateral Agent, at such other location in a jurisdiction where all action that may be necessary, or that Collateral Agent may reasonably request, in order to perfect and protect the security interest
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granted or purported to be granted hereby, or to enable Collateral Agent to exercise and enforce its rights and remedies hereunder, with respect to such Accounts and Related Contracts shall have been taken. Each Grantor will hold and preserve such records and chattel paper and will permit representatives of Collateral Agent, upon reasonable notice during normal business hours, to inspect and make abstracts from such records and chattel paper, and each Grantor agrees to render to Collateral Agent, at Grantor's cost and expense, such clerical and other assistance as may be reasonably requested with regard thereto. Promptly upon the reasonable request of Collateral Agent, each Grantor shall deliver to Collateral Agent complete and correct copies of each Related Contract.
(b) Each Grantor shall maintain (i) complete records of each Account, in accordance with its customary business practices, including records of all payments received, credits granted and merchandise returned, and (ii) all documentation relating thereto.
(c) Except as otherwise provided in this subsection (c), each Grantor shall continue to collect, at its own expense, all amounts due or to become due to such Grantor under the Accounts and Related Contracts. In connection with such collections, each Grantor may take (and, upon the occurrence and during the continuance of an Event of Default at Collateral Agent's direction, shall take) such action as such Grantor or Collateral Agent may deem necessary or advisable to enforce collection of amounts due or to become due under the Accounts; provided, however, that Collateral Agent shall have the right at any time, upon the occurrence and during the continuation of an Event of Default and upon written notice to such Grantor of its intention to do so, to notify the account debtors or obligors under any Accounts of the assignment of such Accounts to Collateral Agent and, to the extent such Grantor is not legally or contractually prohibited from doing so and such contractual prohibitions are enforceable under applicable law, to direct such account debtors or obligors to make payment of all amounts due or to become due to such Grantor thereunder directly to Collateral Agent, to notify each Person maintaining a lockbox or similar arrangement to which account debtors or obligors under any Accounts have been directed to make payment to remit all amounts representing collections on checks and other payment items from time to time sent to or deposited in such lockbox or other arrangement directly to Collateral Agent and, upon such notification and at the expense of Grantors, to enforce collection of any such Accounts and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Grantor might have done. After receipt by such Grantor of the notice from Collateral Agent referred to in the proviso to the preceding sentence, (i) all amounts and proceeds (including checks and other instruments) received by such Grantor in respect of the Accounts and the Related Contracts shall be received in trust for the benefit of Collateral Agent hereunder, shall be segregated from other funds of such Grantor and shall be forthwith paid over or delivered to Collateral Agent in the same form as so received (with any necessary endorsement) to be held as cash Collateral and applied as provided by Section 20 hereof, and (ii) such Grantor shall not adjust, settle or compromise the amount or payment of any Account, or release wholly or partly any account debtor or obligor thereof, or allow any credit or discount thereon.
SECTION 9. SPECIAL COVENANTS WITH RESPECT TO THE SECURITIES COLLATERAL.
(a) DELIVERY. Each Grantor agrees that all certificates or instruments representing or evidencing the Securities Collateral shall be delivered to and held by or on behalf of Collateral Agent pursuant hereto and shall be in suitable form for transfer by delivery or, as applicable, shall be accompanied by such Grantor's endorsement, where necessary, or duly executed instruments of transfer or assignment in blank, all in form and substance reasonably satisfactory to Collateral Agent. Collateral Agent shall have the right at any time to exchange certificates or instruments representing or evidencing such Securities Collateral for certificates or instruments of smaller or larger denominations. Nothing in this Section 9(a) shall apply to Pledged Shares held by a Grantor in a Person in whom Borrowers in the aggregate hold less than 10% (whether in voting power or economic value or both) of the shares of stock or other equity interests.
(b) COVENANTS. Each Grantor shall (i) not, except as expressly permitted by each of the Credit Documents, permit any issuer of Pledged Shares that is a Subsidiary or an Affiliate of any Grantor to merge or consolidate unless all the outstanding capital stock or other equity interests of the surviving or resulting Person is, upon such merger or consolidation, pledged hereunder and no cash, securities or other property is distributed in respect of the outstanding shares of any other constituent corporation; provided, if the surviving or resulting Person upon any such merger or consolidation involving an issuer of Pledged Shares which is a Foreign Subsidiary is a Foreign Subsidiary then such Grantor shall only be required to pledge outstanding capital stock of such surviving or resulting Person possessing up to but not exceeding 65% of the voting power of all classes of capital stock or other
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equity interests of such issuer entitled to vote; (ii) to the extent legally
able to do so, cause each issuer of Pledged Shares that is controlled by such
Grantor not to issue any stock, other equity interests or other securities in
addition to or in substitution for the Pledged Shares issued by such issuer,
except to such Grantor or unless such stock, equity interests or securities
received by the Grantor are pledged hereunder; (iii) pledge hereunder, and
deliver to Collateral Agent as soon as practicable (but in no event later than
three Business Days) upon its acquisition (directly or indirectly) thereof, any
and all additional shares of stock, other equity interests or other securities
of each issuer of Pledged Shares; (iv) pledge hereunder, and deliver to
Collateral Agent as soon as practicable (but in no event later than three
Business Days) upon its acquisition (directly or indirectly) thereof, any and
all shares of stock or other equity interests of any Person that, after the date
of this Agreement, becomes, as a result of any occurrence, a direct Subsidiary
of such Grantor; provided that, notwithstanding anything contained in this
clause (iv) to the contrary, such Grantor shall only be required to pledge the
outstanding capital stock or other equity interests of a Foreign Subsidiary up
to but not exceeding 65% of the voting power of all classes of capital stock or
other equity interests of such Foreign Subsidiary entitled to vote; (v) pledge
hereunder, as soon as practicable (but in no event later than five Business
Days) upon their issuance, any and all instruments or other evidences of
additional indebtedness from time to time owed to such Grantor by any obligor on
the Pledged Debt (to the extent issued by Company or any of its Subsidiaries);
(vi) pledge hereunder, as soon as practicable (but in no event later than five
Business Days) upon their issuance, any and all instruments or other evidences
of indebtedness from time to time owed to such Grantor by any Person that after
the date of this Agreement becomes, as a result of any occurrence, a direct or
indirect Subsidiary of such Grantor; and (vii) at the request of Collateral
Agent, promptly execute and deliver to Collateral Agent an agreement providing
for the control, as that term is defined in the UCC, by Collateral Agent of all
securities entitlements and securities accounts of such Grantor; provided,
however, that nothing in this Section 9(b) shall be construed as a waiver of the
prohibitions and restrictions on the Grantors with respect to investments as set
forth in any applicable Credit Document.
(c) VOTING AND DISTRIBUTIONS. So long as no Event of Default shall have occurred and be continuing, (i) each Grantor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Securities Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement, the Revolver Credit Agreement, or the Term Loan Agreement; provided, no Grantor shall exercise or refrain from exercising any such right if Collateral Agent shall have notified such Grantor that, in Collateral Agent's judgment, such action would have a material adverse effect on the value of the Securities Collateral or any part thereof; and provided further, such Grantor shall give Collateral Agent at least five Business Days' prior written notice of the manner in which it intends to exercise, or the reasons for refraining from exercising, any such right if exercising, or refraining from exercising, such right would reasonably be expected to have a material adverse effect on the value of the Securities Collateral or any part thereof (it being understood, however, that neither (among other things) (A) the voting by such Grantor of any Pledged Shares for or such Grantor's consent to the election of directors or other members of a governing body of an issuer of Pledged Shares at a regularly scheduled annual or other meeting of stockholders or holders of equity interests or with respect to incidental matters at any such meeting, nor (B) such Grantor's consent to or approval of any action otherwise permitted under this Agreement, the Revolver Credit Agreement or the Term Loan Agreement shall be deemed inconsistent with the terms of this Agreement, the Revolver Credit Agreement or the Term Loan Agreement, respectively, within the meaning of this Section 9(c), and no notice of any such voting or consent need be given to Collateral Agent) and (ii) each Grantor shall be entitled to receive and retain, and to utilize any and all dividends, other distributions and interest paid in respect of the Securities Collateral to the extent permitted under the Credit Documents; provided, that except as otherwise provided in the Credit Documents, any and all (A) dividends, distributions and interest paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Securities Collateral, (B) dividends and other distributions paid or payable in cash in respect of any Securities Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus, and (C) cash paid, payable or otherwise distributed in respect of principal or in redemption of or in exchange for any Securities Collateral, shall be, and shall forthwith be delivered to Collateral Agent to hold as, Securities Collateral and shall, if received by such Grantor, be received in trust for the benefit of Collateral Agent, be segregated from the other property or funds of such Grantor and be forthwith delivered to Collateral Agent as Securities Collateral in the same form as so received (with all necessary endorsements).
Upon the occurrence and during the continuation of an Event of Default, (x) all rights of such Grantor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant
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hereto shall cease, and all such rights shall thereupon become vested in Collateral Agent who shall thereupon have the sole right to exercise such voting and other consensual rights; (y) all rights of such Grantor to receive the dividends, other distributions and interest payments which it would otherwise be authorized to receive and retain pursuant hereto shall cease, and all such rights shall thereupon become vested in Collateral Agent who shall thereupon have the sole right to receive and hold as Securities Collateral such dividends, other distributions and interest payments; and (z) all dividends, principal, interest payments and other distributions which are received by such Grantor contrary to the provisions of clause (ii) of the immediately preceding paragraph or clause (y) above shall be received in trust for the benefit of Collateral Agent, shall be segregated from other funds of such Grantor and shall forthwith be paid over to Collateral Agent as Securities Collateral in the same form as so received (with any necessary endorsements).
(d) IRREVOCABLE PROXY. In order to permit Collateral Agent to
exercise the voting and other consensual rights which it may be entitled to
exercise pursuant hereto and to receive all dividends, principal or interest
payments and other distributions which it may be entitled to receive hereunder,
(I) each Grantor shall promptly execute and deliver (or cause to be executed and
delivered) to Collateral Agent all such proxies, dividend payment orders and
other instruments as Collateral Agent may from time to time request, and (II)
without limiting the effect of clause (I) above, each Grantor hereby grants to
Collateral Agent an IRREVOCABLE PROXY to vote the Pledged Shares and to exercise
all other rights, powers, privileges and remedies to which a holder of the
Pledged Shares would be entitled (including giving or withholding written
consents of shareholders or other holders of equity interests, calling special
meetings of shareholders or other holders of equity interests and voting at such
meetings), which proxy shall be effective, automatically and without the
necessity of any action (including any transfer of any Pledged Shares on the
record books of the issuer thereof) by any other Person (including the issuer of
the Pledged Shares or any officer or agent thereof), upon the occurrence and
during the continuance of an Event of Default and which proxy shall only
terminate upon the Payment in Full of all Secured Obligations.
SECTION 10. SPECIAL COVENANTS WITH RESPECT TO THE INTELLECTUAL PROPERTY COLLATERAL.
(a) Each Grantor shall:
(i) use commercially reasonable efforts so as not to permit the inclusion in any contract to which it hereafter becomes a party of any provision that could or might in any way impair or prevent the creation of a security interest in, or the assignment of, such Grantor's rights and interests in any property that is material Intellectual Property Collateral acquired under such contracts; and
(ii) furnish to Collateral Agent from time to time at Collateral Agent's reasonable request statements and schedules further identifying and describing any material Intellectual Property Collateral and such other reports in connection with such Collateral, all in reasonable detail.
(b) Except as otherwise provided in this Section 10, each
Grantor shall continue to collect in accordance with its customary business
practice, at its own expense, all amounts due or to become due to such Grantor
in respect of the material Intellectual Property Collateral or any portion
thereof. In connection with such collections, each Grantor may take (and, after
the occurrence and during the continuance of any Event of Default at Collateral
Agent's reasonable direction, shall take) such action as such Grantor or
Collateral Agent may deem reasonably necessary or advisable to enforce
collection of such amounts; provided, Collateral Agent shall have the right (but
not the obligation) at any time, upon the occurrence and during the continuation
of an Event of Default, to notify the obligors with respect to any such amounts
of the existence of the security interests created hereby and to direct such
obligors to make payment of all such amounts directly to Collateral Agent, and,
upon such notification and at the expense of such Grantor, to enforce collection
of any such amounts and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as such Grantor might have
done. Upon the occurrence and during the continuation of any Event of Default,
(i) all amounts and proceeds (including checks and other instruments) received
by each Grantor in respect of amounts due to such Grantor in respect of the
Intellectual Property Collateral or any portion thereof shall be received in
trust for the benefit of Collateral Agent hereunder, shall be segregated from
other funds of such Grantor and shall be forthwith paid over or delivered to
Collateral Agent in the same form as so received (with any necessary
endorsement) to be held as cash Collateral and
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applied as provided by Section 20 herein, and (ii) such Grantor shall not adjust, settle or compromise the amount or payment of any such amount or release wholly or partly any obligor with respect thereto or allow any credit or discount thereon.
(c) Each Grantor shall give Collateral Agent 10 Business Days prior written notice of any abandonment of any material Intellectual Property Collateral (it being understood that no such notice needs to be given by such Grantor of the abandonment of non-material Intellectual Property) or any pending patent application or any Patent.
(d) Except as provided herein, each Grantor shall have the right to commence and prosecute in its own name, as real party in interest, for its own benefit and at its own expense, such suits, proceedings or other actions for infringement, unfair competition, dilution, misappropriation or other damage, or reexamination or reissue proceedings as are necessary to protect the Intellectual Property Collateral. Each Grantor shall promptly, following its becoming aware thereof, notify Collateral Agent of the institution of, or of any adverse determination in, any proceeding (whether in the United States Patent and Trademark Office, the United States Copyright Office or any federal, state, local or foreign court) regarding such Grantor's ownership, right to use, or interest in any material Intellectual Property Collateral. Each Grantor shall provide to Collateral Agent any information with respect thereto requested by Collateral Agent.
(e) In addition to, and not by way of limitation of, the granting of a security interest in the Collateral pursuant hereto, each Grantor, effective upon the occurrence and during the continuation of an Event of Default, hereby assigns, transfers and conveys to Collateral Agent the nonexclusive right and license to use all trademarks, tradenames, copyrights, patents or technical processes (including, without limitation, the Intellectual Property Collateral) owned or used by such Grantor that relate to the Collateral and any other collateral granted by such Grantor as security for the Secured Obligations, together with any goodwill associated therewith, all to the extent necessary to enable Collateral Agent to realize on the Collateral in accordance with this Agreement and to enable any transferee or assignee of the Collateral to enjoy the benefits of the Collateral. This right shall inure to the benefit of all successors, assigns and transferees of Collateral Agent and its successors, assigns and transferees, whether by voluntary conveyance, operation of law, assignment, transfer, foreclosure, deed in lieu of foreclosure or otherwise. Such right and license shall be granted free of charge, without requirement that any monetary payment whatsoever be made to such Grantor.
SECTION 11. SPECIAL PROVISIONS WITH RESPECT TO THE ASSIGNED AGREEMENTS.
(a) Each Grantor shall at its expense:
(i) if consistent with sound business practices, perform and observe all terms and provisions of the Assigned Agreements to be performed or observed by it, maintain the Assigned Agreements in full force and effect, enforce the Assigned Agreements in accordance with such Grantor's customary business practice; and
(ii) after the occurrence and during the continuation of an Event of Default and upon the request of Collateral Agent, furnish to Collateral Agent, promptly upon receipt thereof, copies of all notices, requests and other material documents received by such Grantor under or pursuant to the Assigned Agreements, and from time to time (A) furnish to Collateral Agent such information and reports regarding the Assigned Agreements as Collateral Agent may reasonably request and (B) upon request of Collateral Agent make to the parties to such Assigned Agreements such demands and requests for information and reports or for action as such Grantor is entitled to make under the Assigned Agreements.
(b) Upon the occurrence and during the continuance of an Event of Default, no Grantor shall:
(i) cancel or terminate any of the Assigned Agreements or consent to or accept any cancellation or termination thereof;
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(ii) amend or otherwise modify the Assigned Agreements or give any consent, waiver or approval thereunder;
(iii) waive any default under or breach of the Assigned Agreements;
(iv) consent to or permit or accept any prepayment of amounts to become due under or in connection with the Assigned Agreements, except as expressly provided therein; or
(v) take any other action in connection with the Assigned Agreements that could reasonably be expected to materially impair the value of the interest or rights of such Grantor thereunder or that could reasonably be expected to materially impair the interest or rights of Collateral Agent.
SECTION 12. [INTENTIONALLY OMITTED.]
SECTION 13. [INTENTIONALLY OMITTED.]
SECTION 14. SPECIAL PROVISIONS WITH RESPECT TO THE COLLATERAL ACCOUNTS.
Collateral Agent is hereby authorized to establish and maintain at its offices restricted deposit accounts and restricted securities accounts which shall be in the names of Grantors, jointly or each individually, and under the sole dominion and control of Collateral Agent. Each Grantor agrees that from time to time, at the expense of Grantors, such Grantor will promptly execute and deliver account control agreements in form and substance satisfactory to Collateral Agent and take all further action that may be necessary or desirable, or that Collateral Agent may reasonably request, in order to perfect and protect the security interest granted or purported to be granted hereby in such accounts or to enable Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any such accounts.
SECTION 15. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT.
Each Grantor hereby irrevocably appoints Collateral Agent as such Grantor's attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor, Collateral Agent or otherwise, from time to time in Collateral Agent's discretion to take any action and to execute any instrument that Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including without limitation:
(a) upon the occurrence and during the continuance of an Event of Default, to obtain and adjust insurance required to be maintained by such Grantor or paid to Collateral Agent pursuant to Section 7 hereof;
(b) upon the occurrence and during the continuance of an Event of Default, to ask for, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral;
(c) upon the occurrence and during the continuance of an Event of Default, to receive, endorse and collect any drafts or other instruments, documents and chattel paper in connection with clauses (a) and (b) above;
(d) upon the occurrence and during the continuance of an Event of Default, to file any claims or take any action or institute any proceedings that Collateral Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of Collateral Agent with respect to any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens permitted under this Agreement or each of the Credit Documents) levied or placed upon the Collateral, the legality or validity thereof and the amounts necessary to discharge the same to be determined by Collateral Agent in its sole discretion, any such payments made
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by Collateral Agent to become obligations of such Grantor to Collateral Agent, due and payable immediately without demand;
(f) upon the occurrence and during the continuance of an Event of Default, to sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications and notices in connection with Accounts and other documents relating to the Collateral; and
(g) upon the occurrence and during the continuance of an Event of Default, generally to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though Collateral Agent were the absolute owner thereof for all purposes, and to do, at Collateral Agent's option and Grantors' expense, at any time or from time to time, all acts and things that Collateral Agent reasonably deems necessary to protect, preserve or realize upon the Collateral and Collateral Agent's security interests therein in order to effect the intent of this Agreement, all as fully and effectively as such Grantor might do.
SECTION 16. COLLATERAL AGENT MAY PERFORM.
If any Grantor fails to perform any agreement contained herein, Collateral Agent may itself perform, or cause performance of (but shall not be obligated to perform or cause the performance of), such agreement, and the expenses of Collateral Agent incurred in connection therewith shall be payable by Grantors under Section 21(b) hereof.
SECTION 17. STANDARD OF CARE.
The powers conferred on Collateral Agent hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the exercise of reasonable care in the custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, Collateral Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of Collateral in its possession if such Collateral is accorded treatment substantially equal to that which Collateral Agent accords its own property.
SECTION 18. REMEDIES.
(a) GENERALLY. Subject to the terms of the Intercreditor Agreement, if any Event of Default shall have occurred and be continuing, Collateral Agent may exercise in respect of the Collateral, in addition to all other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the UCC (whether or not the UCC applies to the affected Collateral), and also may (i) require each Grantor to, and each Grantor hereby agrees that it will at its expense and upon request of Collateral Agent forthwith, assemble all or part of the Collateral as directed by Collateral Agent and make it available to Collateral Agent at a place to be designated by Collateral Agent that is reasonably convenient to both parties, (ii) enter onto the property where any Collateral is located and take possession thereof with or without judicial process, (iii) prior to the disposition of the Collateral, store, process, repair or recondition the Collateral or otherwise prepare the Collateral for disposition in any manner to the extent Collateral Agent reasonably deems appropriate, (iv) take possession of any Grantor's premises or place custodians in exclusive control thereof, remain on such premises and use the same and any of such Grantor's equipment for the purpose of completing any work in process, taking any actions described in the preceding clause (iii) and collecting any Secured Obligation, (v) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of Collateral Agent's offices or elsewhere, for cash, on credit or for future delivery, at such time or times and at such price or prices and upon such other terms as Collateral Agent may deem commercially reasonable, (vi) exercise dominion and control over and refuse to permit further withdrawals from any Deposit Account maintained with Collateral Agent or any Benefited Party and provide instructions directing the disposition of funds in Deposit Accounts not maintained with Collateral Agent or any Benefited Party and (vii) provide entitlement orders with respect to securities entitlements and other investment property constituting a part of the Collateral and with notice to the relevant Grantor, transfer to or register in the name of Collateral Agent or any of its nominees any or all of the Securities Collateral. Collateral Agent or any Benefited Party (subject to the terms of the Intercreditor Agreement)
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may be the purchaser of any or all of the Collateral at any such sale and Collateral Agent, as agent for and representative of the Benefited Parties (but not any Benefited Party in its individual capacity unless Requisite Obligees shall otherwise agree in writing), shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Secured Obligations as a credit on account of the purchase price for any Collateral payable by Collateral Agent at such sale. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. To the extent permitted by applicable law, each Grantor hereby waives any claims against Collateral Agent arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if Collateral Agent accepts the first offer received and does not offer such Collateral to more than one offeree. If the proceeds of any sale or other disposition of the Collateral are insufficient to pay all the Secured Obligations, Grantors shall be jointly and severally liable for the deficiency and the fees of any attorneys employed by Collateral Agent to collect such deficiency. Each Grantor further agrees that a breach of any of the covenants contained in this Section will cause irreparable injury to Collateral Agent, that Collateral Agent has no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against such Grantor, and each Grantor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no default has occurred giving rise to the Secured Obligations becoming due and payable prior to their stated maturities.
(b) SECURITIES COLLATERAL.
(i) Each Grantor recognizes that, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws, Collateral Agent may be compelled, with respect to any sale of all or any part of the Securities Collateral conducted without prior registration or qualification of such Securities Collateral under the Securities Act and/or such state securities laws, to limit purchasers to those who will agree, among other things, to acquire the Securities Collateral for their own account, for investment and not with a view to the distribution or resale thereof. Each Grantor acknowledges that any such private sales may be at prices and on terms less favorable than those obtainable through a public sale without such restrictions (including a public offering made pursuant to a registration statement under the Securities Act) and, notwithstanding such circumstances and the registration rights granted to Collateral Agent by such Grantor pursuant hereto and notwithstanding the provisions of Section 9-610(c) of the UCC, which each Grantor hereby waives to the extent permitted by applicable law, each Grantor agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that Collateral Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any Securities Collateral for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would, or should, agree to so register it. If Collateral Agent determines to exercise its right to sell any or all of the Securities Collateral, upon written request, each Grantor shall and shall cause each issuer of any Pledged Shares to be sold hereunder from time to time to furnish to Collateral Agent all such information as Collateral Agent may request in order to determine the number of shares and other instruments included in the Securities Collateral which may be sold by Collateral Agent in exempt transactions under the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder, as the same are from time to time in effect and to otherwise comply with the Securities Act and such rules and regulations in connection with such sale.
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(ii) If Collateral Agent shall determine to exercise its right to sell all or any of the Securities Collateral pursuant to this Section, each Grantor agrees that, upon request of Collateral Agent (which request may be made by Collateral Agent in its sole discretion), such Grantor will, at its own expense (A) execute and deliver, and cause each issuer of the Securities Collateral contemplated to be sold and the directors and officers thereof to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or, in the opinion of Collateral Agent, advisable to register such Securities Collateral under the provisions of the Securities Act and to cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be furnished, and to make all amendments and supplements thereto and to the related prospectus which, in the opinion of Collateral Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto; (B) use its best efforts to qualify the Securities Collateral under all applicable state securities or "Blue Sky" laws and to obtain all necessary governmental approvals for the sale of the Securities Collateral, as requested by Collateral Agent; (C) cause each such issuer to make available to its security holders, as soon as practicable, an earnings statement which will satisfy the provisions of Section 11(a) of the Securities Act; (D) do or cause to be done all such other acts and things as may be necessary to make such sale of the Securities Collateral or any part thereof valid and binding and in compliance with applicable law; and (E) bear all costs and expenses, including reasonable attorneys' fees, of carrying out its obligations under this Section.
(iii) Without limiting the generality of those
provisions of the Revolver Credit Agreement (or any successor
provisions thereto) and the Term Loan Agreement (or any
successor provisions thereto) that require one or more of the
Grantors to reimburse expenses of or indemnify the Collateral
Agent or any Benefited Party in the event of any public sale
described herein, each Grantor agrees to indemnify and hold
harmless Collateral Agent and the Benefited Parties and each
of their respective directors, officers, employees and agents
from and against any loss, fee, cost, expense, damage,
liability or claim, joint or several, to which any such
Persons may become subject or for which any of them may be
liable, under the Securities Act or otherwise, insofar as such
losses, fees, costs, expenses, damages, liabilities or claims
(or any litigation commenced or threatened in respect thereof)
arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any
preliminary prospectus, registration statement, prospectus or
other such document published or filed in connection with such
public sale, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and
will reimburse Collateral Agent and such other Persons for any
legal or other expenses reasonably incurred by Collateral
Agent and such other Persons in connection with any
litigation, of any nature whatsoever, commenced or threatened
in respect thereof (including any and all fees, costs and
expenses whatsoever reasonably incurred by Collateral Agent
and such other Persons and counsel for Collateral Agent and
such other Persons in investigating, preparing for, defending
against or providing evidence, producing documents or taking
any other action in respect of, any such commenced or
threatened litigation or any claims asserted). This indemnity
shall be in addition to any liability which any Grantor may
otherwise have and shall extend upon the same terms and
conditions to each Person, if any, that controls Collateral
Agent or such Persons within the meaning of the Securities
Act.
(c) REMEDIES WITH RESPECT TO BORROWERS. Furthermore, upon the occurrence and during the continuance of any Event of Default, Collateral Agent may revoke each Grantor's rights to use cash collateral in which Collateral Agent has an interest; provided that, any other provision of this Agreement or any other Credit Document to the contrary notwithstanding, with respect to the foregoing, Collateral Agent shall give each Loan Party five Business Days prior written notice (which notice shall be delivered by facsimile or overnight courier) of the exercise of its rights and remedies with respect to the Collateral. The enumeration of the foregoing rights and remedies is not intended to be exhaustive and the exercise of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative and not alternative. Each Grantor hereby waives (i) presentment, demand and protest and notice of presentment, dishonor, notice of intent to accelerate, notice of
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acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all commercial paper, accounts, contract rights, documents, instruments, chattel paper and guaranties or other property at any time held by Collateral Agent and any Benefited Party on which Loan Parties may in any way be liable and hereby ratify and confirm whatever Collateral Agent and the Benefited Parties may lawfully do in this regard, (ii) subject to the notice provisions of the preceding paragraph, all rights to notice and hearing prior to Collateral Agent's taking possession or control of, or to the reply of Collateral Agent or any Benefited Party, attachment or levy upon, the Collateral, or any bond or security which might be required by any court prior to allowing Collateral Agent or any Benefited Party to exercise any of their remedies, and (iii) the benefit of all valuation, appraisal and exemption laws. Each Grantor acknowledges they have been advised by counsel of their choice with respect to the effect of the foregoing waivers and this Agreement, the Credit Documents and the transactions evidenced by this Agreement and the Credit Documents.
SECTION 19. ADDITIONAL REMEDIES FOR INTELLECTUAL PROPERTY COLLATERAL.
(a) Anything contained herein to the contrary notwithstanding,
upon the occurrence and during the continuation of an Event of Default, (i)
Collateral Agent shall have the right (but not the obligation) to bring suit, in
the name of any Grantor, Collateral Agent or otherwise, to enforce any
Intellectual Property Collateral, in which event each Grantor shall, at the
request of Collateral Agent, do any and all lawful acts and execute any and all
documents required by Collateral Agent in aid of such enforcement and each
Grantor shall promptly, upon demand, reimburse and indemnify Collateral Agent as
provided in those provisions of the Revolver Credit Agreement (or any successor
provisions thereto) or the Term Loan Agreement (or any successor provisions
thereto) that require one or more of the Grantors to reimburse expenses of or
indemnify the Collateral Agent or the Benefited Parties and as provided in
Section 21 hereof, as applicable, in connection with the exercise of its rights
under this Section, and, to the extent that Collateral Agent shall elect not to
bring suit to enforce any Intellectual Property Collateral as provided in this
Section, each Grantor agrees to use all reasonable measures, whether by action,
suit, proceeding or otherwise, to prevent the infringement of any of the
Intellectual Property Collateral by others and for that purpose agrees to use
its commercially reasonable judgment in maintaining any action, suit or
proceeding against any Person so infringing reasonably necessary to prevent such
infringement; (ii) upon written demand from Collateral Agent, each Grantor shall
execute and deliver to Collateral Agent an assignment or assignments of the
Intellectual Property Collateral and such other documents as are necessary or
appropriate to carry out the intent and purposes of this Agreement; (iii) each
Grantor agrees that such an assignment and/or recording shall be applied to
reduce the Secured Obligations outstanding only to the extent that Collateral
Agent (or any Revolver Lender or Term Loan Lender, subject to the terms of the
Intercreditor Agreement) receives cash proceeds in respect of the sale of, or
other realization upon, the Intellectual Property Collateral; and (iv) within
five Business Days after written notice from Collateral Agent, each Grantor
shall make available to Collateral Agent, to the extent within such Grantor's
power and authority, such personnel in such Grantor's employ on the date of such
Event of Default as Collateral Agent may reasonably designate, by name, title or
job responsibility, to permit such Grantor to continue, directly or indirectly,
to produce, advertise and sell the products and services sold or delivered by
such Grantor under or in connection with the Trademarks, Trademark Registrations
and Trademark Rights, such persons to be available to perform their prior
functions on Collateral Agent's behalf and to be compensated by Collateral Agent
at such Grantor's expense on a per diem, pro-rata basis consistent with the
salary and benefit structure applicable to each as of the date of such Event of
Default.
(b) If (i) an Event of Default shall have occurred and, by reason of cure, waiver, modification, amendment or otherwise, no longer be continuing, (ii) no other Event of Default shall have occurred and be continuing, (iii) an assignment to Collateral Agent of any rights, title and interests in and to the Intellectual Property Collateral shall have been previously made, and (iv) the Secured Obligations shall not have become immediately due and payable, upon the written request of any Grantor, Collateral Agent shall promptly execute and deliver to such Grantor, at such Grantor's cost and expense, such assignments as may be necessary to reassign to such Grantor any such rights, title and interests as may have been assigned to Collateral Agent as aforesaid, subject to any disposition thereof that may have been made by Collateral Agent; provided, after giving effect to such reassignment, Collateral Agent's security interests granted pursuant hereto, as well as all other rights and remedies of Collateral Agent granted hereunder, shall continue to be in full force and effect; and provided further, the rights, title and interests so reassigned shall be free and clear of all Liens other than Liens (if any) encumbering such rights, title and interest at the time of their assignment to Collateral Agent and Liens permitted under the relevant provisions of the Credit Documents.
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SECTION 20. APPLICATION OF PROCEEDS.
All proceeds received by Collateral Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied in accordance with the Intercreditor Agreement.
SECTION 21. INDEMNITY AND EXPENSES.
(a) Grantors jointly and severally agree to indemnify Collateral Agent, the Revolver Agent, each Revolver Lender, each Term Loan Agent, each Term Loan Lender, and each other Benefited Party from and against any and all claims, losses and liabilities in any way relating to, growing out of or resulting from this Agreement and the transactions contemplated hereby (including without limitation enforcement of this Agreement), except to the extent such claims, losses or liabilities result solely from Collateral Agent's or such Revolver Agent's, Revolver Lender's, Term Loan Agent's, Term Loan Lender's or Benefited Party's gross negligence or willful misconduct as finally determined by a court of competent jurisdiction.
(b) Grantors jointly and severally agree to pay to Collateral
Agent upon demand the amount of any and all costs and expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents, that
Collateral Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral, (iii) the
exercise or enforcement of any of the rights of Collateral Agent hereunder, or
(iv) the failure by any Grantor to perform or observe any of the provisions
hereof.
(c) The obligations of Grantors in this Section 21 shall survive the termination of this Agreement and the discharge of Grantors' other obligations under this Agreement, the Revolver Credit Agreement and the Term Loan Agreement (subject to the terms of the Intercreditor Agreement).
SECTION 22. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS; TERMINATION AND RELEASE.
(a) This Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect until the Payment in Full of all Secured Obligations, (ii) be binding upon Grantors and their respective successors and assigns, and (iii) inure, together with the rights and remedies of Collateral Agent hereunder, to the benefit of Collateral Agent and its successors, transferees and assigns. Without limiting the generality of the foregoing clause (iii), but subject to the relevant assignment provisions set forth in each of the Credit Documents and the Intercreditor Agreement, (A) the Revolver Agent or any Revolver Lender may assign or otherwise transfer its rights under the Revolver Credit Agreement to any other Person, and in each case such other Person shall thereupon become vested with all the benefits in respect thereof granted to Revolver Agent or Revolver Lenders, as applicable, herein or otherwise (subject to the terms of the Intercreditor Agreement) and (B) any Term Loan Agent and any Term Loan Lender may assign or otherwise transfer its rights under the Term Loan Agreement to any other Person, and in each case such other Person shall thereupon become vested with all the benefits in respect thereof granted to the Term Loan Agent or such Term Loan Lender, as applicable, herein or otherwise (subject to the terms of the Intercreditor Agreement).
(b) Upon the Payment in Full of all Secured Obligations, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to the applicable Grantors. Upon any such termination Collateral Agent will, at Grantors' expense, execute and deliver to Grantors such documents as Grantors shall reasonably request to evidence such termination. In addition, upon the proposed sale, transfer or other disposition of any Collateral by a Grantor in accordance with the relevant provisions of each Credit Document for which such Grantor desires to obtain a security interest release from Collateral Agent, such Grantor shall deliver an Officer's Certificate (x) stating that the Collateral subject to such disposition is being sold, transferred or otherwise disposed of in compliance with the terms of the Credit Documents and (y) specifying the Collateral being sold, transferred or otherwise disposed of in the proposed transaction. Upon the receipt of such Officer's Certificate and so long as no Event of Default has occurred and is continuing or would result from the proposed disposition of the Collateral and so long as the proceeds from such disposition are applied in accordance with the Credit Documents, Collateral Agent shall, at Grantor's expense, so long as Collateral Agent believes in good faith that the Officer's Certificate delivered by such Grantor with respect to such sale is true, correct and complete, execute and deliver such releases
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of its security interest in such Collateral which is to be so sold, transferred or disposed of, as may be reasonably requested by such Grantor.
SECTION 23. COLLATERAL AGENT AS AGENT.
(a) Collateral Agent has been appointed to act as Collateral Agent hereunder by the Revolver Agent, the Revolver Lenders, the Term Loan Agents, the Term Loan Lenders and the Cash Management Bank. Collateral Agent shall be obligated, and shall have the right hereunder, to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking any action (including without limitation the release or substitution of Collateral), solely in accordance with this Agreement and the Credit Documents.
(b) Collateral Agent shall at all times be the same Person that is the Collateral Agent under the Intercreditor Agreement. Written notice of resignation by Collateral Agent pursuant to subsections 6.1(h) or (i) of the Intercreditor Agreement shall also constitute notice of resignation as Collateral Agent under this Agreement; removal of Collateral Agent pursuant to subsections 6.1(h) or (i) of the Intercreditor Agreement shall also constitute removal as Collateral Agent under this Agreement; and appointment of a successor Collateral Agent pursuant to subsections 6.1(h) or (i) of the Intercreditor Agreement shall also constitute appointment of a successor Collateral Agent under this Agreement. Upon the acceptance of any appointment as Collateral Agent under subsections 6.1(h) or (i) of the Intercreditor Agreement by a successor Collateral Agent, that successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Collateral Agent under this Agreement, and the retiring or removed Collateral Agent under this Agreement shall promptly (i) transfer to such successor Collateral Agent all sums, securities and other items of Collateral held hereunder, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Collateral Agent under this Agreement, and (ii) execute and deliver to such successor Collateral Agent such amendments to financing statements, and take such other actions, as may be necessary or appropriate in connection with the assignment to such successor Collateral Agent of the security interests created hereunder, whereupon such retiring or removed Collateral Agent shall be discharged from its duties and obligations under this Agreement. After any retiring or removed Collateral Agent's resignation or removal hereunder as Collateral Agent, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was Collateral Agent hereunder.
SECTION 24. [INTENTIONALLY OMITTED.]
SECTION 25. AMENDMENTS; ETC.
No amendment, modification, termination or waiver of any provision of this Agreement, and no consent to any departure by any Grantor therefrom, shall in any event be effective unless the same shall be in writing and signed by Collateral Agent and, in the case of any such amendment or modification, by Grantors. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. In the event of any refinancing, replacement or extension of the Term Loan Agreement or Revolver Credit Agreement, references in this Agreement to sections or subsections of the Term Loan Agreement and Revolver Credit Agreement shall refer to the functionally equivalent sections or subsections in such refinanced, replaced or extended agreement as the context requires.
SECTION 26. NOTICES.
Any notice or other communication herein required or permitted to be given shall be in writing and may be personally served or sent by telefacsimile or United States mail or courier service and shall be deemed to have been given when delivered in person or by courier service, upon receipt of telefacsimile, or three Business Days after depositing it in the United States mail with postage prepaid and properly addressed; provided that notices to Collateral Agent shall not be effective until received. For the purposes hereof, the address of each party hereto shall be as set forth under such party's name on the signature page hereof or such other address as shall be designated by such party in a written notice delivered to the other parties hereto. Electronic mail and Internet and intranet websites may be used to distribute routine communications, provided, however, that no signature with respect to any notice, request, agreement, waiver, amendment or other document or any notice that is intended to have a binding effect may be sent by electronic mail.
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SECTION 27. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of Collateral Agent in the exercise of any power, right or privilege hereunder shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude any other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.
SECTION 28. SEVERABILITY.
In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 29. HEADINGS.
Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect.
SECTION 30. GOVERNING LAW; TERMS; RULES OF CONSTRUCTION.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE UCC PROVIDES THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein or in the Credit Documents, terms used in Articles 8 and 9 of the UCC are used herein as therein defined. The rules of construction set forth in subsection 1.3 of the Revolver Credit Agreement shall be applicable to this Agreement mutatis mutandis.
SECTION 31. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GRANTOR ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH GRANTOR, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO SUCH GRANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 26 HEREOF; (IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH GRANTOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; (V) AGREES THAT SECURED PARTY RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST SUCH GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION; AND (VI) AGREES THAT THE PROVISIONS OF THIS SECTION 31 RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.
Security Agreement
SECTION 32. WAIVER OF JURY TRIAL.
GRANTORS AND SECURED PARTY HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including without limitation contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. Each Grantor and Collateral Agent acknowledge that this waiver is a material inducement for Grantors and Collateral Agent to enter into a business relationship, that Grantors and Collateral Agent have already relied on this waiver in entering into this Agreement and that each will continue to rely on this waiver in their related future dealings. Each Grantor and Collateral Agent further warrant and represent that each has reviewed this waiver with its legal counsel, and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 32 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.
SECTION 33. COUNTERPARTS.
This Agreement may be executed in one or more counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. Delivery of an executed counterpart of a signature page to this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart thereof.
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Security Agreement
IN WITNESS WHEREOF, Grantors and Collateral Agent have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.
GRANTORS:
COVANTA POWER INTERNATIONAL HOLDINGS, INC.
By:______________________________
Name: Vincent L. Bolognini
Title: Senior Vice President
Notice Address:
c/o Covanta Energy Group, Inc.
40 Lane Road
Fairfield, New Jersey 07007
Attn: Jeffrey Horowitz, Esq.
COVANTA POWER DEVELOPMENT, INC. COVANTA POWER DEVELOPMENT OF BOLIVIA, INC. COVANTA WASTE TO ENERGY OF ITALY, INC.,
By: ____________________________________ Name: Vincent L. Bolognini Title: Senior Vice President
Notice Address for Borrowers:
c/o Covanta Energy Group, Inc.
40 Lane Road
Fairfield, NJ 07007
Attn: Jeffrey Horowitz, Esq.
Security Agreement
BANK OF AMERICA, N.A.,
as Collateral Agent
By:______________________________
Name:
Title:
Notice Address:
Bank of America, N.A., as Collateral Agent
555 So. Flower Street, 17th Floor
CA9-706-17-54
Los Angeles, California 90071
Attention: David Price, Vice President
Voice: (213) 345-1300
Fax: (415) 503-5011
email: david.price@bankofamerica.com
Security Agreement
SCHEDULE 1(e)(i) TO
SECURITY AGREEMENT
PLEDGED SHARES
CLASS OF PERCENTAGE OF
PLEDGED PAR NUMBER OF OUTSTANDING
ISSUER OF PLEDGED SHARES SHARES CERTIFICATE NOS. VALUE PLEDGED SHARES PLEDGED SHARES
|
Security Agreement
1(e)(i)-1
SCHEDULE 1(g)(i) TO
SECURITY AGREEMENT
U.S. TRADEMARKS:
Trademark Registration Registration
Registered Owner Description Number Date
|
FOREIGN TRADEMARKS:
Trademark Registration Registration
Registered Owner Description Number Date
|
Security Agreement
1(g)(i)-1
SCHEDULE 1(g)(ii) TO
SECURITY AGREEMENT
U.S. PATENTS ISSUED:
Patent No. Issue Date Invention Inventor |
U.S. PATENTS PENDING:
Applicant's Date Application
Name Filed Number Invention Inventor
|
FOREIGN PATENTS ISSUED:
Patent No. Issue Date Invention Inventor |
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1(g)(ii)-1
FOREIGN PATENTS PENDING:
Applicant's Date Application
Name Filed Number Invention Inventor
|
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1(g)(ii)-2
SCHEDULE 1(g)(iii) TO
SECURITY AGREEMENT
U.S. COPYRIGHTS:
Title Registration No. Date of Issue Registered Owner |
FOREIGN COPYRIGHT REGISTRATIONS:
Country Title Registration No. Date of Issue |
PENDING U.S. COPYRIGHT REGISTRATIONS & APPLICATIONS:
Title Reference No. Date of Application Copyright Claimant |
PENDING FOREIGN COPYRIGHT REGISTRATIONS & APPLICATIONS:
Country Title Registration No. Date of Issue |
Security Agreement
1(g)(iii)-1
SCHEDULE 1(j)
TO
SECURITY AGREEMENT
COMMERCIAL TORT CLAIMS
Security Agreement
1(j)-1
SCHEDULE 4(b)
TO
SECURITY AGREEMENT
LOCATIONS OF EQUIPMENT AND INVENTORY
NAME OF GRANTOR LOCATIONS OF EQUIPMENT AND INVENTORY |
Security Agreement
4(b)-1
SCHEDULE 4(d)
TO
SECURITY AGREEMENT
OFFICE LOCATIONS, TYPE AND JURISDICTION OF ORGANIZATION
JURISDICTION OF
NAME OF GRANTOR TYPE OF ORGANIZATION OFFICE LOCATIONS ORGANIZATION
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4(d)-1
SCHEDULE 4(e)
TO
SECURITY AGREEMENT
OTHER NAMES
NAME OF GRANTOR OTHER NAMES |
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4(e)-1
SCHEDULE 4(g)
TO
SECURITY AGREEMENT
CERTAIN CONTRACTUAL OBLIGATIONS
Security Agreement
4(g)-1
SCHEDULE 4(i)
TO
SECURITY AGREEMENT
FILING OFFICES
Grantor Filing Offices |
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4(i)-1
EXHIBIT I TO
SECURITY AGREEMENT
[FORM OF GRANT OF TRADEMARK SECURITY INTEREST]
GRANT OF TRADEMARK SECURITY INTEREST
WHEREAS, [NAME OF GRANTOR], a ___________ corporation ("GRANTOR"), owns and uses in its business, and will in the future adopt and so use, various intangible assets, including the Trademark Collateral (as defined below);
WHEREAS, COVANTA POWER INTERNATIONAL HOLDINGS, INC., a Delaware corporation ("COMPANY") and the Subsidiaries of Company listed on the signature pages thereof (collectively, Company and such Subsidiaries of Company are "BORROWERS" and each a "BORROWER") have entered into certain Credit Agreement dated as of March __, 2004 (said Credit Agreement or any credit agreement entered into by Revolver Borrowers to refinance, replace, renew or extend, in whole or in part, said Credit Agreement and the indebtedness thereunder, as said Credit Agreement or any replacement to said Credit Agreement may be amended, restated, supplemented or otherwise modified from time to time, being the "REVOLVER CREDIT AGREEMENT") with the financial institutions listed on the signature pages thereof as Lenders (collectively, together with their respective successors and assigns party to the Revolver Credit Agreement from time to time, the "REVOLVER LENDERS"), and Deutsche Bank AG, New York Branch, as Administrative Agent for the Revolver Lenders (in such capacity, the "REVOLVER AGENT"), pursuant to which the Revolver Lenders have made certain commitments, subject to the terms and conditions set forth in the Revolver Credit Agreement, to extend certain revolving credit facilities to Borrowers;
WHEREAS, Borrowers have entered into certain Credit Agreement dated as of March __, 2004 (said Credit Agreement or any credit agreement entered into by Term Loan Borrowers to refinance, replace, renew or extend, in whole or in part, said Credit Agreement and the indebtedness thereunder, as said Credit Agreement or any replacement to said Credit Agreement may be amended, restated, supplemented or otherwise modified from time to time, being the "TERM LOAN AGREEMENT") with the financial institutions listed on the signature pages thereof as Lenders (collectively, together with their respective successors and assigns party to the Term Loan Agreement from time to time, the "TERM LOAN LENDERS"), Bank of America, N.A., as Administrative Agent (in such capacity, the "TERM LOAN FACILITY AGENT") and Deutsche Bank Securities, Inc. as Documentation Agent for the Term Loan Lenders (in such capacity, the "TERM LOAN DOCUMENTATION AGENT," and together with the Term Loan Facility Agent, the "TERM LOAN AGENTS"), pursuant to which the Term Loan Lenders have made certain commitments, subject to the terms and conditions set forth in the Term Loan Agreement, to extend certain term loan facilities to Borrowers;
WHEREAS, Borrowers are required to maintain the Cash Management System (as defined in the Term Loan Agreement and the Revolver Credit Agreement) with Collateral Agent (in such capacity, the "CASH MANAGEMENT BANK") and the obligations of Borrowers to the Cash Management Bank arising from or relating to the Cash Management System are secured under the Security Agreement (as defined below); and
WHEREAS, pursuant to the terms of a Security Agreement dated as of March __, 2004 (as it may heretofore have been and as it may from time to time hereafter be amended, restated, supplemented or otherwise modified, the "SECURITY AGREEMENT"), among Grantor, the other grantors named therein and Bank of America, N.A., in its capacity as collateral agent for and representative of the Secured Parties (as defined in the Intercreditor Agreement referred to below) (the "COLLATERAL AGENT"), Grantor has granted in favor of Collateral Agent a secured and protected interest in, and Collateral Agent has agreed to become a secured creditor with respect to, the Trademark Collateral;
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, subject to the terms and conditions of the Security Agreement, Grantor hereby grants to Collateral Agent a security interest, (subject to the terms of the Intercreditor Agreement (as defined in the Security Agreement) (including, without limitation, the provisions regarding lien priority)), in all of Grantor's right, title and
Security Agreement
interest in and to the following, in each case whether now or hereafter existing or in which Grantor now has or hereafter acquires an interest and wherever the same may be located (the "TRADEMARK COLLATERAL"):
(i) all rights, title and interest (including rights acquired pursuant to a license or otherwise but only to the extent permitted by agreements governing such license or other use) in and to all trademarks, service marks, designs, logos, indicia, tradenames, trade dress, corporate names, company names, business names, fictitious business names, trade styles and/or other source and/or business identifiers and applications pertaining thereto, owned by such Grantor, or hereafter adopted and used, in its business (including, without limitation, the trademarks specifically identified in Schedule A) (collectively, the "TRADEMARKS"), all registrations that have been or may hereafter be issued or applied for thereon in the United States and any state thereof and in foreign countries (including, without limitation, the registrations and applications specifically identified in Schedule A) (the "TRADEMARK REGISTRATIONS"), all common law and other rights (but in no event any of the obligations) in and to the Trademarks in the United States and any state thereof and in foreign countries (the "TRADEMARK RIGHTS"), and all goodwill of such Grantor's business symbolized by the Trademarks and associated therewith (the "ASSOCIATED GOODWILL"); and
(ii) all proceeds, products, rents and profits of or from any and all of the foregoing Trademark Collateral and, to the extent not otherwise included, all payments under insurance (whether or not Collateral Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Trademark Collateral. For purposes of this Grant of Trademark Security Interest, the term "PROCEEDS" includes whatever is receivable or received when Trademark Collateral or proceeds are sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary.
Notwithstanding anything herein to the contrary, in no event shall the Trademark Collateral include, and Grantor shall be not deemed to have granted a security interest in, any of Grantor's rights or interests in any license, contract or agreement to which Grantor is a party or any of its rights or interests thereunder, to the extent, but only to the extent, that such a grant would, under the terms of such license, contract or agreement or otherwise, result in a breach of the terms of, or constitute a default under any license, contract or agreement to which Grantor is a party on the date hereof (other than to the extent that any such provision would be rendered ineffective pursuant to the UCC or any other applicable law (including the Bankruptcy Code (as defined in the Intercreditor Agreement) or principles of equity); provided, that immediately upon the ineffectiveness, lapse or termination of any such provision, the Trademark Collateral shall include, and Grantor shall be deemed to have granted a security interest to Collateral Agent in, all such rights and interests as if such provision had never been in effect; provided, further that if the assignment of proceeds of such license, contract or agreement would not result in a breach of the terms of, or constitute a default under the provisions of such license, contract or agreement, such proceeds shall be included in the Trademark Collateral.
Grantor does hereby further acknowledge and affirm that the rights and remedies of Collateral Agent with respect to the security interests in the Trademark Collateral granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein.
Security Agreement
IN WITNESS WHEREOF, Grantor has caused this Grant of Trademark Security Interest to be duly executed and delivered by its officer thereunto duly authorized as of the __ day of _______, 200__.
[NAME OF GRANTOR]
By:_____________________________
Name:_________________________
Title:__________________________
Security Agreement
I-S-1
SCHEDULE A
TO
GRANT OF TRADEMARK SECURITY INTEREST
United States
Trademark Registration Registration
Registered Owner Description Number Date
|
Security Agreement
I-A-1
EXHIBIT II TO
SECURITY AGREEMENT
[FORM OF GRANT OF PATENT SECURITY INTEREST]
GRANT OF PATENT SECURITY INTEREST
WHEREAS, [NAME OF GRANTOR], a ___________ corporation ("GRANTOR"), owns and uses in its business, and will in the future adopt and so use, various intangible assets, including the Patent Collateral (as defined below);
WHEREAS, COVANTA POWER INTERNATIONAL HOLDINGS, INC., a Delaware corporation ("COMPANY") and the Subsidiaries of Company listed on the signature pages thereof (collectively, Company and such Subsidiaries of Company are "BORROWERS" and each a "BORROWER") have entered into certain Credit Agreement dated as of March __, 2004 (said Credit Agreement or any credit agreement entered into by Revolver Borrowers to refinance, replace, renew or extend, in whole or in part, said Credit Agreement and the indebtedness thereunder, as said Credit Agreement or any replacement to said Credit Agreement may be amended, restated, supplemented or otherwise modified from time to time, being the "REVOLVER CREDIT AGREEMENT") with the financial institutions listed on the signature pages thereof as Lenders (collectively, together with their respective successors and assigns party to the Revolver Credit Agreement from time to time, the "REVOLVER LENDERS"), and Deutsche Bank AG, New York Branch, as Administrative Agent for the Revolver Lenders (in such capacity, the "REVOLVER AGENT"), pursuant to which the Revolver Lenders have made certain commitments, subject to the terms and conditions set forth in the Revolver Credit Agreement, to extend certain revolving credit facilities to Borrowers;
WHEREAS, Borrowers have entered into certain Credit Agreement dated as of March __, 2004 (said Credit Agreement or any credit agreement entered into by Term Loan Borrowers to refinance, replace, renew or extend, in whole or in part, said Credit Agreement and the indebtedness thereunder, as said Credit Agreement or any replacement to said Credit Agreement may be amended, restated, supplemented or otherwise modified from time to time, being the "TERM LOAN AGREEMENT") with the financial institutions listed on the signature pages thereof as Lenders (collectively, together with their respective successors and assigns party to the Term Loan Agreement from time to time, the "TERM LOAN LENDERS"), Bank of America, N.A., as Administrative Agent (in such capacity, the "TERM LOAN FACILITY AGENT") and Deutsche Bank Securities, Inc. as Documentation Agent for the Term Loan Lenders (in such capacity, the "TERM LOAN DOCUMENTATION AGENT," and together with the Term Loan Facility Agent, the "TERM LOAN AGENTS"), pursuant to which the Term Loan Lenders have made certain commitments, subject to the terms and conditions set forth in the Term Loan Agreement, to extend certain term loan facilities to Borrowers;
WHEREAS, Borrowers are required to maintain the Cash Management System (as defined in the Term Loan Agreement and the Revolver Credit Agreement) with Collateral Agent (in such capacity, the "CASH MANAGEMENT BANK") and the obligations of Borrowers to the Cash Management Bank arising from or relating to the Cash Management System are secured under the Security Agreement (as defined below); and
WHEREAS, pursuant to the terms of a Security Agreement dated as of March __, 2004 (as it may heretofore have been and as it may from time to time hereafter be amended, restated, supplemented or otherwise modified, the "SECURITY AGREEMENT"), among Grantor, the other grantors named therein and Bank of America, N.A., in its capacity as collateral agent for and representative of the Secured Parties (as defined in the Intercreditor Agreement referred to below) (the "COLLATERAL AGENT"), Grantor has granted in favor of Collateral Agent a secured and protected interest in, and Collateral Agent has agreed to become a secured creditor with respect to, the Patent Collateral;
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, subject to the terms and conditions of the Security Agreement, Grantor hereby grants to Collateral Agent four separate security interests, (subject to the terms of the Intercreditor Agreement (as defined in the Security Agreement) (including, without limitation, the provisions regarding lien priority)), in all of Grantor's
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right, title and interest in and to the following, in each case whether now or hereafter existing or in which Grantor now has or hereafter acquires an interest and wherever the same may be located (the "PATENT COLLATERAL"):
(i) all rights, title and interest (including rights acquired pursuant to a license or otherwise but only to the extent permitted by agreements governing such license or other use) in and to all patents and patent applications and rights and interests in patents and patent applications under any domestic or foreign law that are presently, or in the future may be, owned or held by such Grantor and all patents and patent applications and rights, title and interests in patents and patent applications under any domestic or foreign law that are presently, or in the future may be, owned by such Grantor in whole or in part (including, without limitation, the patents and patent applications listed in Schedule A), all rights (but not obligations) corresponding thereto to sue for past, present and future infringements and all re-issues, divisions, continuations, renewals, extensions and continuations-in-part thereof (all of the foregoing being collectively referred to as the "PATENTS"); and
(ii) all proceeds, products, rents and profits of or from any and all of the foregoing Patent Collateral and, to the extent not otherwise included, all payments under insurance (whether or not Collateral Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Patent Collateral. For purposes of this Grant of Patent Security Interest, the term "PROCEEDS" includes whatever is receivable or received when Patent Collateral or proceeds are sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary.
Notwithstanding anything herein to the contrary, in no event shall the Patent Collateral include, and Grantor shall be not deemed to have granted a security interest in, any of Grantor's rights or interests in any license, contract or agreement to which Grantor is a party or any of its rights or interests thereunder, to the extent, but only to the extent, that such a grant would, under the terms of such license, contract or agreement or otherwise, result in a breach of the terms of, or constitute a default under any license, contract or agreement to which Grantor is a party on the date hereof (other than to the extent that any such provision would be rendered ineffective pursuant to the UCC or any other applicable law (including the Bankruptcy Code (as defined in the Intercreditor Agreement) or principles of equity); provided, that immediately upon the ineffectiveness, lapse or termination of any such provision, the Patent Collateral shall include, and Grantor shall be deemed to have granted a security interest to Collateral Agent in, all such rights and interests as if such provision had never been in effect; provided, further that if the assignment of proceeds of such license, contract or agreement would not result in a breach of the terms of, or constitute a default under the provisions of such license, contract or agreement, such proceeds shall be included in the Patent Collateral.
Grantor does hereby further acknowledge and affirm that the rights and remedies of Collateral Agent with respect to the security interests in the Patent Collateral granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein.
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IN WITNESS WHEREOF, Grantor has caused this Grant of Patent Security Interest to be duly executed and delivered by its officer thereunto duly authorized as of the ___ day of ____________, 200__.
[NAME OF GRANTOR]
By:_____________________________
Name:_________________________
Title:__________________________
Security Agreement
II-S-1
SCHEDULE A
TO
GRANT OF PATENT SECURITY INTEREST
PATENTS ISSUED:
Patent No. Issue Date Invention Inventor |
PATENTS PENDING:
Applicant's Date Application
Name Filed Number Invention Inventor
|
Security Agreement
II-A-1
EXHIBIT III TO
SECURITY AGREEMENT
[FORM OF GRANT OF COPYRIGHT SECURITY INTEREST]
GRANT OF COPYRIGHT SECURITY INTEREST
WHEREAS, [NAME OF GRANTOR], a ___________ corporation ("GRANTOR"), owns and uses in its business, and will in the future adopt and so use, various intangible assets, including the Copyright Collateral (as defined below);
WHEREAS, COVANTA POWER INTERNATIONAL HOLDINGS, INC., a Delaware corporation ("COMPANY") and the Subsidiaries of Company listed on the signature pages thereof (collectively, Company and such Subsidiaries of Company are "BORROWERS" and each a "BORROWER") have entered into certain Credit Agreement dated as of March __, 2004 (said Credit Agreement or any credit agreement entered into by Revolver Borrowers to refinance, replace, renew or extend, in whole or in part, said Credit Agreement and the indebtedness thereunder, as said Credit Agreement or any replacement to said Credit Agreement may be amended, restated, supplemented or otherwise modified from time to time, being the "REVOLVER CREDIT AGREEMENT") with the financial institutions listed on the signature pages thereof as Lenders (collectively, together with their respective successors and assigns party to the Revolver Credit Agreement from time to time, the "REVOLVER LENDERS"), and Deutsche Bank AG, New York Branch, as Administrative Agent for the Revolver Lenders (in such capacity, the "REVOLVER AGENT"), pursuant to which the Revolver Lenders have made certain commitments, subject to the terms and conditions set forth in the Revolver Credit Agreement, to extend certain revolving credit facilities to Borrowers;
WHEREAS, Borrowers have entered into certain Credit Agreement dated as of March __, 2004 (said Credit Agreement or any credit agreement entered into by Term Loan Borrowers to refinance, replace, renew or extend, in whole or in part, said Credit Agreement and the indebtedness thereunder, as said Credit Agreement or any replacement to said Credit Agreement may be amended, restated, supplemented or otherwise modified from time to time, being the "TERM LOAN AGREEMENT") with the financial institutions listed on the signature pages thereof as Lenders (collectively, together with their respective successors and assigns party to the Term Loan Agreement from time to time, the "TERM LOAN LENDERS"), Bank of America, N.A., as Administrative Agent (in such capacity, the "TERM LOAN FACILITY AGENT") and Deutsche Bank Securities, Inc. as Documentation Agent for the Term Loan Lenders (in such capacity, the "TERM LOAN DOCUMENTATION AGENT," and together with the Term Loan Facility Agent, the "TERM LOAN AGENTS"), pursuant to which the Term Loan Lenders have made certain commitments, subject to the terms and conditions set forth in the Term Loan Agreement, to extend certain term loan facilities to Borrowers;
WHEREAS, Borrowers are required to maintain the Cash Management System (as defined in the Term Loan Agreement and the Revolver Credit Agreement) with Collateral Agent (in such capacity, the "CASH MANAGEMENT BANK") and the obligations of Borrowers to the Cash Management Bank arising from or relating to the Cash Management System are secured under the Security Agreement (as defined below); and
WHEREAS, pursuant to the terms of a Security Agreement dated as of March __, 2004 (as it may heretofore have been and as it may from time to time hereafter be amended, restated, supplemented or otherwise modified, the "SECURITY AGREEMENT"), among Grantor, the other grantors named therein and Bank of America, N.A., in its capacity as collateral agent for and representative of the Secured Parties (as defined in the Intercreditor Agreement referred to below) (the "COLLATERAL AGENT"), Grantor has granted in favor of Collateral Agent a secured and protected interest in, and Collateral Agent has agreed to become a secured creditor with respect to, the Copyright Collateral;
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, subject to the terms and conditions of the Security Agreement, Grantor hereby grants to Collateral Agent four separate security interests, (subject to the terms of the Intercreditor Agreement (as defined in the Security Agreement) (including, without limitation, the provisions regarding lien priority)), in all of Grantor's
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right, title and interest in and to the following, in each case whether now or hereafter existing or in which Grantor now has or hereafter acquires an interest and wherever the same may be located (the "COPYRIGHT COLLATERAL"):
(i) all rights, title and interest (including rights acquired pursuant to a license or otherwise but only to the extent permitted by agreements governing such license or other use) under copyright in various published and unpublished works of authorship including, without limitation, computer programs, computer data bases, other computer software layouts, trade dress, drawings, designs, writings, and formulas (including, without limitation, the works listed on Schedule A, as the same may be amended pursuant hereto from time to time) (collectively, the "COPYRIGHTS"), all copyright registrations issued to Grantor and applications for copyright registration that have been or may hereafter be issued or applied for thereon in the United States and any state thereof and in foreign countries (including, without limitation, the registrations listed on Schedule A, as the same may be amended pursuant hereto from time to time) (collectively, the "COPYRIGHT REGISTRATIONS"), all common law and other rights in and to the Copyrights in the United States and any state thereof and in foreign countries including all copyright licenses (but with respect to such copyright licenses, only to the extent permitted by such licensing arrangements) (the "COPYRIGHT RIGHTS"), including, without limitation, each of the Copyrights, rights, titles and interests in and to the Copyrights, all derivative works and other works protectable by copyright, which are presently, or in the future may be, owned, created (as a work for hire for the benefit of Grantor), authored (as a work for hire for the benefit of Grantor), or acquired by Grantor, in whole or in part, and all Copyright Rights with respect thereto and all Copyright Registrations therefor, heretofore or hereafter granted or applied for, and all renewals and extensions thereof, throughout the world, including all proceeds thereof (such as, by way of example and not by limitation, license royalties and proceeds of infringement suits), the right (but not the obligation) to renew and extend such Copyright Registrations and Copyright Rights and to register works protectable by copyright and the right (but not the obligation) to sue in the name of such Grantor or in the name of Collateral Agent or Lenders for past, present and future infringements of the Copyrights and Copyright Rights; and
(ii) all proceeds, products, rents and profits of or from any and all of the foregoing Copyright Collateral and, to the extent not otherwise included, all payments under insurance (whether or not Collateral Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Copyright Collateral. For purposes of this Grant of Copyright Security Interest, the term "PROCEEDS" includes whatever is receivable or received when Copyright Collateral or proceeds are sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary.
Notwithstanding anything herein to the contrary, in no event shall the Copyright Collateral include, and Grantor shall be not deemed to have granted a security interest in, any of Grantor's rights or interests in any license, contract or agreement to which Grantor is a party or any of its rights or interests thereunder, to the extent, but only to the extent, that such a grant would, under the terms of such license, contract or agreement or otherwise, result in a breach of the terms of, or constitute a default under any license, contract or agreement to which Grantor is a party on the date hereof (other than to the extent that any such provision would be rendered ineffective pursuant to the UCC or any other applicable law (including the Bankruptcy Code (as defined in the Intercreditor Agreement) or principles of equity); provided, that immediately upon the ineffectiveness, lapse or termination of any such provision, the Copyright Collateral shall include, and Grantor shall be deemed to have granted a security interest to Collateral Agent in, all such rights and interests as if such provision had never been in effect; provided, further that if the assignment of proceeds of such license, contract or agreement would not result in a breach of the terms of, or constitute a default under the provisions of such license, contract or agreement, such proceeds shall be included in the Copyright Collateral.
Grantor does hereby further acknowledge and affirm that the rights and remedies of Collateral Agent with respect to the security interests in the Copyright Collateral granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein.
Security Agreement
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IN WITNESS WHEREOF, Grantor has caused this Grant of Copyright Security Interest to be duly executed and delivered by its officer thereunto duly authorized as of the ___ day of ___________, 200__.
[NAME OF GRANTOR]
By:_____________________________
Name:_________________________
Title:__________________________
Security Agreement
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SCHEDULE A
TO
GRANT OF COPYRIGHT SECURITY INTEREST
U.S. COPYRIGHTS:
Title Registration No. Date of Issue Registered Owner |
PENDING U.S. COPYRIGHT REGISTRATIONS & APPLICATIONS:
Title Reference No. Date of Application Copyright Claimant |
Security Agreement
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EXHIBIT IV TO
SECURITY AGREEMENT
PLEDGE SUPPLEMENT
This Pledge Supplement, dated as of _________________, 200__ is delivered pursuant to the Security Agreement, dated as of March __, 2004 among ____________, a ____________ ("GRANTOR"), the other Grantors named therein, and Bank of America, N.A., as Collateral Agent (as it may heretofore have been and as it may from time to time hereafter be amended, restated, supplemented or otherwise modified, the "SECURITY AGREEMENT"). Capitalized terms used herein not otherwise defined herein shall have the meanings ascribed thereto in the Security Agreement.
Grantor hereby agrees that the [Pledged Shares] [Pledged Debt]
listed on the schedule attached hereto shall be deemed to be part of the
[Pledged Shares] [Pledged Debt] and shall become part of the Securities
Collateral and shall secure all Secured Obligations.
IN WITNESS WHEREOF, Grantor has caused this Amendment to be duly executed and delivered by its duly authorized officer as of _______________, 200__.
[GRANTOR]
By:_____________________________
Name:_________________________
Title:__________________________
Security Agreement
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EXHIBIT V TO
SECURITY AGREEMENT
IP SUPPLEMENT
This IP SUPPLEMENT, dated as of ____________, 200__ is
delivered pursuant to and supplements (i) the Security Agreement, dated as of
March __, 2004 (as it may heretofore have been and as it may from time to time
hereafter be amended, restated, supplemented or otherwise modified, the
"SECURITY AGREEMENT"), among _______________ ("GRANTOR"), the other Grantors
named therein, and Bank of America, N.A., as Collateral Agent, and (ii) the
[Grant of Trademark Security Interest] [Grant of Patent Security Interest]
[Grant of Copyright Security Interest] dated as of ___________, 200__ (the
"GRANT") executed by Grantor. Capitalized terms used herein not otherwise
defined herein shall have the meanings ascribed thereto in the Grant.
Grantor grants to Collateral Agent some separate security
interests (as set forth in the Security Agreement) in all of Grantor's right,
title and interest in and to the [Trademark Collateral] [Patent Collateral]
[Copyright Collateral] listed on Schedule A attached hereto. All such [Trademark
Collateral] [Patent Collateral] [Copyright Collateral] shall be deemed to be
part of the [Trademark Collateral] [Patent Collateral] [Copyright Collateral]
and shall be hereafter subject to each of the terms and conditions of the
Security Agreement and the Grant.
IN WITNESS WHEREOF, Grantor has caused this Supplement to be duly executed and delivered by its duly authorized officer as of ______________, 200__.
[GRANTOR]
By:_____________________________
Name:_________________________
Title:__________________________
[Attach Schedule A]
Security Agreement
EXHIBIT 4.29
EXHIBIT VIII
[FORM OF CEA STOCK PLEDGE AGREEMENT]
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "AGREEMENT") is dated as of March __, 2004 and entered into by and between COVANTA ENERGY AMERICAS, INC., a Delaware corporation (the "PLEDGOR"), and BANK OF AMERICA, N.A., in its capacity as collateral agent for and representative of the Secured Parties (as defined in the Intercreditor Agreement referred to below) (the "COLLATERAL AGENT"). All capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed thereto in the Intercreditor Agreement.
PRELIMINARY STATEMENTS
A. As of the date hereof, Pledgor is the legal and beneficial owner of the shares of Capital Stock issued by Covanta Power International Holdings, Inc. ("COMPANY") listed on Schedule I hereto.
B. Pursuant to the Credit Agreement dated as of March ___, 2004 (said Credit Agreement or any credit agreement entered into by Revolver Borrowers (as defined below) to refinance, replace, renew or extend, in whole or in part, said Credit Agreement and the indebtedness thereunder to the extent permitted pursuant to the Term Loan Agreement (as defined below), as said Credit Agreement or any replacement to said Credit Agreement may be amended, restated, supplemented or otherwise modified from time to time, being the "REVOLVER CREDIT AGREEMENT"), by and among Company as a borrower, the Subsidiaries of Company party thereto from time to time as additional borrowers (collectively, Company and such Subsidiaries being the "REVOLVER BORROWERS" and each a "REVOLVER BORROWER"), the financial institutions from time to time party thereto as lenders (the "REVOLVER LENDERS"), and Deutsche Bank AG, New York Branch, as administrative agent for the Revolver Lenders (in such capacity, the "REVOLVER AGENT"), the Revolver Lenders have made certain commitments (each, a "REVOLVER COMMITMENT"), subject to the terms and conditions set forth in the Revolver Credit Agreement, to extend certain revolving credit facilities to Revolver Borrowers.
C. Pursuant to the Credit Agreement dated as of March ___, 2004 (said Credit Agreement or any credit agreement entered into by Term Loan Borrowers to refinance, replace, renew or extend, in whole or in part, said Credit Agreement and the indebtedness thereunder to the extent permitted pursuant to the Revolver Credit Agreement, as said Credit Agreement or any replacement to said Credit Agreement may be amended, restated, supplemented or otherwise modified from time to time, being the "TERM LOAN AGREEMENT," and collectively with the Revolver Credit Agreement, the "CREDIT AGREEMENTS"), by and among Company as a borrower, the Subsidiaries of Company party thereto from time
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to time as additional borrowers (collectively, Company and such Subsidiaries being the "TERM LOAN BORROWERS" and each a "TERM LOAN BORROWER," and collectively with the Revolver Borrowers, the "BORROWERS"), the financial institutions from time to time party thereto as lenders (the "TERM LOAN LENDERS") and Bank of America, N.A., as administrative agent for the Term Loan Lenders (in such capacity, the "TERM LOAN AGENT"), and Deutsche Bank Securities, Inc., as documentation agent for the Term Loan Lenders (in such capacity, the "TERM LOAN DOCUMENTATION AGENT," and collectively with the Term Loan Agent, the Term Loan Lenders, the Revolver Agent and the Revolver Lenders, the "BENEFITED PARTIES"), the Term Loan Lenders have made certain commitments (each, a "TERM LOAN COMMITMENT," and together with the Revolver Commitments, collectively, the "COMMITMENTS"), subject to the terms and conditions set forth in the Term Loan Agreement, to extend certain term loan facilities to the Term Loan Borrowers.
D. In accordance with the terms of the Credit Agreements, Borrowers are required to maintain the Cash Management System with Bank of America (in such capacity, the "CASH MANAGEMENT BANK"), and it is desired that the Cash Management Obligations be secured hereunder.
E. The Revolver Borrowers, the Term Loan Borrowers, Pledgor, the Revolver Agent, the Revolver Lenders, the Term Loan Agents, the Term Loan Lenders, the Cash Management Bank and Collateral Agent have entered into that certain Intercreditor Agreement dated as of March ___, 2004 (as it may hereafter be amended, restated, supplemented or otherwise modified from time to time, the "INTERCREDITOR AGREEMENT"), pursuant to which the Revolver Agent, the Revolver Lenders, the Term Loan Agents, the Term Loan Lenders and the Cash Management Bank have appointed Collateral Agent, and Collateral Agent has agreed to act, as collateral agent for the Revolver Agent, the Revolver Lenders, the Term Loan Agents, the Term Loan Lenders and the Cash Management Bank hereunder.
F. It is a condition precedent to (i) the extension of credit by the Revolver Lenders under the Revolver Credit Agreement and (ii) the extension of credit by the Term Loan Lenders under the Term Loan Agreement that the Pledgor shall have granted the security interest and undertaken the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce the Revolver Lenders to make extensions of credit from time to time under the Revolver Credit Agreement, the Term Loan Lenders to continue their extensions of credit under the Term Loan Agreement, the Cash Management Bank to provide cash management services to the Borrowers and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Pledgor hereby agrees with Collateral Agent as follows:
SECTION 1. PLEDGE OF SECURITY. Pledgor hereby pledges and collaterally assigns to Collateral Agent, and hereby grants to Collateral Agent a security interest in, all of Pledgor's right, title and interest in and to the following (the "PLEDGED COLLATERAL"):
(a) all Capital Stock in Company now or hereafter owned by Pledgor, whether such Capital Stock is classified as investment property or general intangibles under
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the Uniform Commercial Code as in effect in the State of New York ("UCC"), including all securities convertible into, and rights, warrants, options and other rights to purchase or otherwise acquire, any Capital Stock in Company, and including those owned on the date hereof and described in Schedule I for Pledgor, the certificates or other instruments representing any of the foregoing and any interest of Pledgor in the entries on the books of any securities intermediary pertaining thereto (the "PLEDGED EQUITY"), and all distributions, dividends, and other property received, receivable or otherwise distributed in respect of or in exchange therefor;
(b) all books, records, ledger cards, files, correspondence, computer programs, tapes, disks and related data processing software that at any time evidence any of the Pledged Collateral or are otherwise necessary or helpful in the collection thereof or realization thereupon;
(c) to the extent not covered by clauses (a) and (b) above, all proceeds of any or all of the foregoing Pledged Collateral. For purposes of this Agreement, the term "PROCEEDS" includes whatever is receivable or received when Pledged Collateral or proceeds are sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes, without limitation, proceeds of any indemnity or guaranty payable to Pledgor or Collateral Agent from time to time with respect to any of the Pledged Collateral.
The security interest granted hereby is subject to the terms of the Intercreditor Agreement (including, without limitation, the provisions regarding lien priority).
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the Pledged Collateral assigned by Pledgor is collateral security for, the Secured Obligations.
SECTION 3. DELIVERY OF PLEDGED COLLATERAL. All certificates or instruments representing or evidencing the Pledged Collateral shall be delivered to and held by or on behalf of Collateral Agent pursuant hereto and shall be in suitable form for transfer by delivery or, as applicable, shall be accompanied by Pledgor's endorsement, where necessary, or duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to Collateral Agent. Upon the occurrence and during the continuation of an Event of Default, Collateral Agent shall have the right, with notice to Pledgor, to transfer to or to register in the name of Collateral Agent or any of its nominees any or all of the Pledged Collateral, subject to the revocable rights specified in Section 7(a). In addition, Collateral Agent shall have the right at any time to exchange certificates or instruments representing or evidencing Pledged Equity for certificates or instruments of smaller or larger denominations.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Pledgor represents and warrants as follows:
(a) Organization and Powers. Pledgor is duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and
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proposed to be conducted and to enter into this Agreement and carry out the transactions contemplated hereby.
(b) Good Standing. Pledgor is qualified to do business and in good standing wherever necessary to carry on its present business and operations, except in jurisdictions in which the failure to be so qualified or in good standing has not had and will not have a material adverse effect on the business, operations, properties, assets or condition (financial or otherwise) of Pledgor and its subsidiaries, taken as a whole.
(c) Authorization. The execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action by Pledgor.
(d) No Conflict. The execution, delivery and performance by Pledgor of this Agreement will not (i) violate the Certificate of Incorporation or Bylaws of Pledgor, (ii) violate any provision of law applicable to Pledgor, or any order, judgment or decree of any court or other agency of government binding on Pledgor, (iii) be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of Pledgor, (iv) result in or require the creation or imposition of any Lien upon any of its properties or assets other than the Lien created by this Agreement, or (v) require the approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Pledgor.
(e) Binding Obligation. This Agreement is the legally valid and binding obligation of Pledgor, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors' rights generally.
(f) Due Authorization, etc. of Pledged Equity. All of the Pledged Equity described on Schedule I has been duly authorized and validly issued and is fully paid and non-assessable.
(g) Description of Pledged Equity. The Pledged Equity constitutes all of the issued and outstanding Capital Stock in Company and there are no outstanding warrants, options or other rights to purchase, or other agreements outstanding with respect to, or property that is now or hereafter convertible into, or that requires the issuance or sale of, any Capital Stock of Company.
(h) Ownership of Pledged Collateral. Pledgor is the legal, record and beneficial owner of the Pledged Collateral and its interests in the Pledged Collateral are free and clear of any Lien except for Permitted Encumbrances.
(i) Governmental Authorizations. No authorization, approval or other action by, and no notice to or filing with, any Government Authority or regulatory body is required for either (i) the pledge by Pledgor of the Pledged Collateral pursuant to this Agreement and the grant by Pledgor of the security interests granted hereby, (ii) the execution, delivery or performance of this Agreement by Pledgor, or (iii) the exercise by Collateral Agent of the voting or other rights, or the remedies in respect of the Pledged Collateral, provided for in this Agreement (except as may be required in connection with a
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disposition of Pledged Collateral by laws affecting the offering and sale of securities generally).
(j) Perfection. The security interest in the Pledged Collateral granted to Collateral Agent in Section 2 hereof constitutes a valid security interest, to the extent the UCC is applicable thereto, securing the payment of the applicable Secured Obligations. Upon (i) the filing of UCC financing statements naming Pledgor as "debtor", naming Collateral Agent as "secured party" and describing the Pledged Collateral in the filing offices listed on Schedule II and (ii) in the case of Pledged Collateral consisting of certificated securities, in addition to filing such financing statements, delivery of the certificates representing such certificated securities to Collateral Agent, duly endorsed or accompanied by duly executed instruments of assignment or transfer in blank, the security interest in the Pledged Collateral referred to in the immediately preceding sentence will constitute a perfected security interest therein, to the extent the UCC is applicable thereto, prior to all other Liens, securing the payment of the Secured Obligations, and all filings and other actions in the United States necessary to perfect and protect such security interest have been duly made or taken.
(k) Office Locations; Type and Jurisdiction of Organization. The chief executive office of Pledgor is as of the date hereof, located at the location set forth on Schedule III annexed hereto; as of the date hereof, Pledgor's name as it appears in official filings in its jurisdiction of incorporation, jurisdiction of incorporation and corporation number provided by the applicable Government Authority of its jurisdiction of incorporation are set forth on Schedule III annexed hereto.
(l) Names. Pledgor (or predecessor by merger or otherwise of Pledgor) has not, within the five year period preceding the date hereof, had a different name from the name of Pledgor listed on the signature pages hereof, except the names set forth on Schedule III annexed hereto.
(m) Margin Regulations. The pledge of the Pledged Collateral pursuant to this Agreement does not violate Regulations T, U or X of the Board of Governors of the Federal Reserve System.
(n) Other Information. All information heretofore, supplied to Collateral Agent pursuant to the Revolver Credit Agreement or the Term Loan Agreement by or on behalf of Pledgor with respect to the Pledged Collateral is accurate and complete in all material respects.
SECTION 5. COVENANTS. Pledgor shall:
(a) not, except as expressly permitted by the Credit Documents with respect to actions taken or omitted to be taken by Pledgor or Company or its Subsidiaries, (i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Pledged Collateral, (ii) create or suffer to exist any Lien upon or with respect to any of the Pledged Collateral, except for Permitted Encumbrances, or (iii) permit any issuer of Pledged Equity to merge or consolidate;
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(b) (i) cause Company not to issue any Capital Stock in addition to or in substitution for the Pledged Equity issued by Company, except to Pledgor and (ii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all additional Capital Stock of Company;
(c) at its expense (i) perform and comply in all material respects with all terms and provisions of any agreement related to the Pledged Collateral required to be performed or complied with by it, (ii) maintain all such agreements in full force and effect, and (iii) enforce all such agreements in accordance with their terms;
(d) give Collateral Agent at least 30 days' prior written
notice of any (i) change in Pledgor's name, identity or corporate structure and
(ii) reincorporation, reorganization or other action that results in a change of
the jurisdiction or organization of Pledgor;
(e) promptly deliver to Collateral Agent all written notices received by it with respect to the Pledged Collateral; and
(f) if any Pledged Collateral is not a security pursuant to
Section 8-103 of the UCC, not take any action that, under such Section, converts
such Pledged Collateral into a security without causing the issuer thereof to
issue to it certificates or instruments evidencing such Pledged Collateral,
which it shall promptly deliver to Collateral Agent as provided in this Section
5.
SECTION 6. FURTHER ASSURANCES; PLEDGE AMENDMENTS.
(a) Pledgor agrees that from time to time, at the expense of Pledgor, Pledgor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary, or that Collateral Agent may reasonably request, in order to perfect and protect the security interest granted or purported to be granted hereby or to enable Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Pledged Collateral. Without limiting the generality of the foregoing, Pledgor will: (i) execute (if necessary) and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary, or as Collateral Agent may reasonably request, in order to perfect and preserve the security interest granted or purported to be granted hereby and (ii) at Collateral Agent's reasonable request, appear in and defend any action or proceeding that may affect Pledgor's title to or Collateral Agent's security interest in all or any material part of the Pledged Collateral. Pledgor hereby authorizes Collateral Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Pledged Collateral.
(b) Pledgor further agrees that it will, upon obtaining any additional Capital Stock in Company, promptly (and in any event within five Business Days) deliver to Collateral Agent a Pledge Amendment, duly executed by Pledgor, in substantially the form of Schedule IV annexed hereto (a "PLEDGE AMENDMENT"), together with supplements to the Schedules annexed hereto, as applicable, to cause such Schedules to be complete and accurate at such time, in respect of the additional Pledged Equity to be pledged pursuant to this
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Agreement; provided that the failure of Pledgor to execute a Pledge Amendment with respect to any additional Pledged Equity shall not impair the security interest of Collateral Agent therein or otherwise adversely affect the rights and remedies of Collateral Agent hereunder with respect thereto. Upon each such acquisition, the representations and warranties contained in Section 4 hereof shall be deemed to have been made by Pledgor as to the Pledged Collateral described in such Pledge Amendment.
SECTION 7. VOTING RIGHTS; DIVIDENDS; ETC.
(a) So long as no Event of Default shall have occurred and be continuing:
(i) Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Credit Documents; provided, however, that Pledgor shall not exercise or refrain from exercising any such right if Collateral Agent shall have notified Pledgor that, in Collateral Agent's judgment, such action would have a material adverse effect on the value of the Pledged Collateral or any part thereof; and
(ii) Pledgor shall be entitled to receive and retain, and to utilize free and clear of the lien of this Agreement, any and all dividends, other distributions and interest paid in respect of the Pledged Collateral; provided, however, that any and all
(A) dividends, other distributions and interest paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Pledged Collateral,
(B) dividends and other distributions paid or payable in cash in respect of any Pledged Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in respect of principal or in redemption of or in exchange for any Pledged Collateral,
in each case shall be, and shall forthwith be delivered to Collateral Agent to hold as, Pledged Collateral and shall, if received by Pledgor, be received in trust for the benefit of Collateral Agent, be segregated from the other property or funds of Pledgor and be forthwith delivered to Collateral Agent as Pledged Collateral in the same form as so received (with all necessary endorsements).
Notwithstanding the foregoing, the parties hereto acknowledge that the Credit Agreements contain restrictions on the payment of dividends and distributions on the Pledged Collateral, none of which restrictions are waived or otherwise prejudiced hereby.
(b) Upon the occurrence and during the continuation of an Event of Default:
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(i) upon written notice from Collateral Agent to Pledgor, all rights of Pledgor to exercise the voting and other consensual rights that it would otherwise be entitled to exercise pursuant to Section 7(a)(i) shall cease, and all such rights shall thereupon become vested in Collateral Agent who shall thereupon have the sole right to exercise such voting and other consensual rights;
(ii) except as otherwise provided in the Credit Documents, upon written
notice from Collateral Agent to Pledgor all rights of Pledgor to
receive the dividends, other distributions and interest payments that
it would otherwise be authorized to receive and retain pursuant to
Section 7(a)(ii) shall cease, and all such rights shall thereupon
become vested in Collateral Agent who shall thereupon have the sole
right to receive and hold as Pledged Collateral such dividends, other
distributions and interest payments; and
(iii) all dividends, principal, interest payments and other distributions that are received by Pledgor contrary to the provisions of paragraph (ii) of this Section 7(b) shall be received in trust for the benefit of Collateral Agent, shall be segregated from other funds of Pledgor and shall forthwith be paid over to Collateral Agent as Pledged Collateral in the same form as so received (with any necessary endorsements).
(c) IRREVOCABLE PROXY. In order to permit Collateral Agent to
exercise the voting and other consensual rights that it may be entitled to
exercise pursuant to Section 7(b)(i) and to receive all dividends and other
distributions which it may be entitled to receive under Section 7(a)(ii) or
Section 7(b)(ii), (i) Pledgor shall promptly execute and deliver (or cause to be
executed and delivered) to Collateral Agent all such proxies, dividend payment
orders and other instruments as Collateral Agent may from time to time
reasonably request and (ii) without limiting the effect of the immediately
preceding clause (i), Pledgor hereby grants to Collateral Agent an IRREVOCABLE
PROXY to vote the Pledged Equity and to exercise all other rights, powers,
privileges and remedies to which a holder of the Pledged Equity would be
entitled (including, without limitation, giving or withholding written consents
of holders of the Pledge Equity, calling special meetings of holders of the
Pledged Equity and voting at such meetings), which proxy shall be effective,
automatically and without the necessity of any action (including any transfer of
any Pledged Equity on the record books of the issuer thereof) by any other
Person (including the issuer of the Pledged Equity or any officer or agent
thereof), only upon the occurrence and during the continuance of an Event of
Default and which proxy shall only terminate upon the payment in full of all
Secured Obligations (other than contingent indemnification Secured Obligations
with respect to claims which have not yet arisen).
SECTION 8. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. Pledgor hereby irrevocably appoints Collateral Agent as Pledgor's attorney-in-fact, with full authority in the place and stead of Pledgor and in the name of Pledgor, Collateral Agent or otherwise, from time to time in Collateral Agent's discretion to take any action and to execute any instrument that Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including without limitation:
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(a) upon the occurrence and during the continuance of an Event of Default, to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Pledged Collateral;
(b) upon the occurrence and during the continuance of an Event of Default, to receive, endorse and collect any instruments made payable to Pledgor representing any dividend, principal or interest payment or other distribution in respect of the Pledged Collateral or any part thereof and to give full discharge for the same;
(c) upon the occurrence and during the continuance of an Event of Default, to file any claims or take any action or institute any proceedings that Collateral Agent may deem necessary or desirable for the collection of any of the Pledged Collateral or otherwise to enforce the rights of Collateral Agent with respect to any of the Pledged Collateral;
(d) with notice to the Pledgor, to pay or discharge taxes or Liens (other than Liens permitted under this Agreement or the Credit Documents) levied or placed upon or threatened against the Pledged Collateral, the legality or validity thereof and the amounts necessary to discharge the same to be determined by Collateral Agent in its sole discretion, any such payments made by Collateral Agent to become obligations of Pledgor to Collateral Agent, due and payable immediately without demand; and
(e) upon the occurrence and during the continuance of an Event of Default, generally to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Pledged Collateral as fully and completely as though Collateral Agent were the absolute owner thereof for all purposes, and to do, at Collateral Agent's option and Pledgor's expense, at any time or from time to time, all acts and things that Collateral Agent deems necessary to protect, preserve or realize upon the Pledged Collateral and Collateral Agent's security interest therein in order to effect the intent of this Agreement, all as fully and effectively as Pledgor might do.
SECTION 9. COLLATERAL AGENT MAY PERFORM; NO ASSUMPTION.
(a) If Pledgor fails to perform any agreement contained herein, Collateral Agent may itself perform, or cause performance of, such agreement, and the expenses of Collateral Agent incurred in connection therewith shall be payable by Pledgor under Section 13(b).
(b) Anything contained herein to the contrary notwithstanding,
(i) Pledgor shall remain liable under any agreements included in or related to
the Pledged Collateral, to the extent set forth therein, to perform all of its
duties and obligations thereunder to the same extent as if this Agreement had
not been executed, (ii) the exercise by Collateral Agent of any of its rights
hereunder shall not release Pledgor from any of its duties or obligations under
any such agreements, and (iii) Collateral Agent shall not have any obligation or
liability under any such agreements by reason of this Agreement, nor shall
Collateral Agent be obligated to perform any of the obligations or duties of
Pledgor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
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SECTION 10. STANDARD OF CARE. The powers conferred on Collateral Agent hereunder are solely to protect its interest in the Pledged Collateral and shall not impose any duty upon it to exercise any such powers. Except for the exercise of reasonable care in the custody of any Pledged Collateral in its possession and the accounting for moneys actually received by it hereunder, Collateral Agent shall have no duty as to any Pledged Collateral, it being understood that Collateral Agent shall have no responsibility for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Pledged Collateral, whether or not Collateral Agent has or is deemed to have knowledge of such matters, (b) taking any necessary steps (other than steps taken in accordance with the standard of care set forth above to maintain possession of the Pledged Collateral) to preserve rights against any prior parties or any other rights pertaining to any Pledged Collateral, (c) taking any necessary steps to collect or realize upon the Secured Obligations or any guarantee therefor, or any part thereof, or any of the Pledged Collateral, or (d) initiating any action to protect the Pledged Collateral against the possibility of a decline in market value. Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of Pledged Collateral in its possession if such Pledged Collateral is accorded treatment substantially equal to that which Collateral Agent accords its own property consisting of negotiable securities.
SECTION 11. REMEDIES.
(a) Subject to the terms of the Intercreditor Agreement, if any Event of Default shall have occurred and be continuing, Collateral Agent may exercise in respect of the Pledged Collateral, in addition to all other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the UCC (whether or not the UCC applies to the affected Pledged Collateral), and Collateral Agent may also in its sole discretion, without notice except as specified below, sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange or broker's board or at any of Collateral Agent's offices or elsewhere, for cash, on credit or for future delivery, at such time or times and at such price or prices and upon such other terms as Collateral Agent may deem commercially reasonable, irrespective of the impact of any such sales on the market price of the Pledged Collateral. Collateral Agent or any Benefited Party (subject to the terms of the Intercreditor Agreement) may be the purchaser of any or all of the Pledged Collateral at any such sale, and Collateral Agent, as agent for and representative of Lenders (but not any Benefited Party in its individual capacity unless Requisite Obligees shall otherwise agree in writing), shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Pledged Collateral sold at any such public sale, to use and apply any of the Secured Obligations as a credit on account of the purchase price for any Pledged Collateral payable by Collateral Agent at such sale. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of Pledgor, and Pledgor hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. Collateral Agent shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given.
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Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Pledgor hereby waives (to the extent permitted by applicable law) any claims against Collateral Agent arising by reason of the fact that the price at which any Pledged Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if Collateral Agent accepts the first offer received and does not offer such Pledged Collateral to more than one offeree.
(b) Pledgor recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as from time to time amended (the "SECURITIES ACT"), and applicable state securities laws, Collateral Agent may be compelled, with respect to any sale of all or any part of the Pledged Collateral conducted without prior registration or qualification of such Pledged Collateral under the Securities Act and/or such state securities laws, to limit purchasers to those who will agree, among other things, to acquire the Pledged Collateral for their own account, for investment and not with a view to the distribution or resale thereof. Pledgor acknowledges that any such private placement may be at prices and on terms less favorable than those obtainable through a sale without such restrictions (including, without limitation, an offering made pursuant to a registration statement under the Securities Act) and, notwithstanding such circumstances and the registration rights granted to Collateral Agent by Pledgor pursuant to Section 11(d), Pledgor agrees that any such private placement shall not be deemed, in and of itself, to be commercially unreasonable and that Collateral Agent shall have no obligation to delay the sale of any Pledged Collateral for the period of time necessary to permit the issuer thereof to register it for a form of sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would, or should, agree to so register it.
(c) If Collateral Agent determines to exercise its right to sell any or all of the Pledged Collateral, upon written request, Pledgor shall and shall cause each issuer of any Pledged Equity to be sold hereunder from time to time to furnish to Collateral Agent all such information as Collateral Agent may request in order to determine the amount of Pledged Collateral that may be sold by Collateral Agent in exempt transactions under the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder, as the same are from time to time in effect.
(d) If Collateral Agent shall determine to exercise its right to sell all or any of the Pledged Collateral, Pledgor agrees that, upon request of Collateral Agent (which request may be made by Collateral Agent in its sole discretion), Pledgor will, at its own expense:
(i) execute and deliver, and use best efforts to cause each issuer of the Pledged Collateral contemplated to be sold and the directors and officers thereof to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or, in the opinion of Collateral Agent, advisable to register such Pledged Collateral under the provisions of the Securities Act and to cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law
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to be furnished, and to make all amendments and supplements thereto and to the related prospectus which, in the opinion of Collateral Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto;
(ii) use its best efforts to qualify the Pledged Collateral under all applicable state securities or "Blue Sky" laws and to obtain all necessary governmental approvals for the sale of the Pledged Collateral, as requested by Collateral Agent;
(iii) cause each such issuer to make available to its security holders, as soon as practicable, an earnings statement which will satisfy the provisions of Section 11(a) of the Securities Act;
(iv) do or cause to be done all such other acts and things as may be necessary to make such sale of the Pledged Collateral or any part thereof valid and binding and in compliance with applicable law; and
(v) bear all costs and expenses, including reasonable attorneys' fees, of carrying out its obligations under this Section 11(d).
Pledgor further agrees that a breach of any of the covenants contained in Section 11 will cause irreparable injury to Collateral Agent, that Collateral Agent has no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in Sections 11 shall be specifically enforceable against Pledgor, and Pledgor hereby waives and agrees (to the extent permitted by applicable law) not to assert any defenses against an action for specific performance of such covenants except for a defense that no default has occurred giving rise to the Secured Obligations becoming due and payable prior to their stated maturities. Nothing in this Section 11(d) shall in any way alter the rights of Collateral Agent hereunder.
SECTION 12. APPLICATION OF PROCEEDS. To the extent any sale of, collection from, or other realization upon all or any part of the Pledged Collateral is expressly permitted by the Credit Documents, Pledgor shall pay to Collateral Agent any Net Asset Sale Proceeds received by Pledgor or any of its Subsidiaries in respect of such sale, collection or other realization (to the extent required by the Credit Documents). Except as expressly provided elsewhere in this Agreement, all proceeds received by Collateral Agent in respect of any sale of, collection from, or other realization upon all or any part of the Pledged Collateral (whether pursuant to the preceding sentence or otherwise) shall be applied in accordance with the Intercreditor Agreement.
SECTION 13. INDEMNITY AND EXPENSES.
(a) Pledgor agrees to indemnify Collateral Agent and each Benefited Party from and against any and all claims, losses and liabilities in any way relating to, growing out of or resulting from this Agreement and the transactions contemplated hereby (including, without limitation, enforcement of this Agreement), except to the extent such claims, losses or liabilities result solely from Collateral Agent's or such Benefited Party's gross negligence or willful misconduct as finally determined by a court of competent jurisdiction.
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(b) Pledgor agrees to pay to Collateral Agent upon demand the amount of any and all costs and expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, that Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Pledged Collateral, (iii) the exercise or enforcement of any of the rights of Collateral Agent hereunder, or (iv) the failure by Pledgor to perform or observe any of the provisions hereof.
(c) Anything contained in this Agreement to the contrary notwithstanding, the obligations of Pledgor set forth in this Section 13 are included herein solely for the purpose of including such obligations within the Secured Obligations, and such obligations shall in all respects be limited by the provisions of Section 27; accordingly, nothing in this Section 13 shall be construed in a manner which shall obligate Pledgor to make any payment, or provide any security, to Collateral Agent with respect to such obligations apart from the grant of the security interest in the Pledged Collateral as set forth in Section 1 hereof.
(d) In the event of any registered offering described in
Section 11(d), Pledgor agrees to indemnify and hold harmless Collateral Agent
and each of Collateral Agent's directors, officers, employees and agents from
and against any loss, fee, cost, expense, damage, liability or claim, joint or
several, to which Collateral Agent or such other persons may become subject or
for which any of them may be liable, under the Securities Act or otherwise,
insofar as such losses, fees, costs, expenses, damages, liabilities or claims
(or any litigation commenced or threatened in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus, registration statement, prospectus
or other such document published or filed in connection with such registered
offering, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will promptly reimburse Collateral Agent and such other persons for any
legal or other expenses reasonably incurred by Collateral Agent and such other
persons in connection with any litigation, of any nature whatsoever, commenced
or threatened in respect thereof (including without limitation any and all fees,
costs and expenses whatsoever reasonably incurred by Collateral Agent and such
other persons and counsel for Collateral Agent and such other persons in
investigating, preparing for, defending against or providing evidence, producing
documents or taking any other action in respect of, any such commenced or
threatened litigation or any claims asserted). This indemnity shall be in
addition to any liability which Pledgor may otherwise have and shall extend upon
the same terms and conditions to each person, if any, that controls Collateral
Agent or such persons within the meaning of the Securities Act.
(e) The obligations of Pledgor in this Section 13 shall (i) survive the termination of this Agreement and the discharge of Pledgor's other obligations under this Agreement, the Revolver Credit Agreement and the Term Loan Agreement (subject to the terms of the Intercreditor Agreement).
SECTION 14. CONTINUING SECURITY INTERESTS; TRANSFER OF LOANS.
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(a) This Agreement shall create a continuing security interest in the Pledged Collateral and shall (i) remain in full force and effect until the payment in full of all Secured Obligations (other than contingent indemnification Secured Obligations with respect to claims which have not yet arisen), and the cancellation or termination of all commitments to extend credit under the Credit Documents (collectively, the "COMMITMENTS"), (ii) be binding upon Pledgor, its successors and assigns, and (iii) inure, together with the rights and remedies of Collateral Agent hereunder, to the benefit of Collateral Agent and its successors, transferees and assigns. Without limiting the generality of the foregoing clause (iii), but subject to the relevant assignment provisions set forth in each of the Credit Documents and the Intercreditor Agreement, (A) the Revolver Agent or any Revolver Lender may assign or otherwise transfer its rights under the Revolver Credit Agreement to any other Person, and in each case such other Person shall thereupon become vested with all the benefits in respect thereof granted to the Revolver Agent or such Revolver Lender, as applicable, herein or otherwise (subject to the terms of the Intercreditor Agreement) and (B) any Term Loan Agent and any Term Loan Lender may assign or otherwise transfer its rights under the Term Loan Agreement to any other Person, and in each case such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Term Loan Agent or such Term Loan Lender, as applicable, herein or otherwise (subject to the terms of the Intercreditor Agreement).
(b) Upon the payment in full of all Secured Obligations (other
than contingent indemnification Secured Obligations with respect to claims which
have not yet arisen), and the cancellation or termination of the Commitments,
the security interest granted hereby shall terminate and all rights to the
Pledged Collateral shall revert to Pledgor. Upon any such termination Collateral
Agent will, at Pledgor's expense, execute and deliver to Pledgor such documents
as Pledgor shall reasonably request to evidence such termination. In addition,
upon the proposed sale, transfer or other disposition of any Pledged Collateral
by Pledgor in accordance with the relevant provisions of each Credit Document
for which Pledgor desires to obtain a security interest release from Collateral
Agent, Pledgor shall deliver an Officer's Certificate (x) stating that the
Pledged Collateral subject to such disposition is being sold, transferred or
otherwise disposed of in compliance with the terms of the Credit Documents and
(y) specifying the Pledged Collateral being sold, transferred or otherwise
disposed of in the proposed transaction. Upon the receipt of such Officer's
Certificate and so long as (i) no Event of Default has occurred and is
continuing or would result from the proposed disposition of the Pledged
Collateral, (ii) such disposition is expressly permitted by the Credit
Documents, and (iii) the proceeds from such disposition are applied in
accordance with the Credit Documents and, with respect to proceeds received by
Pledgor, in accordance with this Agreement, Collateral Agent shall, at Pledgor's
expense, so long as Collateral Agent believes in good faith that the Officer's
Certificate delivered by Pledgor with respect to such sale is true, correct and
complete, execute and deliver such releases of its security interest in such
Pledged Collateral which is to be so sold, transferred or disposed of, as may be
reasonably requested by Pledgor.
SECTION 15. COLLATERAL AGENT AS AGENT.
(a) Pursuant to the Intercreditor Agreement, Collateral Agent has been appointed to act as Collateral Agent hereunder by the Benefited Parties. Collateral Agent
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shall be obligated, and shall have the right hereunder, to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking any action (including without limitation the release or substitution of Pledged Collateral), solely in accordance with this Agreement, the Intercreditor Agreement and the other Credit Documents; provided that Collateral Agent shall exercise, or refrain from exercising, any remedies provided for in Section 11 in accordance with the instructions of Requisite Obligees.
(b) Collateral Agent shall at all times be the same Person that is Collateral Agent under the Intercreditor Agreement. Written notice of resignation by Collateral Agent pursuant to subsections 6.1(h) or (i) of the Intercreditor Agreement shall also constitute notice of resignation as Collateral Agent under this Agreement; removal of Collateral Agent pursuant to subsections 6.1(h) or (i) of the Intercreditor Agreement shall also constitute removal as Collateral Agent under this Agreement; and appointment of a successor Collateral Agent pursuant to subsections 6.1(h) or (i) of the Intercreditor Agreement shall also constitute appointment of a successor Collateral Agent under this Agreement. Upon the acceptance of any appointment as Collateral Agent under subsections 6.1(h) or (i) of the Intercreditor Agreement by a successor Collateral Agent, that successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Collateral Agent under this Agreement, and the retiring or removed Collateral Agent under this Agreement shall promptly (i) transfer to such successor Collateral Agent all sums, securities and other items of Collateral held hereunder, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Collateral Agent under this Agreement, and (ii) execute and deliver to such successor Collateral Agent such amendments to financing statements, and take such other actions, as may be necessary or appropriate in connection with the assignment to such successor Collateral Agent of the security interest created hereunder, whereupon such retiring or removed Collateral Agent shall be discharged from its duties and obligations under this Agreement. After any retiring or removed Collateral Agent's resignation or removal hereunder as Collateral Agent, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was Collateral Agent hereunder.
SECTION 16. [INTENTIONALLY OMITTED]
SECTION 17. AMENDMENTS; ETC. No amendment, modification, termination or waiver of any provision of this Agreement, and no consent to any departure by Pledgor therefrom, shall in any event be effective unless the same shall be in writing and signed by Collateral Agent and, in the case of any such amendment or modification, by Pledgor. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given.
SECTION 18. NOTICES. Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served, or sent by telefacsimile or United States mail or courier service or electronic mail and shall be deemed to have been given (a) when delivered in person or by courier service, (b) upon receipt of telefacsimile in complete and legible form, or (c) three
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Business Days after depositing it in the United States mail with postage prepaid and properly addressed; provided that notices to Collateral Agent shall not be effective until received. For the purposes hereof, the address of each party hereto shall be as set forth under such party's name on the signature pages hereof or such other address as shall be designated by such Person in a written notice delivered to such other party hereto.
Notices and other communications hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by Collateral Agent. Collateral Agent may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.
SECTION 19. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of Collateral Agent in the exercise of any power, right or privilege hereunder shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude any other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.
SECTION 20. SEVERABILITY. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 21. HEADINGS. Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect.
SECTION 22. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THAT WOULD REQUIRE APPLICATION OF ANOTHER LAW, EXCEPT TO THE EXTENT THAT THE UCC PROVIDES THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein or in the Credit Documents, terms used in Articles 8 and 9 of the UCC are used herein as therein defined. The rules of construction set forth in subsection 1.3 of each Credit Agreement shall be applicable to this Agreement mutatis mutandis.
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SECTION 23. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST PLEDGOR ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, PLEDGOR, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO PLEDGOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 18; (IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER PLEDGOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; (V) AGREES THAT COLLATERAL AGENT RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION; AND (VI) AGREES THAT THE PROVISIONS OF THIS SECTION 23 RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.
SECTION 24. WAIVER OF JURY TRIAL. PLEDGOR AND COLLATERAL AGENT HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including without limitation contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. Pledgor and Collateral Agent acknowledge that this waiver is a material inducement for Pledgor and Collateral Agent to enter into a business relationship, that Pledgor and Collateral Agent have already relied on this waiver in entering into this Agreement and that each will continue to rely on this waiver in their related future dealings. Pledgor and Collateral Agent further warrant and represent that each has reviewed this waiver with its legal counsel, and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 24 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
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SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.
SECTION 25. COUNTERPARTS. This Agreement may be executed in one or more counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. Delivery of an executed counterpart of a signature page to this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart thereof.
SECTION 26. SURETYSHIP WAIVERS BY PLEDGOR, ETC.
(a) Pledgor agrees that its obligations hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than payment in full of all Secured Obligations (other than contingent indemnification Secured Obligations with respect to claims which have not yet arisen). In furtherance of the foregoing and without limiting the generality thereof, Pledgor agrees as follows: (i) Collateral Agent or any Benefited Party may from time to time, without notice or demand and without affecting the validity or enforceability of this Agreement or giving rise to any limitation, impairment or discharge of Pledgor's liability hereunder, (A) renew, extend, accelerate or otherwise change the time, place, manner or terms of payment of the Secured Obligations, (B) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Secured Obligations or any agreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations, (C) request and accept guaranties of the Secured Obligations and take and hold other security for the payment of the Secured Obligations, (D) release, exchange, compromise, subordinate or modify, with or without consideration, any other security for payment of the Secured Obligations, any guaranties of the Secured Obligations, or any other obligation of any Person with respect to the Secured Obligations, (E) enforce and apply any other security now or hereafter held by or for the benefit of Collateral Agent or any Benefited Party in respect of the Secured Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that Collateral Agent or any Benefited Party, or any of them, may have against any such security, as Collateral Agent in its discretion may determine consistent with the Credit Documents and any applicable security agreement, including foreclosure on any such security pursuant to one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable, and (F) exercise any other rights available to Collateral Agent or any Benefited Party under the Credit Documents at law or in equity; and (ii) this Agreement and the obligations of Pledgor hereunder shall be valid and enforceable and shall not be subject to any limitation, impairment or discharge for any reason (other than payment in full of the Secured Obligations (other than contingent indemnification Secured Obligations with respect to claims which have not yet arisen)), including without limitation the occurrence of any of the following, whether or not Pledgor shall have had notice or knowledge of any of them: (A) any failure to assert or enforce or agreement not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the
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exercise or enforcement of, any claim or demand or any right, power or remedy with respect to the Secured Obligations or any agreement relating thereto, or with respect to any guaranty of or other security for the payment of the Secured Obligations, (B) any waiver, amendment or modification of, or any consent to departure from, any of the terms or provisions of the Credit Documents, or any agreement or instrument executed pursuant thereto, or of any guaranty or other security for the Secured Obligations, (C) the Secured Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or unenforceable in any respect, (D) the application of payments received from any source to the payment of indebtedness other than the Secured Obligations, even though Collateral Agent or Benefited Parties, or any of them, might have elected to apply such payment to any part or all of the Secured Obligations, (E) any failure to perfect or continue perfection of a security interest in any other collateral which secures any of the Secured Obligations, (F) any defenses, set-offs or counterclaims which any Borrower may allege or assert against Collateral Agent or any Benefited Party in respect of the Secured Obligations, including but not limited to failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction and usury, and (G) any other act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of Pledgor as an obligor in respect of the Secured Obligations.
(b) Pledgor hereby waives, for the benefit of Benefited Parties and Collateral Agent: (i) any right to require Collateral Agent or Benefited Parties as a condition of payment or performance by Pledgor, to (A) proceed against any Borrower, any guarantor of the Secured Obligations or any other Person, (B) proceed against or exhaust any other security held from any Borrower, any guarantor of the Secured Obligations or any other Person, (C) proceed against or have resort to any balance of any deposit account or credit on the books of Collateral Agent, any Benefited Party in favor of any Borrower or any other Person, or (D) pursue any other remedy in the power of Collateral Agent or any Benefited Party whatsoever; (ii) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of any Borrower including, without limitation, any defense based on or arising out of the lack of validity or the unenforceability of the Secured Obligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of any Borrower from any cause other than payment in full of all Secured Obligations; (iii) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (iv) any defense based upon Collateral Agent's or any Benefited Party's errors or omissions in the administration of the Secured Obligations, except behavior which amounts to gross negligence or willful misconduct; (v) (A) any principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms of this Agreement and any legal or equitable discharge of Pledgor's obligations hereunder, (B) the benefit of any statute of limitations affecting Pledgor's liability hereunder or the enforcement hereof, (C) any rights to set-offs, recoupments and counterclaims, and (D) promptness, diligence and any requirement that Collateral Agent or any Benefited Party protect, secure, perfect or insure any other security interest or lien or any property subject thereto; (vi) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, notices of default under the Credit Documents or any agreement or instrument related thereto, notices of any renewal, extension or modification of the Secured Obligations or any agreement related thereto, notices of any extension of credit to any Borrower and
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notices of any of the matters referred to in Section 26(a) and any right to consent to any thereof; and (vii) to the fullest extent permitted by law, any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms of this Agreement.
(c) Until the Secured Obligations shall have been paid in full
and the Commitments shall have terminated, Pledgor shall withhold exercise of
(i) any claim, right or remedy, direct or indirect, that Pledgor now has or may
hereafter have against any Borrower or any assets of any Borrower in connection
with this Agreement or the performance by Pledgor of its obligations hereunder,
in each case whether such claim, right or remedy arises in equity, under
contract, by statute, under common law or otherwise and including without
limitation (A) any right of subrogation, reimbursement or indemnification that
Pledgor now has or may hereafter have against any Borrower, (B) any right to
enforce, or to participate in, any claim, right or remedy that Collateral Agent
or any Benefited Party now has or may hereafter have against any Borrower, and
(C) any benefit of, and any right to participate in, any other collateral or
security now or hereafter held by Collateral Agent or any Benefited Party, and
(ii) any right of contribution Pledgor now has or may hereafter have against any
guarantor of any of the Secured Obligations. Pledgor further agrees that, to the
extent the agreement to withhold exercise of its rights of subrogation,
reimbursement, indemnification and contribution as set forth herein is found by
a court of competent jurisdiction to be void or voidable for any reason, any
rights of subrogation, reimbursement or indemnification Pledgor may have against
any Borrower or against any other collateral or security, and any rights of
contribution Pledgor may have against any such guarantor, shall be junior and
subordinate to any rights Collateral Agent or Benefited Parties may have against
such Borrower, to all right, title and interest Collateral Agent or Benefited
Parties may have in any such other collateral or security, and to any right
Collateral Agent or Benefited Parties may have against any such guarantor.
(d) Benefited Parties and Collateral Agent shall have no obligation to disclose or discuss with Pledgor their respective assessments, or Pledgor's assessment, of the financial condition of Borrowers. Pledgor has adequate means to obtain information from Borrowers on a continuing basis concerning the financial condition of Borrowers and their ability to perform their obligations under the Credit Documents and Pledgor assumes the responsibility for being and keeping informed of the financial condition of Borrowers and of all circumstances bearing upon the risk of nonpayment of the Secured Obligations. Pledgor hereby waives and relinquishes any duty on the part of Collateral Agent or any Benefited Party to disclose any matter, fact or thing relating to the business, operations or condition of Borrowers now known or hereafter known by Collateral Agent or any Benefited Party.
SECTION 27. LIMITED RECOURSE. Notwithstanding anything to the contrary in this Agreement, no recourse shall be had, whether by levy or execution, or under any law, or by the enforcement of any assessment or penalty or otherwise, for the payment of any of the Secured Obligations, against Pledgor individually or personally, any successor or Affiliate of Pledgor, or any of the assets of the aforesaid persons, it being expressly understood that the sole remedies available to Collateral Agent and the Secured Parties pursuant to this Agreement with respect to the Secured Obligations shall be against the Pledged Collateral; provided that nothing in this Section 27 shall (i) constitute a waiver, release or discharge of
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any of the Secured Obligations, but the same shall continue until fully paid, discharged, observed or performed, or (ii) in any way limit or restrict any right of Collateral Agent or the Secured Parties to foreclose the Liens and the security interest granted pursuant to this Agreement or otherwise realize upon any of the Pledged Collateral.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, Pledgor and Collateral Agent have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.
COVANTA ENERGY AMERICAS, INC.,
as Pledgor
By: __________________________
Name: _______________________
Title: ________________________
Notice Address for Pledgor:
CEA Stock Pledge Agreement
BANK OF AMERICA, N.A.,
as Collateral Agent
By: __________________________
Name: _______________________
Title: ________________________
Notice Address for Collateral Agent:
Bank of America, N.A., as Collateral Agent
555 So. Flower Street, 17th Floor
CA9-706-17-54
Los Angeles, California 90071
Attention: David Price, Vice President
Voice: (213) 345-1300
Fax: (415) 503-5011
email: david.price@bankofamerica.com
SCHEDULE I
Attached to and forming a part of the Pledge Agreement dated as of March __, 2004 between Covanta Energy Americas, Inc., as Pledgor, and Bank of America, N.A., as Collateral Agent.
Part A
AMOUNT OF
CLASS EQUITY PERCENTAGE
ISSUER OF EQUITY INTEREST CERTIFICATE NOS. INTERESTS PLEDGED
|
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SCHEDULE-I-1
SCHEDULE II
PLEDGE AGREEMENT
FILING OFFICE
Pledgor Filing Office |
CEA Stock Pledge Agreement
SCHEDULE II-1
SCHEDULE III
OFFICE, TYPE AND JURISDICTION OF ORGANIZATION
NAME OF TYPE OF JURISDICTION OF PLEDGOR ORGANIZATION ORGANIZATION ORGANIZATION NUMBER |
NAMES OF PLEDGOR USED IN PAST FIVE YEARS
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SCHEDULE III-1
SCHEDULE IV
PLEDGE AMENDMENT
This Pledge Amendment, dated ____________, ____, is delivered pursuant to Section 6(b) of the Pledge Agreement referred to below. The undersigned hereby agrees that this Pledge Amendment may be attached to the Pledge Agreement dated March __, 2004, between Covanta Energy Americas, Inc., as Pledgor, and Bank of America, N.A., as Collateral Agent (the "PLEDGE AGREEMENT," capitalized terms defined therein being used herein as therein defined), and that the Capital Stock listed on this Pledge Amendment shall be deemed to be part of the Pledged Equity and shall become part of the Pledged Collateral and shall secure all Secured Obligations.
COVANTA ENERGY AMERICAS, INC.,
as Pledgor
By: ___________________________
Title:
Class of Amount of Percentage
Equity Certificate Equity Ownership Percentage
Issuer Interests Nos. Interests Interest Pledged
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EXHIBIT 4.30
EXECUTION COPY
SECURITY AND PLEDGE AGREEMENT
SECURITY AND PLEDGE AGREEMENT (the "Agreement"), dated as of January 31 2003 by and among AMERICAN COMMERCIAL LINES LLC, a Delaware corporation (the "Borrower"), and the subsidiaries of the Borrower signatory hereto (together with the Borrower, the "Grantors"), each a debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code and JPMORGAN CHASE BANK, as agent (in such capacity, the "Agent") for the financial institutions and other lenders (the "Lenders") party to the Credit Agreement (as hereinafter defined).
WHEREAS, contemporaneously with the execution and delivery of this Agreement, the Agent, the Lenders and the Grantors are entering into a Revolving Credit and Guaranty Agreement dated as of the date hereof (as amended, modified or supplemented from time to time, the "Credit Agreement"); and
WHEREAS, unless otherwise defined herein, terms defined in the Credit Agreement are used herein as therein defined; and
WHEREAS, it is a condition precedent to the making of Loans and the issuance of Letters of Credit that the Grantors shall have granted a security interest, pledge and lien on (x) all cash and cash equivalents maintained in the Letter of Credit Account pursuant to Section 364(c)(2) of the Bankruptcy Code and (y) certain of the Grantors' assets and properties and the proceeds thereof pursuant to Sections 364(c)(2), 364(c)(3) and 364(d)(1) of the Bankruptcy Code; and
WHEREAS, the grant of such security interest, pledge and lien has been authorized pursuant to Sections 364(c)(2), 364(c)(3) and 364(d)(1) of the Bankruptcy Code by the Interim Order and (after its entry by the Bankruptcy Court) the Final Order; and,
WHEREAS, to supplement the Interim Order and the Final Order without in any way diminishing or limiting the effect of the Interim Order and the Final Order or the security interest, pledge and lien granted thereunder, the parties hereto desire to more fully set forth their respective rights in connection with such security interest, pledge and lien; and
WHEREAS, this Agreement has been approved by the Interim Order and (after its entry by the Bankruptcy Court) the Final Order;
NOW, THEREFORE, in consideration of the premises and in order to induce the Lenders to make Loans and issue Letters of Credit, the Grantors hereby agree with the Agent as follows:
SECTION 1. GRANT OF SECURITY AND PLEDGE. Each of the Grantors hereby transfers, grants, bargains, sells, conveys, hypothecates, assigns, pledges and sets over to the Agent for its benefit and the ratable benefit of the Lenders and hereby grants to the Agent for its benefit and the ratable benefit of the Lenders, a perfected pledge and security interest in all of each Grantors' right, title and interest in and to the following (the "Collateral"), which pledge and security interest shall be subject to the priorities and other terms set forth in Section 2.23 of the Credit Agreement:
(a) all present and future accounts, accounts receivable, rents, charters, charter hires, freights, sub-freights, cargoes, operating profits, rights to stoppage in transit, and other rights of each of the Grantors to payment for goods sold or leased or for services rendered (except those evidenced by instruments or chattel paper), whether now existing or hereafter arising and wherever arising, and whether or not they have been earned by performance (collectively, the "Accounts");
(b) all goods and merchandise now owned or hereafter acquired by each of the Grantors wherever located, whether in the possession of a Grantor or of a bailee or other person for sale, storage, transit, processing, use or otherwise consisting of whole goods, components, supplies, materials, or consigned, returned or repossessed goods which are held for sale or lease or to be furnished (or have been furnished) under any contract of service or which are raw materials, work-in-process, finished goods or materials used or consumed in such Grantor's business or processed by or on behalf of any Grantor (collectively, the "Inventory");
(c) all machinery, all manufacturing, distribution, selling, data processing and office equipment, all furniture, furnishings, appliances, fixtures and trade fixtures, tools, tooling, molds, dies, vehicles, aircraft, vessels, boilers, engines, masts, spars, rigging, boats, pumps, anchors, cables, chains, tackle, apparel, fittings, equipment, other appurtenances and all other goods of every type and description (other than Inventory), in each instance whether now owned or hereafter acquired by each of the Grantors and wherever located (collectively, the "Equipment");
(d) all works of art now owned or hereafter acquired by each of the Grantors, including, without limitation, paintings, sketches, drawings, prints, sculptures, crafts, tapestries, porcelain, carvings, artifacts, renderings and designs;
(e) all rights, interests, choses in action, causes of action, claims and all other intangible property of each of the Grantors of every kind and nature (other than Accounts, Trademarks, Patents and Copyrights), in each instance whether now owned or hereafter acquired by such Grantor, including, without limitation, all general intangibles, but excluding avoidance actions under the Bankruptcy Code (it being understood and agreed, however, that the proceeds of any such avoidance actions shall be available to repay the Obligations); all corporate and other business records; all loans, royalties, and other obligations receivable; all inventions, designs, trade secrets, computer programs, software, printouts and other computer materials, goodwill, registrations, copyrights, licenses, franchises, customer lists, credit files, correspondence, and advertising materials (to the extent the same are assignable); all customer and supplier contracts, firm sale orders, rights under license and franchise agreements (including all license agreements with any other Person in connection with any of the Patents and Trademarks or such other
Person's names or marks, whether such Grantor is a licensor or licensee under any such license agreement but only to the extent such license agreements are assignable), and other contracts and contract rights; all interests in partnerships and joint ventures; all tax refunds and tax refund claims; all right, title and interest under leases, subleases, licenses and concessions and other agreements to the extent assignable relating to real or personal property; all payments due or made to each of the Grantors in connection with any requisition, confiscation, condemnation, seizure or forfeiture of any property by any person or governmental authority; all deposit accounts (general or special) with any bank or other financial institution; all credits with and other claims against carriers and shippers; all rights to indemnification; all reversionary interests in pension and profit sharing plans and reversionary, beneficial and residual interest in trusts; all proceeds of insurance of which each of the Grantors is beneficiary; and all letters of credit, guaranties, liens, security interest and other security held by or granted to each of the Grantors; and all other intangible property, whether or not similar to the foregoing (collectively, the "General Intangibles");
(f) all chattel paper, all instruments, all notes and debt instruments and all payments thereunder and instruments and other property from time to time delivered in respect thereof or in exchange therefor, and all bills of lading, warehouse receipts and other documents of title and documents, in each instance whether now owned or hereafter acquired by each of the Grantors;
(g) all property or interests in property now or hereafter acquired by each of the Grantors which may be owned or hereafter may come into the possession, custody or control of the Agent or any agent or affiliate of the Agent in any way or for any purpose (whether for safekeeping, deposit, custody, pledge, transmission, collection or otherwise), and all rights and interests of each of the Grantors, now existing or hereafter arising and however and wherever arising, in respect of any and all (i) notes, drafts, letters of credits, stocks, bonds, and debt and equity securities, whether or not certificated, and warrants, options, puts and calls and other rights to acquire or otherwise relating to the same; (ii) money (including all cash and cash equivalents held in the Letter of Credit Account (as defined and referred to in the Credit Agreement)); (iii) proceeds of loans, including, without limitation, Loans made under the Credit Agreement; and (iv) insurance proceeds and books and records relating to any of the property covered by this Agreement; together, in each instance, with all accessions and additions thereto, substitutions therefor, and replacements, proceeds and products thereof;
(h) all trademarks, trade names, trade styles, service marks, prints and labels on which said trademarks, trade names, trade styles and service marks have appeared or appear, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, and all registrations and recordings thereof, including, without limitation, applications, registrations and recordings in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof, or any other country or political subdivision thereof (except for "intent to use" applications for trademark or service mark registrations filed pursuant to Section 1(b) of the Lanham Act, unless and until an Amendment to Allege Use or a Statement of Use under Sections 1(c) and 1(d) of said Act has been filed), all whether now owned or hereafter acquired by each of the Grantors, including, but not limited to, those described in Schedule 3 annexed hereto and made a part hereof, and all reissues, extensions or renewals thereof and all licenses thereof (together, in each case, with the goodwill of the
business connected with the use of, and symbolized by each such trademark, service mark, trade name and trade dress, all of the foregoing being herein referred to as the "Trademarks");
(i) all letters patent of the United States or any other country, and all registrations and recordings thereof, including, without limitation, applications, registrations and recordings in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, all whether now owned or hereafter acquired by each of the Grantors, including, but not limited to, those described in Schedule 3 annexed hereto and made a part hereof, and (ii) all reissues, continuations, continuations-in-part or extensions thereof and all licenses thereof (all of the foregoing being herein referred to as the "Patents");
(j) all copyrights of the United States, or any other country, and all registrations and recordings thereof, including, without limitation, applications, registrations and recordings in the United States Copyright Office or in any similar office or agency of the United States, any State thereof, or any other country or political subdivision thereof, all whether now owned or hereafter acquired by each of the Grantors, including, but not limited to, those described in Schedule 3 hereto and all renewals and extensions thereof and all licenses thereof (all of the foregoing being herein referred to as the "Copyrights");
(k) all books, records, ledger cards and other property at any time evidencing or relating to the Accounts, Equipment, General Intangibles, Trademarks, Patents or Copyrights;
(l) (i) all the shares of capital stock and membership interests
owned by each Grantor, as applicable, listed on Schedule 4 hereto of the issuers
listed thereon (individually, an "Issuer", and collectively, the "Issuers") and
all shares of capital stock and membership interests of any Issuer obtained in
the future by such Grantor and the certificates representing or evidencing all
such shares (the "Pledged Shares"); (ii) all other property which may be
delivered to and held by the Agent in respect of the Pledged Shares pursuant to
the terms hereof; (iii) subject to Section 9 below, all dividends, cash,
instruments and other property from time to time received, receivable or
otherwise distributed, in respect of, in exchange for or upon the conversion of
the securities referred to in clauses (i) and (ii) above; and (iv) subject to
Section 9 below, all rights and privileges of each Grantor, as applicable, with
respect to the securities and other property referred to in clauses (i), (ii)
and (iii) (the items referred to in clauses (i) through (iv) being collectively
called the "Pledged Collateral");
(m) all other personal property of each of the Grantors, whether tangible or intangible, and whether now owned or hereafter acquired; and
(n) all proceeds and products of any of the foregoing, in any form, including, without limitation, any claims against third parties for loss or damage to or destruction of any or all of the foregoing and to the extent not otherwise included, all (i) payments under insurance (whether or not the Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral and (ii) cash.
Notwithstanding anything contained herein to the contrary, the total amount of shares of capital stock or other ownership interests of any Person pledged pursuant to Section 1(l) above that is not incorporated or organized in the United States shall in no event exceed sixty-five percent (65%) of the total outstanding shares of capital stock or such other ownership interests thereof.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement and the Collateral secure the payment of all obligations of each of the Grantors, now or hereafter existing, under the Credit Agreement and the other Loan Documents (and any other documents in respect of such obligations), and in respect of Indebtedness permitted by Section 6.03(v) of the Credit Agreement, whether for principal, interest, fees, expenses or otherwise, and all obligations of each of the Grantors now or hereafter existing under or in respect of this Agreement (all such obligations of the Grantor being herein called the "Obligations").
SECTION 3. DELIVERY OF PLEDGED COLLATERAL; OTHER ACTION. Upon written request by the Agent (and without further order of the Bankruptcy Court), all certificates or instruments representing or evidencing the Pledged Collateral shall be delivered to and held by the Agent pursuant hereto and shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Agent. Upon the occurrence and during the continuance of any Event of Default, the Agent shall have the right (for the ratable benefit of the Lenders), at any time in its discretion and without notice to the Grantors to transfer to or to register in the name of the Agent or any of its nominees any or all of the Pledged Collateral.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Each Grantor, jointly and severally, represents and warrants as follows:
(a) All of the Inventory and/or Equipment is located at the places specified in Schedule 1 hereto. The chief places of business and chief executive offices of each of the Grantors and the offices where each Grantor keeps its records concerning any Accounts and all originals of all chattel paper which evidence any Account are located at the places specified in Schedule 2 hereto. All registered trade names under which each of the Grantors have sold and will sell Inventory are listed on Schedule 3 hereto.
(b) Each of the Grantors owns the Collateral free and clear of any lien, security interest, charge or encumbrance except for the security interest created by this Agreement and except as permitted under Section 6.01 of the Credit Agreement. No effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any recording office, except (x) such as may have been filed in favor of the Agent relating to this Agreement and (y) in favor of any holder of a Lien permitted under Section 6.01 of the Credit Agreement.
(c) As of the Filing Date, no Grantor owns any material Trademarks, Patents or Copyrights or has any material Trademarks, Patents or Copyrights registered in, or the subject of pending applications in, the United States Patent and Trademark Office or any similar office or agency in any other country or any political subdivision thereof, other than those described in Schedule 3 hereto. The registrations for the Collateral disclosed on such Schedule 3 hereto are valid and subsisting and in full force and effect. None of the material Patents or Copyrights have been abandoned or dedicated.
(d) The Pledged Shares have been duly authorized and validly issued and are fully paid and non-assessable.
(e) Each Grantor, as the case may be, is the legal and beneficial owner of the Pledged Shares as described on Schedule 4, free and clear of any lien, security interest, option or other charge or encumbrance, except for the security interest created by this Agreement and the Final Order and Liens permitted under Section 6.01.
(f) Except as disclosed on Schedule 4, the Pledged Shares described in Section 1(l) hereof constitute all of the issued and outstanding shares of stock of each of the Issuers and no Issuer is under any contractual obligation to issue any additional shares of stock or any other securities, rights or indebtedness.
(g) Except for the Interim Order and the Final Order, no authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required either (i) for the grant and pledge by each of the Grantors of the security interests granted hereby or for the execution, delivery or performance of this Agreement by each of the Grantors or (ii) for the perfection of the security interests (except for such recordation of preferred ship mortgages with the United States Coast Guard as may be required by the Ship Mortgage Act) or the exercise by the Agent of its rights and remedies hereunder.
SECTION 5. FURTHER ASSURANCES.
(a) Each of the Grantors agrees that from time to time, at the expense of the Grantors, it will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary, or that the Agent may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Agent to exercise and enforce any of its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, and without further order of the Bankruptcy Court, each of the Grantors will execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary, or as the Agent may reasonably request, in order to perfect and preserve the security interests granted or purported to be granted hereby.
(b) Each Grantor hereby authorizes the Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of such Grantor where permitted by law.
(c) Each Grantor will furnish to the Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Agent may reasonably request, all in reasonable detail.
SECTION 6. AS TO EQUIPMENT AND INVENTORY. Each Grantor shall:
(a) Keep the Equipment and Inventory (other than Inventory sold in the ordinary course of business) at the places specified therefor in Schedule 1 hereto or, upon 30 days' prior written notice to the Agent following any transfer thereof to a different jurisdiction, at other places in jurisdictions where all action required by Section 5 shall have been taken to assure the continuation of the perfection of the security interest of the Agent (for its benefit and the ratable benefit of the Lenders) with respect to the Equipment and Inventory.
(b) Subject to provisions of the Credit Agreement, maintain or cause to be maintained in good repair, working order and condition, excepting ordinary wear and tear and damage due to casualty, all of the Equipment, and make or cause to be made all appropriate repairs, renewals and replacements thereof, to the extent not obsolete and consistent with past practice of such Grantor, as quickly as practicable after the occurrence of any loss or damage thereto which are necessary or reasonably desirable to such end, except where the failure to do any of the foregoing would not result in a material adverse effect on the assets, properties, condition (financial or otherwise), operations or prospects of the Grantors, taken as a whole.
(c) Until satisfaction in full of the Obligations, at any time when an Event of Default has occurred and is continuing: (i) each Grantor will perform any and all reasonable actions requested by the Agent to enforce the Agent's security interest in the Inventory and all of the Agent's rights hereunder, such as subleasing warehouses to the Agent or its designee, placing and maintaining signs, appointing custodians, transferring Inventory to warehouses, and delivering to the Agent warehouse receipts and documents of title in the Agent's name; (ii) if any Inventory is in the possession or control of any of the Grantors' agents, contractors or processors or any other third party, each such Grantor will notify the Agent thereof and will notify such agents, contractors or processors or third party of the Agent's security interest therein and, upon request, instruct them to hold all such Inventory for the Agent and such Grantor's account, as their interests may appear, and subject to the Agent's instructions; (iii) the Agent shall have the right to hold all Inventory subject to the security interest granted hereunder; and (iv) the Agent shall have the right to take possession of the Inventory or any part thereof and to maintain such possession on such Grantor's premises or to remove any or all of the Inventory to such other place or places as the Agent desires in its sole discretion. If the Agent exercises its right to take possession of the Inventory, such Grantor, upon the Agent's demand, will assemble the Inventory and make it available to the Agent at such Grantor's premises at which it is located.
SECTION 7. AS TO ACCOUNTS.
(a) Each Grantor shall keep its chief place of business and chief
executive office and the offices where it keeps its records concerning the
Accounts, and the offices where it keeps all originals of all chattel paper
which evidence Accounts, at the location or locations therefor specified in
Section 4(a) or, upon 15 days' prior written notice to the Agent, at such other
locations in a jurisdiction where all actions required by Section 5 shall have
been taken with respect to the Accounts. Each Grantor will hold and preserve
such records and chattel paper and will permit representatives of the Agent, at
any time during normal business hours and upon reasonable prior written notice,
to inspect and make abstracts from such records and chattel paper in accordance
with Section 5.06 of the Credit Agreement.
(b) Except as otherwise provided in this subsection (b), each
Grantor shall continue to collect in accordance with its customary practice, at
its own expense, all amounts due or to become due to such Grantor under the
Accounts and, prior to the occurrence and continuance of an Event of Default,
such Grantor shall have the right to adjust, settle or compromise the amount or
payment of any Account, or release wholly or partly any account debtor or
obligor thereof, or allow any credit or discount thereon, all in accordance with
its customary practices. In connection with such collections, the Grantors may,
upon the occurrence and during the continuation of an Event of Default, take
(and at the direction of the Agent shall take) such action as the Grantors or
the Agent may reasonably deem necessary or advisable to enforce collection of
the Accounts; provided, that upon written notice by the Agent to any Grantor,
following the occurrence and during the continuation of an Event of Default, of
its intention so to do, the Agent shall have the right to notify the account
debtors or obligors under any Accounts of the assignment of such Accounts to the
Agent and to direct such account debtors or obligors to make payment of all
amounts due or to become due to such Grantor thereunder directly to the Agent
and, upon such notification and at the expense of such Grantor, to enforce
collection of any such Accounts, and to adjust, settle or compromise the amount
or payment thereof, in the same manner and to the same extent as such Grantor
might have done. After receipt by such Grantor of the notice referred to in the
proviso to the preceding sentence, and unless and until such notice is rescinded
by the Agent by written notice to such Grantor (i) all amounts and proceeds
(including instruments) received by such Grantor in respect of the Accounts
shall be received in trust for the benefit of the Agent (for the ratable benefit
of the Lenders) hereunder, shall be segregated from other funds of the Grantors
and shall be forthwith paid over to the Agent in the same form as so received
(with any necessary endorsement) to be held as cash collateral and either (A)
released to the Grantors if such Event of Default shall have been cured or
waived or (B) if such Event of Default shall be continuing, applied as provided
by Section 15, and (ii) the Grantors shall not adjust, settle or compromise the
amount or payment of any Account, or release wholly or partly any account debtor
or obligor thereof, or allow any credit or discount thereon.
SECTION 8. AS TO TRADEMARKS, PATENTS AND COPYRIGHTS.
(a) Each Grantor shall, either itself or through licensees, continue to use the Trademarks as each is currently used in the Grantor's business in order to maintain the Trademarks in full force free from any claim of abandonment for nonuse and each such Grantor will not (and will not permit any licensee thereof to) do any act or knowingly omit to do any act whereby any Trademark may become invalidated, unless such failure to use a Trademark is not reasonably likely to have a material adverse effect on the assets, properties, condition (financial or otherwise), operations or prospects of the Grantors taken as a whole.
(b) No Grantor will do any act, or omit to do any act, whereby the Patents or Copyrights may become abandoned or dedicated and each such Grantor shall notify the Agent immediately if it knows of any reason or has reason to know that any application or registration may become abandoned or dedicated, unless such abandonment or dedication is not reasonably likely to have a material adverse effect on the condition (financial or otherwise), operations or properties of the Grantors taken as a whole.
(c) No Grantor will, either itself or through any agent, employee,
licensee or designee (i) file an application for the registration of any Patent
or Trademark with the United States Patent and Trademark Office or any similar
office or agency in any other country or any political subdivision thereof or
(ii) file any assignment of any patent or trademark, which such Grantor may
acquire from a third party, with the United States Patent and Trademark Office
or any similar office or agency in any other country or any political
subdivision thereof, unless such Grantor shall, within 30 days after the date of
such filing, notify the Agent thereof, and, upon request of the Agent, execute
and deliver any and all assignments, agreements, instruments, documents and
papers as the Agent may request to evidence the Agent's interest in such Patent
or Trademark and the goodwill and general intangibles of such Grantor relating
thereto or represented thereby, and such Grantor hereby constitutes the Agent
its attorney-in-fact to execute and file all such writings for the foregoing
purposes, all lawful acts of such attorney being hereby ratified and confirmed;
such power being coupled with an interest is irrevocable until the Obligations
are paid in full.
(d) Each Grantor will take all necessary steps in any proceeding before the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, to maintain in all material respects each application and registration of all material Trademarks, Patents and Copyrights, including, without limitation, filing of renewals, affidavits of use, affidavits of incontestability and opposition, interference and cancellation proceedings.
(e) Each Grantor will, without further order of the Bankruptcy Court, perform all acts and execute and deliver all further instruments and documents, including, without limitation, assignments for security in form suitable for filing with the United States Patent and Trademark Office, and the United States Copyright Office, respectively, reasonably requested by the Agent at any time to evidence, perfect, maintain, record and enforce the Agent's interest in all material Trademarks, Patents and Copyrights or otherwise in furtherance of the provisions of this Agreement, and each Grantor hereby authorizes the Agent to execute and file one or more accurate financing statements (and similar documents) or copies thereof or of this Security Agreement with respect to material Patents, Trademarks and Copyrights signed only by the Agent.
(f) Each Grantor will, upon acquiring knowledge of any use by any person of any term or design likely to cause confusion with any material Trademark, promptly notify the Agent of such use, and if requested by the Agent, shall join with the Agent, at such Grantor's expense, in such action as the Agent, in its reasonable discretion, may deem advisable for the protection of the Agent's interest in and to the Trademarks.
SECTION 9. AS TO THE PLEDGED COLLATERAL; VOTING RIGHTS; DIVIDENDS; ETC.
(a) So long as no Event of Default shall have occurred and be continuing:
(i) the Grantors (as applicable) shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement;
(ii) notwithstanding the provisions of Section 1 hereof, such Grantors shall be entitled to receive and retain any and all dividends and other distributions paid in respect of the Pledged Collateral; provided, that any and all
(A) dividends paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Pledged Collateral, and
(B) dividends and other distributions paid or payable in cash in respect of any Pledged Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus,
(C) cash paid, payable or otherwise distributed in respect of, or in redemption of, or in exchange for, any Pledged Shares;
shall be, and shall be forthwith delivered to the Agent to hold as, Pledged Collateral and shall, if received by any of the Grantors, be received in trust for the benefit of the Agent, be segregated from the other property or funds of such Grantor, and be forthwith delivered to the Agent as Pledged Collateral in the same form as so received (with any necessary endorsement); and
(iii) the Agent shall execute and deliver (or cause to be executed and delivered) to the Grantors (as applicable) all such proxies and other instruments as the Grantors (as applicable) may reasonably request for the purpose of enabling such Grantor to exercise the voting and other rights which it is entitled to exercise pursuant to paragraph (i) above and to receive the dividends which it is authorized to receive and retain pursuant to paragraph (ii) above;
(b) Upon the occurrence and during the continuance of an Event of Default:
(i) upon written notice from the Agent to the Grantors (as applicable) to such effect, all rights of such Grantors (as applicable) to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 9(a)(i) and to receive the dividends which it would otherwise be authorized to receive and retain pursuant to Section 9(a)(ii) shall cease, and all such rights shall thereupon become vested in the Agent, who shall thereupon have the sole right to exercise such voting and other consensual rights and to receive and hold as Pledged Collateral any such dividends; and
(ii) all dividends which are received by such Grantors contrary to the provisions of paragraph (i) of this Section 9(b) shall be received in trust for the benefit of the Agent, shall be segregated from other funds of the Grantors and shall be forthwith paid over to the Agent as Pledged Collateral in the same form as so received (with any necessary endorsement).
SECTION 10. INSURANCE. Upon the occurrence and during the continuance of any Event of Default, all insurance payments in respect of Inventory and Equipment shall be held, applied and paid to the Agent as specified in Section 15 hereof.
SECTION 11. TRANSFERS TO OTHERS; LIENS; ADDITIONAL SHARES. Each Grantor shall not:
(a) Sell, assign (by operation of law or otherwise) or otherwise dispose of any of the Collateral, except for dispositions otherwise permitted by the Credit Agreement.
(b) Create or suffer to exist any lien, security interest or other charge or encumbrance upon or with respect to any of the Collateral to secure any obligation of any person or entity, except for the security interest created by this Agreement, the Credit Agreement and the Final Order, or except as otherwise permitted by the Credit Agreement.
(c) Each of the Grantors (as applicable) agrees that it will (i) cause each of the Issuers that are wholly-owned Subsidiaries not to issue any stock or other securities in addition to or substitution for the Pledged Shares issued by such Issuer, except to the respective Grantor and (ii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all such additional shares of stock or other securities of each Issuer of the Pledged Shares.
SECTION 12. AGENT APPOINTED ATTORNEY-IN-FACT. Each Grantor hereby irrevocably appoints the Agent such Grantor's attorney-in-fact (which appointment shall be irrevocable and deemed coupled with an interest), with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, from time to time in the Agent's discretion, upon and during the occurrence and continuation of an Event of Default, to take any action and to execute any instrument which the Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation:
(i) to obtain and adjust insurance required to be paid to the Agent pursuant to Section 10,
(ii) to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral,
(iii) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause
(i) or (ii) above,
(iv) to receive, endorse and collect all instruments made payable to the Grantors representing any dividend or other distribution in respect of the Pledged Collateral or any part thereof and to give full discharge for the same, and
(v) to file any claims or take any action or institute any proceedings which the Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Agent with respect to any of the Collateral.
SECTION 13. AGENT MAY PERFORM. If any Grantor fails to perform any agreement contained herein, the Agent may itself perform, or cause performance of, such agreement, and the reasonable expenses of the Agent incurred in connection therewith (as to which invoices have been furnished) shall be payable by the Grantors under Section 16(b).
SECTION 14. THE AGENT'S DUTIES. The powers conferred on the Agent hereunder are solely to protect its interest and the interests of the Lenders in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral, including, without limitation, ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Pledged Collateral, whether or not the Agent has or is deemed to have knowledge of such matters.
SECTION 15. REMEDIES. If any Event of Default shall have occurred and be continuing, and subject to the provisions of Section 7 of the Credit Agreement:
(a) The Agent may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, and without application to or order of the Bankruptcy Court, all the rights and remedies of a secured party on default under the Uniform Commercial Code and also may (i) require each Grantor to, and each Grantor hereby agrees that it will at its expense and upon request of the Agent forthwith, assemble all or part of the Collateral as directed by the Agent and make it available to the Agent at a place to be designated by the Agent which is reasonably convenient to both parties and (ii) without notice except as specified in the following sentence, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Agent's offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Agent may deem commercially reasonable. Each Grantor agrees that, to the extent notice of such sale shall be required by law, at least ten days' notice to the Grantors of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.
(b) The Agent may instruct the Grantors not to make any further use of the Patents, Copyrights or Trademarks or any mark similar thereto for any purpose to the extent that such use would be inconsistent with the exercise by the Agent of any other remedies under this Section.
(c) The Agent may license, whether general, special or otherwise, and whether on an exclusive or nonexclusive basis, any of the Trademarks, Patents or Copyrights throughout the world for such term or terms, on such conditions, and in such manner, as the Agent shall in its sole discretion determine.
(d) The Agent may (without assuming any obligations or liability thereunder), at any time, enforce (and shall have the exclusive right to enforce) against any licensee or sublicensee all rights and remedies of the Grantors in, to and under any one or more license agreements with respect to the Collateral, and take or refrain from taking any action under any thereof, and each of the Grantors hereby releases the Agent from, and agrees to hold the Agent free and harmless from and against any claims arising out of, any action taken or omitted to be taken with respect to any such license agreement except claims involving gross negligence, willful misconduct or bad faith of the Agent.
(e) In the event of any such license, assignment, sale or other disposition of the Collateral, or any of it, each Grantor shall supply its know-how and expertise relating to the Trademarks, Patents or Copyrights, and its customer lists and other records relating to the Trademarks, Patents or Copyrights to the Agent or its designee.
(f) In order to implement the assignment, sale or other disposal of any of the Trademarks, Patents or Copyrights, the Agent may, at any time, pursuant to the authority granted in Section 12 hereof, execute and deliver on behalf of the Grantors, one or more instruments of assignment of the Trademarks, Patents or Copyrights (or any application of registration thereof), in form suitable for filing, recording or registration in any country.
(g) All cash proceeds received by the Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the discretion of the Agent, be held by the Agent as collateral for, and then or at any time thereafter or shall, upon instruction from the Required Lenders, be applied (after payment of any amounts payable to the Agent pursuant to Section 16 hereof) in whole or in part against, all or any part of the Obligations in such order as provided for in the Credit Agreement. Any surplus of such cash or cash proceeds held by the Agent and remaining after payment in full of all the Obligations shall be paid over to the Grantors or to whomsoever may be lawfully entitled to receive such surplus.
(h) If at any time when the Agent shall determine to exercise its right to sell all or any part of the Pledged Collateral pursuant to this Section 15, such Pledged Collateral or the part thereof to be sold shall not be effectively registered under the Securities Act of 1933, as amended, and as from time to time in effect, and the rules and regulations thereunder (the "Securities Act"), the Agent is hereby expressly authorized to sell such Pledged Collateral or such part thereof by private sale in such manner and under such circumstances as the Agent may deem necessary or advisable in order that such sale may legally be effected without such registration. Without limiting the generality of the foregoing, in any such event the Agent, in compliance with applicable securities laws, (a) may proceed to make such private sale notwithstanding that a registration statement for the purpose of registering such Pledged Collateral or such part thereof shall have been filed under such Securities Act, (b) may approach and negotiate with a restricted number of potential purchasers to effect such sale and (c) may restrict such sale to purchasers as to their number, nature of business and investment intention
including without limitation to purchasers each of whom will represent and agree to the satisfaction of the Agent that such purchaser is purchasing for its own account, for investment, and not with a view to the distribution or sale of such Pledged Collateral, or part thereof, it being understood that the Agent may cause or require each Grantor, and each Grantor hereby agrees upon the written request of the Agent, to cause (i) a legend or legends to be placed on the certificates to be delivered to such purchasers to the effect that the Pledged Collateral represented thereby have not been registered under the Securities Act and setting forth or referring to restrictions on the transferability of such securities; and (ii) the issuance of stop transfer instructions to such Issuer's transfer agent, if any, with respect to the Pledged Collateral, or, if such Issuer transfers its own securities, a notation in the appropriate records of such Issuer. In the event of any such sale, each Grantor does hereby consent and agree that the Agent shall incur no responsibility or liability for selling all or any part of the Pledged Collateral at a price which the Agent may deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might be realized if the sale were public and deferred until after registration as aforesaid.
SECTION 16. INDEMNITY AND EXPENSES.
(a) Each Grantor, jointly and severally, agrees to indemnify the Agent from and against any and all claims, losses and liabilities growing out of or resulting from this Agreement (including, without limitation, enforcement of this Agreement), except claims, losses or liabilities directly arising from the Agent's own gross negligence, willful misconduct or bad faith.
(b) The Grantors will upon demand pay to the Agent the amount of any and all reasonable expenses (as to which invoices have been furnished), including the reasonable fees and disbursements of its counsel and of any experts and agents, which the Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of the Agent hereunder or (iv) the failure by any of the Grantors to perform or observe any of the provisions hereof.
(c) The Grantors assume all responsibility and liability arising from the use of the Trademarks, Patents and Copyrights.
(d) Each of the Grantors agrees that the Agent does not assume, and shall have no responsibility for, the payment of any sums due or to become due under any agreement or contract included in the Collateral or the performance of any obligations to be performed under or with respect to any such agreement or contract by any of the Grantors, and except as the same may have resulted from the gross negligence, willful misconduct or bad faith of the Agent, each of the Grantors hereby jointly and severally agree to indemnify and hold the Agent harmless with respect to any and all claims by any person relating thereto.
SECTION 17. SECURITY INTEREST ABSOLUTE. All rights of the Agent and security interests hereunder, and all obligations of each of the Grantors hereunder, shall be absolute and unconditional, irrespective of any circumstance which might constitute a defense available to, or a discharge of, any guarantor or other obligor in respect of the Obligations.
SECTION 18. AMENDMENTS; ETC. No amendment or waiver of any provision of this Agreement, nor any consent to any departure by any of the Grantors herefrom, shall in any event be effective unless the same shall be in writing and signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
SECTION 19. ADDRESSES FOR NOTICES. All notices and other communications provided for hereunder shall be in writing and shall be given in accordance with the applicable provisions of the Credit Agreement.
SECTION 20. CONTINUING SECURITY INTEREST. This Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect until payment in full of the Obligations, (ii) be binding upon each of the Grantors, their successors and assigns and (iii) inure, together with the rights and remedies of the Agent hereunder, to the benefit of the Agent and each of the Lenders and their respective successors, transferees and assigns. Upon the payment in full of the Obligations, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to the Grantors subject to any existing liens, security interests or encumbrances on such Collateral. Upon any such termination, the Agent will, at the Grantor's expense, execute and deliver to the Grantors such documents as the Grantors shall reasonably request to evidence such termination.
SECTION 21. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, except as required by mandatory provisions of law and except to the extent that the validity or perfection of the security interest hereunder, or remedies hereunder, in respect of any particular Collateral are governed by the laws of a jurisdiction other than the State of New York and by Federal law (including, without limitation, the Bankruptcy Code) to the extent the same has pre-empted the law of the State of New York or such other jurisdiction.
SECTION 22. HEADINGS. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, each of the Grantors and the agent have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first above written.
GRANTORS:
AMERICAN COMMERCIAL LINES LLC
AMERICAN COMMERCIAL LINES HOLDINGS LLC
LOUISIANA DOCK COMPANY LLC
AMERICAN COMMERCIAL TERMINALS LLC
JEFFBOAT LLC
ACL CAPITAL CORP.
AMERICAN COMMERCIAL BARGE LINE LLC
AMERICAN COMMERCIAL LINES INTERNATIONAL LLC
ACBL LIQUID SALES LLC
AMERICAN COMMERCIAL LOGISTICS LLC
HOUSTON FLEET LLC
LEMONT HARBOR & FLEETING SERVICES LLC
AMERICAN COMMERCIAL TERMINALS-MEMPHIS LLC
ORINOCO TASA LLC
ORINOCO TASV LLC
By: _______________________________________
Title:
JPMORGAN CHASE BANK,
INDIVIDUALLY AND AS AGENT
By: _______________________________________
Title:
Signature Page to Security and Pledge Agreement
SCHEDULE 1
Locations of Equipment and Inventory
SCHEDULE 2
Locations of Chief Executive
Office, Chief Place of Business
and Locations Where Records
Concerning Accounts are Kept
SCHEDULE 3
Trademarks, Patents, Copyrights
SCHEDULE 4
PLEDGED STOCK
EXECUTION COPY
EXHIBIT 4.31
REVOLVING CREDIT AND GUARANTY AGREEMENT
AMONG
AMERICAN COMMERCIAL LINES LLC
A DEBTOR AND A DEBTOR-IN-POSSESSION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
AS BORROWER
AMERICAN COMMERCIAL LINES HOLDINGS LLC
AND
THE SUBSIDIARIES OF THE BORROWER NAMED HEREIN,
EACH A DEBTOR AND A DEBTOR-IN-POSSESSION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
AS GUARANTORS
AND
THE LENDERS PARTY HERETO,
AND
JPMORGAN CHASE BANK,
AS ADMINISTRATIVE AGENT, DOCUMENTATION AGENT
AND COLLATERAL AGENT
J.P. MORGAN SECURITIES INC.,
AS BOOK MANAGER
AND
LEAD ARRANGER
AND
GENERAL ELECTRIC CAPITAL CORPORATION,
AS CO-SYNDICATION AGENT
AND
BANK ONE, NA
AS CO-SYNDICATION AGENT
DATED AS OF JANUARY 31, 2003
TABLE OF CONTENTS
PAGE
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SECTION 1. DEFINITIONS............................................................................... 2
SECTION 1.01 Defined Terms............................................................... 2
SECTION 1.02 Terms Generally............................................................. 19
SECTION 2. AMOUNT AND TERMS OF CREDIT................................................................ 20
SECTION 2.01 Commitments of the Lenders.................................................. 20
SECTION 2.02 Borrowing Base.............................................................. 20
SECTION 2.03 Letters of Credit........................................................... 21
SECTION 2.04 Issuance.................................................................... 23
SECTION 2.05 Nature of Letter of Credit Obligations Absolute............................. 23
SECTION 2.06 Making of Loans............................................................. 23
SECTION 2.07 Repayment of Loans; Evidence of Debt........................................ 24
SECTION 2.08 Interest on Loans........................................................... 25
SECTION 2.09 Default Interest............................................................ 25
SECTION 2.10 Optional Termination or Reduction of Commitment............................. 25
SECTION 2.11 Alternate Rate of Interest.................................................. 26
SECTION 2.12 Refinancing of Loans........................................................ 26
SECTION 2.13 Mandatory Prepayment; Commitment Termination; Cash Collateral............... 27
SECTION 2.14 Optional Prepayment of Loans; Reimbursement of Lenders...................... 27
SECTION 2.15 Reserve Requirements; Change in Circumstances............................... 29
SECTION 2.16 Change in Legality.......................................................... 30
SECTION 2.17 Pro Rata Treatment, etc..................................................... 31
SECTION 2.18 Taxes....................................................................... 31
SECTION 2.19 Certain Fees................................................................ 32
SECTION 2.20 Commitment Fee.............................................................. 32
SECTION 2.21 Letter of Credit Fees....................................................... 32
SECTION 2.22 Nature of Fees.............................................................. 33
SECTION 2.23 Priority and Liens.......................................................... 33
SECTION 2.24 Right of Set-Off............................................................ 34
SECTION 2.25 Security Interest in Letter of Credit Account............................... 35
SECTION 2.26 Payment of Obligations...................................................... 35
SECTION 2.27 No Discharge; Survival of Claims............................................ 35
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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SECTION 2.28 Use of Cash Collateral...................................................... 35
SECTION 3. REPRESENTATIONS AND WARRANTIES............................................................ 35
SECTION 3.01 Organization and Authority.................................................. 35
SECTION 3.02 Due Execution............................................................... 36
SECTION 3.03 Statements Made............................................................. 36
SECTION 3.04 Financial Statements........................................................ 36
SECTION 3.05 Ownership................................................................... 37
SECTION 3.06 Liens....................................................................... 37
SECTION 3.07 Compliance with Law......................................................... 37
SECTION 3.08 Insurance................................................................... 38
SECTION 3.09 Use of Proceeds............................................................. 38
SECTION 3.10 Litigation.................................................................. 38
SECTION 4. CONDITIONS OF LENDING..................................................................... 38
SECTION 4.01 Conditions Precedent to Initial Loans and Initial Letters of Credit......... 38
SECTION 4.02 Conditions Precedent to Each Loan and Each Letter of Credit................. 41
SECTION 5. AFFIRMATIVE COVENANTS..................................................................... 43
SECTION 5.01 Financial Statements, Reports, etc.......................................... 43
SECTION 5.02 Corporate Existence......................................................... 45
SECTION 5.03 Insurance................................................................... 45
SECTION 5.04 Obligations and Taxes....................................................... 46
SECTION 5.05 Notice of Event of Default, etc............................................. 46
SECTION 5.06 Access to Books and Records................................................. 46
SECTION 5.07 Maintenance of Concentration Account........................................ 46
SECTION 5.08 Borrowing Base Certificate.................................................. 47
SECTION 5.09 Collateral Monitoring and Review............................................ 47
SECTION 5.10 Certificates of Ownership and Encumbrance................................... 47
SECTION 6. NEGATIVE COVENANTS........................................................................ 47
SECTION 6.01 Liens....................................................................... 47
SECTION 6.02 Merger, etc................................................................. 48
SECTION 6.03 Indebtedness................................................................ 48
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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SECTION 6.04 Capital Expenditures........................................................ 48
SECTION 6.05 EBITDA...................................................................... 49
SECTION 6.06 Guarantees and Other Liabilities............................................ 49
SECTION 6.07 Chapter 11 Claims........................................................... 49
SECTION 6.08 Dividends; Capital Stock.................................................... 49
SECTION 6.09 Transactions with Affiliates................................................ 49
SECTION 6.10 Investments, Loans and Advances............................................. 50
SECTION 6.11 Disposition of Assets....................................................... 50
SECTION 6.12 Nature of Business.......................................................... 50
SECTION 7. EVENTS OF DEFAULT......................................................................... 50
SECTION 7.01 Events of Default........................................................... 50
SECTION 8. THE AGENT................................................................................. 54
SECTION 8.01 Administration by Agent..................................................... 54
SECTION 8.02 Advances and Payments....................................................... 54
SECTION 8.03 Sharing of Setoffs.......................................................... 54
SECTION 8.04 Agreement of Required Lenders............................................... 55
SECTION 8.05 Liability of Agent.......................................................... 55
SECTION 8.06 Reimbursement and Indemnification........................................... 56
SECTION 8.07 Rights of Agent............................................................. 56
SECTION 8.08 Independent Lenders......................................................... 56
SECTION 8.09 Notice of Transfer.......................................................... 56
SECTION 8.10 Successor Agent............................................................. 56
SECTION 9. GUARANTY.................................................................................. 57
SECTION 9.01 Guaranty.................................................................... 57
SECTION 9.02 No Impairment of Guaranty................................................... 58
SECTION 9.03 Subrogation................................................................. 58
SECTION 10. MISCELLANEOUS............................................................................. 58
SECTION 10.01 Notices..................................................................... 58
SECTION 10.02 Survival of Agreement, Representations and Warranties, etc.................. 59
SECTION 10.03 Successors and Assigns...................................................... 59
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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SECTION 10.04 Confidentiality............................................................. 61
SECTION 10.05 Expenses.................................................................... 61
SECTION 10.06 Indemnity................................................................... 62
SECTION 10.07 CHOICE OF LAW............................................................... 62
SECTION 10.08 No Waiver................................................................... 62
SECTION 10.09 Extension of Maturity....................................................... 63
SECTION 10.10 Amendments, etc............................................................. 63
SECTION 10.11 Severability................................................................ 64
SECTION 10.12 Headings.................................................................... 64
SECTION 10.13 Execution in Counterparts................................................... 64
SECTION 10.14 Prior Agreements............................................................ 64
SECTION 10.15 Further Assurances.......................................................... 64
SECTION 10.16 WAIVER OF JURY TRIAL........................................................ 64
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ANNEX A Commitment Amounts EXHIBIT A - Form of Interim Order EXHIBIT B - Form of Security and Pledge Agreement EXHIBIT B-1 - Form of Preferred Fleet Mortgage EXHIBIT C - Form of Assignment and Acceptance EXHIBIT D - Form of Borrowing Base Certificate EXHIBIT E - Form of Opinion of Counsel |
SCHEDULE 3.05 - Subsidiaries
SCHEDULE 3.06 - Liens
SCHEDULE 3.10 - Litigation
SCHEDULE 6.10 - Existing Investments
SCHEDULE 6.11 - Asset Sales
REVOLVING CREDIT AND GUARANTY AGREEMENT
DATED AS OF JANUARY 31, 2003
REVOLVING CREDIT AND GUARANTY AGREEMENT, dated as of January 31,
2003, among AMERICAN COMMERCIAL LINES LLC, a Delaware limited liability company
(the "Borrower"), a debtor and debtor-in-possession in a case pending under
Chapter 11 of the Bankruptcy Code, and American Commercial Lines Holdings LLC, a
Delaware limited liability company and the owner of all the outstanding member
interests of the Borrower ("Holdings") and certain of the direct or indirect
subsidiaries of the Borrower signatory hereto (together with Holdings, each a
"Guarantor" and collectively, the "Guarantors"), each of which Guarantors
referred to in this paragraph is a debtor and debtor-in-possession in a case
pending under Chapter 11 of the Bankruptcy Code (the cases of the Borrower and
the Guarantors, each a "Case" and collectively, the "Cases"), JPMORGAN CHASE
BANK, a New York banking corporation ("JPMorgan Chase"), each of the other
financial institutions from time to time party hereto (together with Chase, the
"Lenders"), JPMORGAN CHASE BANK, as agent (in such capacity, the "Agent") for
the Lenders, and BANK ONE, NA and GENERAL ELECTRIC CAPITAL CORPORATION, as
Co-Syndication Agents (in such capacities, the "Co-Syndication Agents").
INTRODUCTORY STATEMENT
On January 31, 2003, the Borrower and the Guarantors filed voluntary petitions with the Bankruptcy Court initiating the Cases and have continued in the possession of their assets and in the management of their business pursuant to Sections 1107 and 1108 of the Bankruptcy Code.
The Borrower, the Guarantors, the Existing Lenders and JPMorgan Chase, as administrative agent, are parties to that certain Credit Agreement dated as of June 30, 1998, as amended and restated as of April 11, 2002 (as further amended, amended and restated, or otherwise modified, the "Existing Agreement") pursuant to which the Borrower and the Guarantors were truly and justly indebted to the Existing Lenders on the Filing Date in the principal amount of $363,619,276.86 (including the aggregate outstanding face amount of issued but undrawn letters of credit outstanding thereunder) in respect of the extensions of credit provided for thereunder.
The Borrower has applied to the Lenders for (i) a revolving credit and letter of credit facility in an aggregate principal amount not to exceed $25,000,000, and (ii) a term loan facility in an aggregate principal amount not to exceed $50,000,000, all of the Borrower's obligations under which are to be guaranteed by the Guarantors.
The proceeds of the Loans will be used (i) to repurchase the Existing Receivables Portfolio and (ii) for working capital and other general corporate purposes of the Borrower and the Guarantors.
To provide guarantees and security for the repayment of the Loans, the reimbursement of any draft drawn under a Letter of Credit and the payment of the other obligations of the Borrower and the Guarantors hereunder and under the other Loan Documents
(including, without limitation, the Obligations of the Borrower under Section 6.03(v)), the Borrower and the Guarantors will provide to the Agent and the Lenders the following (each as more fully described herein):
(a) a guaranty from each of the Guarantors of the due and punctual payment and performance of the obligations of the Borrower hereunder;
(b) an allowed administrative expense claim in each of the Cases pursuant to Section 364(c)(1) of the Bankruptcy Code having priority over all administrative expenses of the kind specified in Sections 503(b) and 507(b) of the Bankruptcy Code;
(c) a perfected first priority Lien, pursuant to Section 364(c)(2) of the Bankruptcy Code, on all present and future receivables of the Borrower and the Guarantors (including, without limitation, the Existing Receivables Portfolio upon the repurchase thereof), and upon all other unencumbered property of the Borrower and the Guarantors, and on all cash and cash equivalents in the Letter of Credit Account, provided that following the Termination Date, amounts in the Letter of Credit Account shall not be subject to the Carve-Out hereinafter referred to;
(d) a perfected Lien, pursuant to Section 364(c)(3) of the Bankruptcy Code, upon all property of the Borrower and the Guarantors (other than the property referred to in paragraph (e) below that is subject to the valid and perfected Liens that presently secure the Borrower's and Guarantors' pre-petition Indebtedness under the Existing Agreement) that is subject to valid and perfected Liens in existence on the Filing Date or that is subject to valid Liens in existence on the Filing Date that are perfected subsequent to the Filing Date as permitted by Section 546(b) of the Bankruptcy Code or that is subject to Permitted Liens, junior to such valid and perfected Liens; and
(e) perfected first priority priming Liens, pursuant to Section 364(d)(1) of the Bankruptcy Code, upon all property of the Borrower and the Guarantors that is subject to (x) the existing Liens that presently secure the Borrower's and Guarantors' pre-petition Indebtedness under or in connection with the Existing Agreement (but subject to any Liens to which the Liens being primed hereby are subject on the Filing Date or become subject subsequent to the Filing Date as permitted by Section 546(b) of the Bankruptcy Code) and (y) any Liens granted after the Filing Date to provide adequate protection in respect of the Existing Agreement, which first priority priming Liens in favor of the Agent and the Lenders shall be senior in all respects to all of such existing Liens under or in connection with the Existing Agreement, and to any Liens granted after the Filing Date to provide adequate protection in respect thereof.
All of the claims and the Liens granted hereunder in the Cases to the Agent and the Lenders shall be subject to the Carve-Out to the extent provided in Section 2.23.
Accordingly, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
SECTION 1.01 DEFINED TERMS.
"ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.
"ABR Loan" shall mean any Loan bearing interest at a rate determined
by reference to the Alternate Base Rate in accordance with the provisions of
Section 2.
"Account" shall mean any right to payment for goods sold or leased or for services rendered, whether or not earned by performance.
"Additional Credit" shall have the meaning given such term in
Section 4.02(d) hereof.
"Adjusted LIBOR Rate" shall mean, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the quotient of (a) the LIBOR Rate in effect for such Interest Period divided by (b) a percentage (expressed as a decimal) equal to 100% minus Statutory Reserves. For purposes hereof, the term "LIBOR Rate" shall mean the rate at which dollar deposits approximately equal in principal amount to such Eurodollar Borrowing and for a maturity comparable to such Interest Period are offered to the principal London office of the Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.
"Affiliate" shall mean, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, a Person (a "Controlled Person") shall be deemed to be "controlled by" another Person (a "Controlling Person") if the Controlling Person possesses, directly or indirectly, power to direct or cause the direction of the management and policies of the Controlled Person whether by contract or otherwise.
"Agent" shall have the meaning set forth in the Introduction.
"Agreement" shall mean this Revolving Credit and Guaranty Agreement, as the same may from time to time be further amended, modified or supplemented.
"Alternate Base Rate" shall mean, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof, "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by the Agent as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective on the date such change is publicly announced. "Base CD Rate" shall mean the sum of (a) the quotient of (i) the Three-Month Secondary CD Rate divided by (ii) a percentage expressed as a decimal equal to 100% minus Statutory Reserves and (b) the Assessment Rate. "Three-Month Secondary CD Rate" shall mean, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day shall not be a Business Day, the next preceding Business Day) by the Board
through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day), or, if such rate shall not be so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 a.m., New York City time, on such day (or, if such day shall not be a Business Day, on the next preceding Business Day) by the Agent from three New York City negotiable certificate of deposit dealers of recognized standing selected by it. "Federal Funds Effective Rate" shall mean, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it. If for any reason the Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Base CD Rate or the Federal Funds Effective Rate or both for any reason, including the inability or failure of the Agent to obtain sufficient quotations in accordance with the terms hereof, the Alternate Base Rate shall be determined without regard to clause (b) or (c), or both, of the first sentence of this definition, as appropriate, until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate, respectively.
"Assessment Rate" shall mean for any date the annual rate (rounded upwards, if necessary, to the next 1/100 of 1%) most recently estimated by the Agent as the then current net annual assessment rate that will be employed in determining amounts payable by the Agent to the Federal Deposit Insurance Corporation (or any successor) for insurance by such Corporation (or any successor) of time deposits made in dollars at the Agent's domestic offices.
"Assignment and Acceptance" shall mean an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Agent, substantially in the form of Exhibit C.
"Bankruptcy Code" shall mean The Bankruptcy Reform Act of 1978, as heretofore and hereafter amended, and codified as 11 U.S.C. Section 101 et seq.
"Bankruptcy Court" shall mean the United States Bankruptcy Court for the Southern District of Indiana or any other court having jurisdiction over the Cases from time to time.
"Board" shall mean the Board of Governors of the Federal Reserve System of the United States.
"Borrower" shall have the meaning set forth in the Introduction.
"Borrowing" shall mean the incurrence of Tranche A Loans or of Tranche B Loans of a single Type made from all the Tranche A Lenders (in the case of Tranche A Loans) or Tranche B Lenders (in the case of Tranche B Loans), as the case may be, on a single date and having, in the case of Eurodollar Loans, a single Interest Period (with any ABR Loan made pursuant to Section 2.16 being considered a part of the related Borrowing of Eurodollar Loans).
"Borrowing Base" shall mean, on any date, an amount (calculated based on the most recent weekly Borrowing Base Certificate delivered to the Agent in accordance with this Agreement) that is equal to (i) Gross Availability, minus (ii) an amount equal to net maritime liabilities to be determined by the Agent including but not limited to crewman compensation, cargo claims and claims presented to the Borrower or any Guarantor for damages incurred by employees or third parties directly associated with freight services provided minus, (iii) the Necessaries Reserve, minus, (iv) an amount equal to the estimated costs to complete freight services in process as of each Borrowing Base calculation date, with the method of estimation to be determined by the Agent, minus (v) other reserves deemed necessary by the Agent, minus (vi) the Carve-Out. Borrowing Base eligibility standards and reserves, advance rates and the components of "Gross Availability" (including the amount set forth in clauses (iii)(A) and (B) of the definition of such term based on updated appraisals of the Borrower's domestic fleet from time to time) may be fixed and revised from time to time by the Agent in its exclusive judgment (provided that advance rates may not be increased, additional asset categories may not be added to the Borrowing Base and eligibility standards and reserves may not be modified or amended so as to provide the Borrower with increased availability without, in any such case, the consent of the Super-majority Lenders). Notwithstanding anything to the contrary set forth herein, no receivables will be included in the Borrowing Base until all the Existing Receivables Portfolio has been repurchased by the Borrower or a Guarantor.
"Borrowing Base Certificate" shall mean a certificate substantially in the form of Exhibit D hereto (with such changes therein as may be required by the Agent to reflect the components of and reserves against the Borrowing Base as provided for hereunder from time to time), executed and certified by a Financial Officer of the Borrower, which shall include appropriate exhibits and schedules as referred to therein and as provided for in Section 5.08.
"Business Day" shall mean any day other than a Saturday, Sunday or other day on which banks in the State of New York are required or permitted to close (and, for a Letter of Credit, other than a day on which the Fronting Bank issuing such Letter of Credit is closed); provided, however, that when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits on the London interbank market.
"Capital Expenditures" shall mean, for any period, the aggregate of all expenditures (whether paid in cash and not theretofore accrued or accrued as liabilities during such period and including that portion of any post-petition Capitalized Lease which is capitalized on the consolidated balance sheet of the Borrower and the Guarantors) net of cash amounts received by the Borrower and the Guarantors from other Persons during such period in reimbursement of Capital Expenditures made by the Borrower and the Guarantors, excluding interest capitalized during construction, made by the Borrower and the Guarantors during such period that, in conformity with GAAP, are required to be included in or reflected by the property,
plant, equipment or similar fixed asset accounts reflected in the consolidated balance sheet of the Borrower and the Guarantors (including equipment which is purchased simultaneously with the trade-in of existing equipment owned by the Borrower or any of the Guarantors to the extent of the gross amount of such purchase price less the book value of the equipment being traded in at such time), but excluding expenditures made in connection with the replacement or restoration of assets to the extent reimbursed or financed from (x) insurance proceeds paid on account of the loss of or the damage to the assets being replaced or restored or (y) awards of compensation arising from the taking by condemnation or eminent domain of such assets being replaced.
"Capitalized Lease" shall mean, as applied to any Person, any lease of property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with GAAP.
"Carve-Out" shall have the meaning set forth in Section 2.23.
"Cases" shall have the meaning set forth in the Introduction.
"Cash Collateralization" shall have the meaning given such term in
Section 2.03(b).
"Change of Control" shall mean (i) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof), of shares representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding member interests of Holdings; (ii) Holdings no longer owning, beneficially and of record, 100% of the issued and outstanding member interests of the Borrower; or (iii) the occupation of a majority of the seats (other than vacant seats) on the Board of Managers of the Borrower by Persons who were neither (A) nominated by the Board of Managers of the Borrower or Holdings nor (B) appointed by managers so nominated.
"Closing Date" shall mean the date on which this Agreement has been executed and the conditions precedent to the making of the initial Loans set forth in Section 4.01 have been satisfied or waived, which date shall occur promptly upon entry of the Interim Order, but not later than 10 days following the entry of the Interim Order.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder.
"Collateral" shall mean (i) the "Collateral" as defined in the Security and Pledge Agreement and in the mortgages and/or amendments described in Section 4.01(d) and (ii) any other collateral granted as security for the Obligations pursuant to any other Loan Document.
"Commitment" shall mean collectively, the Tranche A Commitments and the Tranche B Commitments.
"Commitment Fee" shall have the meaning set forth in Section 2.20.
"Commitment Letter" shall mean that certain Joint Commitment Letter dated January 29, 2003 among the Initial Lenders, J.P. Morgan Securities Inc. and the Borrower.
"Commitment Percentage" shall mean at any time, with respect to each Lender, the percentage obtained by dividing its Commitment at such time by the Total Commitment at such time.
"Consummation Date" shall mean the date of the substantial consummation (as defined in Section 1101 of the Bankruptcy Code and which for purposes of this Agreement shall be no later than the effective date) of a Reorganization Plan that is confirmed pursuant to an order of the Bankruptcy Court.
"Dollars" and "$" shall mean lawful money of the United States of America.
"EBITDA" shall mean, for any period, all as determined in accordance with GAAP, the consolidated net income (or net loss) of the Borrower and its Subsidiaries for such period, plus (a) the sum of (i) depreciation expense, (ii) amortization expense, (iii) other non-cash expenses, (iv) provision for LIFO adjustment for inventory valuation, (v) net total Federal, state and local income tax expense, (vi) gross interest expense for such period less gross interest income for such period, (vii) extraordinary losses, (viii) any non-recurring charge or restructuring charge, (ix) the cumulative effect of any change in accounting principles, (x) "Chapter 11 expenses" (or "administrative costs reflecting Chapter 11 expenses") as shown on the Borrower's consolidated statement of income for such period and (xi) to the extent not included in such consolidated net income (or net loss), deferred revenue of the Borrower and the Guarantors for such period in respect of Jeffboat Sale and Leaseback Transactions (as hereinafter defined) less (b) the sum of (1) extraordinary gains and (2) any non-cash income or non-cash gains resulting from previously deferred revenue in respect of Jeffboat Sale and Leaseback Transactions plus or minus (c) the amount of cash received or expended in such period in respect of any amount which, under clause (viii) above, was taken into account in determining EBITDA for such or any prior period; and for purposes hereof, the term "Jeffboat Sale and Leaseback Transactions" shall mean the sale by Jeffboat LLC of barges or other equipment manufactured by Jeffboat LLC or any other Guarantor to a third party, which barges or other equipment are then leased back by the Borrower or a Guarantor.
"Eligible Accrued Receivables" shall mean any unbilled Account, without duplication, that has been estimated by the Borrower for accrued revenue related to freight services which is not an Account that is otherwise described in clause (a) through (q) in the definition of Eligible Receivable.
"Eligible Assignee" shall mean (i) a commercial bank having total assets in excess of $1,000,000,000; (ii) a finance company, insurance company or other financial institution or fund, in each case reasonably acceptable to the Agent, which in the ordinary course of business extends credit of the type contemplated herein and has total assets in excess of $200,000,000 and whose becoming an assignee would not constitute a prohibited transaction under Section 4975 of ERISA; (iii) a Lender Affiliate of the assignor Lender; and (iv) any other financial institution satisfactory to the Borrower and the Agent.
"Eligible Receivables" shall mean, at the time of any determination
thereof, each Account (other than an Eligible Accrued Receivable) that satisfies
the following criteria at the time of creation and continues to meet the same at
the time of such determination: such Account (i) has been invoiced to, and
represents the bona fide amounts due to the Borrower or a Guarantor from, the
purchaser of goods or services, in each case originated in the ordinary course
of business of the Borrower or such Guarantor and (ii) is not ineligible for
inclusion in the calculation of the Borrowing Base pursuant to any of clauses
(a) through (q) below or otherwise deemed by the Agent in its sole discretion to
be ineligible for inclusion in the calculation of the Borrowing Base as
described below. Without limiting the foregoing, to qualify as an Eligible
Receivable, an Account shall indicate no person other than the Borrower or a
Guarantor as payee or remittance party. In determining the amount to be so
included, the face amount of an Account shall be reduced by, without
duplication, to the extent not reflected in such face amount, (i) the amount of
all accrued and actual discounts, claims, credits or credits pending,
promotional program allowances, price adjustments, finance charges or other
allowances (including any amount that the Borrower or the Guarantor, as
applicable, may be obligated to rebate to a customer pursuant to the terms of
any agreement or understanding (written or oral)), (ii) the aggregate amount of
all limits and deductions provided for in this definition and elsewhere in this
Agreement and (iii) the aggregate amount of all cash received in respect of such
Account but not yet applied by the Borrower or the Guarantor, to reduce the
amount of such Account. Standards of eligibility may be fixed from time to time
solely by the Agent in the exercise of its exclusive judgement, with any changes
in such standards to be effective three (3) days after delivery of notice
thereof to the Borrower. Unless otherwise approved from time to time in writing
by the Agent, no Account shall be an Eligible Receivable if, without
duplication:
(a) the Borrower or the relevant Guarantor does not have sole lawful and absolute title to such Account; or
(b) the Account (i) is unpaid more than 90 days from the original date of invoice or 60 days from the original due date or (ii) has been written off the books of the Borrower or the applicable Guarantor or has been otherwise designated on such books as uncollectible; or
(c) more than 50% in face amount of all Accounts of the same Account Debtor are ineligible pursuant to clause (b) above; or
(d) the Account Debtor is insolvent or the subject of any bankruptcy case or insolvency proceeding of any kind; or
(e) the Account is not payable in Dollars or the Account Debtor is either not organized under the laws of the United States of America, any state thereof, or the District of Columbia or is located outside or has its principal place of business or substantially all of its assets outside the United States; or
(f) the Account Debtor is the United States of America or any department, agency or instrumentality thereof, unless the Borrower or the relevant Guarantor duly assigns its rights to payment of such Account to the Agent pursuant to the Assignment of Claims Act of
1940, as amended, which assignment and related documents and filings shall be in form and substance satisfactory to the Agent; or
(g) the Account is subject to any adverse security, progress payment, retainage or other similar advance made by or for the benefit of the applicable Account Debtor, in each case to the extent thereof; or
(h) the Account (i) is not subject to a valid and perfected first priority Lien in favor of the Agent for the benefit of the Lenders, subject to no other Liens other than Liens (if any) permitted by the Loan Documents or (ii) does not otherwise conform in all material respects to the representations and warranties contained in the Loan Documents relating to Accounts; or
(i) such Account was invoiced (i) in advance of goods or services provided, or (ii) more than once, or (iii) the associated income has not been earned; or
(j) the Account is a non-trade Account, or relates to payments for interest; or
(k) the sale to the Account Debtor is a guarantee sale, sale-and-return, ship-and-return, sale on approval , extended terms, or other similar basis; or
(l) the Account represents a progress-billing or otherwise does not represent a complete sale; for purposes hereof, `progress-billing" means any invoice for services rendered under a contract or agreement pursuant to which the Account Debtor's obligation to pay such invoice is conditioned upon the Borrower or the relevant Guarantor's completion of any further performance under the contract or agreement; or
(m) it arises out of a sale made by the Borrower or a Guarantor to an employee, officer, agent, director, stockholder, or Affiliate of the Borrower or a Guarantor; or
(n) such Account was not paid in full, and the Borrower or the relevant Guarantor created a new receivable for the unpaid portion of the Account, and other Accounts constituting chargebacks, debit memos and other adjustments for unauthorized deductions; or
(o) the Account Debtor (i) is a creditor, (ii) has or has asserted a right of set-off against the Borrower or the relevant Guarantor (unless such Account Debtor has entered into a written agreement reasonably acceptable to the Agent to waive such set-off rights) or (iii) has disputed its liability (whether by chargeback or otherwise) or made any asserted or unasserted claim with respect to the Account or any other Account of the Borrower or a Guarantor which has not been resolved, in each case, without duplication, to the extent of the amount owed by the Borrower or such Guarantor to the Account Debtor, the amount of such actual or asserted right of set-off, or the amount of such dispute or claim, as the case may be; or
(p) the Account does not comply in all material respects with the requirements of all applicable laws and regulations, whether Federal, state or local, including without limitation the Federal Consumer Credit Protection Act, the Federal Truth in Lending Act and Regulation Z of the Board; or
(q) as to all or any part of such Account, a check promissory note, draft, trade acceptance or other instrument for the payment of money has been received, presented for payment and returned uncollected for any reason.
Notwithstanding the forgoing, all Accounts of any single Account Debtor and its affiliates which, in the aggregate exceed (i) 15% in respect of an Account Debtor whose securities are rated investment grade by any of Moody's or S & P with the exception of Cargill Corporation which shall be limited to 25% provided it is investment grade or (ii) 5% in respect of all other Account Debtors, of the total amount of all Eligible Receivables together with Eligible Accrued Receivables at the time of any determination shall be deemed not to be Eligible Receivables or Eligible Accrued Receivables to the extent of such excess. In determining the aggregate amount from the same Account Debtor that is unpaid more than 90 days from the date of invoice or more than 60 days from the due date pursuant to clause (b), above there shall be excluded the amount of any net credit balances relating to Accounts with invoice dates more than 90 days from the date of invoice or more than 60 days from the due date.
"Environmental Lien" shall mean a Lien in favor of any Governmental Authority for (i) any liability under federal or state environmental laws or regulations, or (ii) damages arising from or costs incurred by such Governmental Authority in response to a release or threatened release of a hazardous or toxic waste, substance or constituent, or other substance into the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9) of ERISA) which together with the Borrower or a Subsidiary of the Borrower would be deemed to be a single employer within the meaning of Section 414(b), (c), (m) or (o) of the Code.
"Eurocurrency Liabilities" shall have the meaning assigned thereto in Regulation D issued by the Board, as in effect from time to time.
"Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar Loans.
"Eurodollar Loan" shall mean any Loan bearing interest at a rate determined by reference to the Adjusted LIBOR Rate in accordance with the provisions of Section 2.
"Event of Default" shall have the meaning given such term in Section 7.
"Excluded Taxes" means, with respect to the Agent, any Lender, the Fronting Bank or any other recipient of any payment to be made by or on account of any obligation of the borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower is located and (c) in the case of a Foreign Bank, any withholding tax that is imposed on amounts payable to such Foreign Bank at the time such Foreign Bank becomes a party to this Agreement (or
designates a new lending office) or is attributable to such Foreign Bank's failure to comply with Section 2.18(e), except to the extent that such Foreign Bank (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 2.18(a).
"Existing Agreement" shall have the meaning set forth in the Introductory Statement and shall include all of the agreements granting security interests and Liens in property and assets of the Borrower and the Guarantors to the Existing Lenders.
"Existing Lenders" shall mean, collectively, the lenders under the Existing Agreement, together with any successors or assigns thereof.
"Existing Receivables Portfolio" shall mean the portfolio of prepetition receivables and related assets previously sold to American Commercial Lines Funding Corporation ("ACLFC") and in existence on the date of the commencement of the Cases.
"Fees" shall collectively mean the Commitment Fees, Letter of Credit Fees and other fees referred to in Sections 2.19, 2.20 and 2.21.
"Filing Date" shall mean January 31, 2003.
"Final Order" shall have the meaning given such term in Section 4.02(d).
"Financial Officer" shall mean the Chief Financial Officer, Controller or Treasurer of the Borrower.
"Fronting Bank" shall mean JPMorgan Chase (or any of its banking affiliates) or such other Lender (which other Lender shall be reasonably satisfactory to the Borrower) as may agree with JPMorgan Chase to act in such capacity.
"Foreign Lender" means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.
"GAAP" shall mean generally accepted accounting principles applied in accordance with Section 1.02.
"Governmental Authority" shall mean any Federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality or any court, in each case whether of the United States or foreign.
"Gross Availability" shall mean an amount equal to the sum of (i)
85% of Eligible Receivables in which the Agent holds a first priority Lien, plus
(ii) 50% of Eligible Accrued Receivables in which the Agent holds a first
priority Lien, plus (iii) an amount in respect of Eligible Vessels equal to (A)
during the period from the Closing Date through June 30, 2003, the lesser of (1)
$55 million and
(2) 125% of all Gross Domestic Receivables in which the Agent holds a first priority Lien and (B) from and after July 1, 2003, the lesser of (1) $55 million and (2) 100% of all Gross Domestic Receivables in which the Agent holds a first priority Lien. "Eligible Vessels" shall mean towboats, barges and other vessels that (i) are owned by the Borrower or a Guarantor, (ii) are registered with the United States Coast Guard, (iii) are subject to the Lien in favor of the Agent described in Section 2.23(a)(iv) and (iv) operate exclusively in domestic waters.
"Gross Domestic Receivable" shall mean any Account that has been invoiced and represents the sale of merchandise and/or provision of services in the ordinary course of business in connection with the Borrower's and Guarantors' domestic operations.
"Guarantor" shall have the meaning set forth in the Introduction.
"Indebtedness" shall mean, at any time and with respect to any Person, (i) all indebtedness of such Person for borrowed money, (ii) all indebtedness of such Person for the deferred purchase price of property or services (other than property, including inventory, and services purchased, and expense accruals and deferred compensation items arising, in the ordinary course of business), (iii) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments (other than performance, surety and appeal bonds arising in the ordinary course of business), (iv) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (v) all obligations of such Person under Capitalized Leases, (vi) all reimbursement, payment or similar obligations of such Person, contingent or otherwise, under acceptance, letter of credit or similar facilities and all obligations of such Person in respect of (x) currency swap agreements, currency future or option contracts and other similar agreements designed to hedge against fluctuations in foreign interest rates and (y) interest rate swap, cap or collar agreements and interest rate future or option contracts; (vii) all Indebtedness referred to in clauses (i) through (vi) above guaranteed directly or indirectly by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (A) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (B) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss in respect of such Indebtedness, (C) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (D) otherwise to assure a creditor against loss in respect of such Indebtedness, and (viii) all Indebtedness referred to in clauses (i) through (vii) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness.
"Initial Lenders" means the Lenders party hereto on the date hereof.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Insufficiency" shall mean, with respect to any Plan, its "amount of unfunded benefit liabilities" within the meaning of Section 4001(a)(18) of ERISA, if any.
"Interim Order" shall have the meaning given such term in Section 4.01(b).
"Interest Payment Date" shall mean (i) as to any Eurodollar Loan, the last day of each consecutive 30 day period running from the commencement of the applicable Interest Period, and (ii) as to all ABR Loans, the last calendar day of each month and the date on which any ABR Loans are refinanced with Eurodollar Loans pursuant to Section 2.12.
"Interest Period" shall mean, as to any Borrowing of Eurodollar Loans, the period commencing on the date of such Borrowing (including as a result of a refinancing of ABR Loans) or on the last day of the preceding Interest Period applicable to such Borrowing and ending on the numerically corresponding day (or if there is no corresponding day, the last day) in the calendar month that is one or three months thereafter, as the Borrower may elect in the related notice delivered pursuant to Sections 2.06(b) or 2.12; provided, however, that (i) if any Interest Period would end on a day which shall not be a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, and (ii) no Interest Period shall end later than the Termination Date.
"Investments" shall have the meaning given such term in Section 6.10.
"JPMorgan Chase" shall have the meaning set forth in the Introduction.
"Lender Affiliate" means, (a) with respect to any Lender, (i) an Affiliate of such Lender or (ii) any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or an Affiliate of such Lender and (b) with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor.
"Lenders" shall have the meaning set forth in the Introduction.
"Letter of Credit" shall mean any irrevocable letter of credit issued pursuant to Section 2.03, which letter of credit shall be (i) a standby letter of credit, (ii) issued for purposes that are consistent with the ordinary course of business of the Borrower or any Guarantor, or for such other purposes as are reasonably acceptable to the Agent, (iii) denominated in Dollars and (iv) otherwise in such form as may be reasonably approved from time to time by the Agent and the applicable Fronting Bank.
"Letter of Credit Account" shall mean the account established by the Borrower under the sole and exclusive control of the Agent maintained at the office of the Agent at 270 Park Avenue, New York, New York 10017 designated as the "Letter of Credit Account" that shall be used solely for the purposes set forth in Section 2.03(b) and 2.13.
"Letter of Credit Fees" shall mean the fees payable in respect of Letters of Credit pursuant to Section 2.21.
"Letter of Credit Outstandings" shall mean, at any time, the sum of
(i) the aggregate undrawn stated amount of all Letters of Credit then
outstanding plus (ii) all amounts theretofore drawn under Letters of Credit and
not then reimbursed.
"Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind whatsoever (including any conditional sale or other title retention agreement or any lease in the nature thereof).
"Loan" shall mean a Tranche A Loan or a Tranche B Loan.
"Loans" shall mean the Tranche A Loans and the Tranche B Loans, collectively.
"Loan Documents" shall mean this Agreement, the Letters of Credit, the Security and Pledge Agreement, the Mortgage, and any other instrument or agreement executed and delivered to the Agent or any Lender in connection herewith.
"Maturity Date" shall mean July 31, 2004.
"Mortgage" shall have the meaning set forth in Section 4.01(d).
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, which is maintained or contributed to by (or to
which there is an obligation to contribute of) the Borrower or a Subsidiary of
the Borrower or an ERISA Affiliate, and each such plan for the five-year period
immediately following the latest date on which the Borrower, or a Subsidiary of
the Borrower or an ERISA Affiliate maintained, contributed to or had an
obligation to contribute to such plan.
"Multiple Employer Plan" shall mean a Single Employer Plan, which
(i) is maintained for employees of the Borrower or an ERISA Affiliate and at
least one person (as defined in Section 3(9) of ERISA) other than the Borrower
and its ERISA Affiliates or (ii) was so maintained and in respect of which the
Borrower or an ERISA Affiliate could have liability under Section 4064 or 4069
of ERISA in the event such Plan has been or were to be terminated.
"Necessaries Reserve" shall mean a reserve that is considered by the Agent in its discretion to be reasonably needed for liabilities arising prior to the recordation of the Mortgage related to supplies or services which are for ongoing operations which include but are not limited to shipping services, towing services, repairs, cleaning and rigging services, fuel expenses, supplies, and the use of a dry dock or marine railway.
"Obligations" shall mean (a) the due and punctual payment of principal of and interest on the Loans and the reimbursement of all amounts drawn under Letters of Credit, and (b) the due and punctual payment of the Fees and all other present and future, fixed or contingent, monetary obligations of the Borrower and the Guarantors to the Lenders and the Agent under the Loan Documents and as permitted by Section 6.03(v).
"Orders" shall mean the Interim Order and the Final Order of the Bankruptcy Court referred to in Sections 4.01(b) and 4.02(d).
"Other Taxes" means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any successor agency or entity performing substantially the same functions.
"Pension Plan" shall mean a defined benefit plan (as defined in
Section 414(j) of the Code and Section 3(35) of ERISA) which meets and is
subject to the requirements of Section 401(a) of the Code.
"Permitted Investments" shall mean:
(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within twelve months from the date of acquisition thereof;
(b) without limiting the provisions of paragraph (d) below, investments in commercial paper maturing within six months from the date of acquisition thereof and having, at such date of acquisition, a rating of at least "A-2" or the equivalent thereof from Standard & Poor's Corporation or of at least "P-2" or the equivalent thereof from Moody's Investors Service, Inc.;
(c) investments in certificates of deposit, banker's acceptances and time deposits (including Eurodollar time deposits) maturing within six months from the date of acquisition thereof issued or guaranteed by or placed with (i) any domestic office of the Agent or the bank with whom the Borrower and the Guarantors maintain their cash management system, provided, that if such bank is not a Lender hereunder, such bank shall have entered into an agreement with the Agent pursuant to which such bank shall have waived all rights of setoff and confirmed that such bank does not have, nor shall it claim, a security interest therein or (ii) any domestic office of any other commercial bank of recognized standing organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $250,000,000 and is the principal banking Subsidiary of a bank holding company having a long-term unsecured debt rating of at least "A-2" or the equivalent thereof from Standard & Poor's Corporation or at least "P-2" or the equivalent thereof from Moody's Investors Service, Inc.;
(d) investments in commercial paper maturing within six months from the date of acquisition thereof and issued by (i) the holding company of the Agent or (ii) the holding company of any other commercial bank of recognized standing organized under the laws of the United States of America or any State thereof that has (A) a combined capital and surplus in excess of $250,000,000 and (B) commercial paper rated at least "A-2" or the equivalent thereof
from Standard & Poor's Corporation or of at least "P-2" or the equivalent thereof from Moody's Investors Service, Inc.;
(e) investments in repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (a) above entered into with any office of a bank or trust company meeting the qualifications specified in clause (c) above;
(f) investments in money market funds substantially all the assets of which are comprised of securities of the types described in clauses (a) through (e) above; and
(g) to the extent owned on the Filing Date, investments by the Borrower or any Guarantor in the capital stock or membership interests of any direct or indirect Subsidiary.
"Permitted Liens" shall mean (i) Liens imposed by law (other than Environmental Liens and any Lien imposed under ERISA) for taxes, assessments or charges of any Governmental Authority for claims not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP; (ii) Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens (other than Environmental Liens and any Lien imposed under ERISA) in existence on the Filing Date or thereafter imposed by law and created in the ordinary course of business; (iii) Liens that are permitted by the Mortgage (or, prior to the execution of the Mortgage, by the preferred fleet mortgages delivered pursuant to the Existing Agreement); (iv) Liens (other than any Lien imposed under ERISA) incurred or deposits made in the ordinary course of business (including, without limitation, surety bonds and appeal bonds) in connection with workers' compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, leases, contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations or arising as a result of progress payments under government contracts; (v) easements (including, without limitation, reciprocal easement agreements and utility agreements), rights-of-way, covenants, consents, reservations, encroachments, variations and zoning and other restrictions, charges or encumbrances (whether or not recorded) and interest of ground lessors, which do not interfere materially with the ordinary conduct of the business of the Borrower or any Guarantor, as the case may be, and which do not materially detract from the value of the property to which they attach or materially impair the use thereof to the Borrower or any Guarantor, as the case may be; (vi) letters of credit or deposits in the ordinary course to secure leases; and (vii) extensions, renewals or replacements of any Lien referred to in paragraphs (i) through (vi) above, provided that the principal amount of the obligation secured thereby is not increased and that any such extension, renewal or replacement is limited to the property originally encumbered thereby.
"Person" shall mean any natural person, corporation, division of a corporation, limited liability company, partnership, trust, joint venture, association, company, estate, unincorporated organization or government or any agency or political subdivision thereof.
"Plan" shall mean a Single Employer Plan or a Multiemployer Plan.
"Prepayment Date" shall mean forty-five (45) days after the entry of the Interim Order by the Bankruptcy Court if the Final Order has not been entered by the Bankruptcy Court prior to the expiration of such forty-five (45) day period.
"Pre-Petition Agent" shall mean JPMorgan Chase Bank as agent for the Existing Lenders.
"Pre-Petition Payment" shall mean a payment (by way of adequate protection or otherwise) of principal or interest or otherwise on account of any pre-petition Indebtedness or trade payables or other pre-petition claims against the Borrower or any Guarantor.
"Register" shall have the meaning set forth in Section 10.03(d).
"Reorganization Plan" shall mean a plan of reorganization in any of the Cases.
"Required Lenders" shall mean, at any time, Lenders holding in excess of 50% of the overall Commitments and the aggregate principal amount of Loans outstanding.
"Security and Pledge Agreement" shall have the meaning set forth in
Section 4.01(c).
"Single Employer Plan" shall mean a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (i) is maintained for employees of the Borrower or an ERISA Affiliate or (ii) was so maintained and in respect of which the Borrower could have liability under Title IV of ERISA in the event such Plan has been or were to be terminated.
"Statutory Reserves" shall mean on any date the percentage (expressed as a decimal) established by the Board and any other banking authority which is (i) for purposes of the definition of Base CD Rate, the then stated maximum rate of all reserves (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City, for new three month negotiable nonpersonal time deposits in dollars of $100,000 or more or (ii) for purposes of the definition of Adjusted LIBOR Rate, the then stated maximum rate for all reserves (including but not limited to any emergency, supplemental or other marginal reserve requirements) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency Liabilities (or any successor category of liabilities under Regulation D issued by the Board, as in effect from time to time). Such reserve percentages shall include, without limitation, those imposed pursuant to said Regulation. The Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in such percentage.
"Subsidiary" shall mean, with respect to any Person (herein referred to as the "parent"), any corporation, association or other business entity (whether now existing or hereafter organized) of which at least a majority of the securities or other ownership interests having ordinary voting power for the election of directors or managers is, at the time as of which any determination is being made, owned or controlled by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.
"Super-majority Lenders" shall have the meaning given such term in
Section 10.10(b).
"Superpriority Claim" shall mean a claim against the Borrower and any Guarantor in any of the Cases which is an administrative expense claim having priority over any or all administrative expenses of the kind specified in Sections 503(b) or 507(b) of the Bankruptcy Code.
"Taxes" means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.
"Termination Date" shall mean the earliest to occur of (i) the Prepayment Date, (ii) the Maturity Date, (iii) the Consummation Date and (iv) the acceleration of the Loans and the termination of the Total Commitment in accordance with the terms hereof.
"Termination Event" shall mean (i) a "reportable event", as such term is described in Section 4043(c) of ERISA (other than a "reportable event" as to which the 30-day notice is waived under subsection .22, .23, .25, .27 or .28 of PBGC Regulation Section 4043) or an event described in Section 4068 of ERISA and excluding events which would not be reasonably likely (as reasonably determined by the Agent) to have a material adverse effect on the financial condition, operations, business, properties or assets of the Borrower and the Guarantors taken as a whole, or (ii) the withdrawal of the Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a "substantial employer," as such term is defined in Section 4001(a)(2) of ERISA, the incurrence of liability by the Borrower or any ERISA Affiliate under Section 4064 of ERISA upon the termination of a Multiple Employer Plan, the imposition of Withdrawal Liability, or (iii) providing notice of intent to terminate a Plan pursuant to Section 4041(c) of ERISA or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, if such amendment requires the provision of security, or (iv) the institution of proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, or (v) any other event or condition (other than the commencement of the Cases and the failure to have made any contribution accrued as of the Filing Date but not paid) which would reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the imposition of any liability under Title IV of ERISA (other than for the payment of premiums to the PBGC in the ordinary course).
"Total Commitment" shall mean, at any time, the sum of the Total Tranche A Commitments and the Total Tranche B Commitments at such time.
"Total Exposure" shall mean, at any time, the sum of (i) the Total Tranche A Commitment and (ii) the aggregate outstanding principal amount of the Term Loans.
"Total Tranche A Commitment" shall mean, at any time, the sum of the Tranche A Commitments at such time.
"Total Tranche B Commitment" shall mean, at any time, the sum of the Tranche B Commitments at such time.
"Tranche A Commitment" shall mean the commitment of each Tranche A Lender to make Tranche A Loans hereunder in the amount set forth opposite its name on Annex A hereto or as may subsequently be set forth in the Register from time to time, as the same may be reduced from time to time pursuant to Section 2.10 and Section 2.13.
"Tranche A Commitment Percentage" shall mean at any time, with respect to each Tranche A Lender, the percentage obtained by dividing its Tranche A Commitment at such time by the Total Tranche A Commitment at such time.
"Tranche A Lender" shall mean each Lender having a Tranche A Commitment.
"Tranche A Letters of Credit" shall have the meaning set forth in
Section 2.03(a).
"Tranche A Loans" shall have the meaning set forth in Section 2.01(a).
"Tranche A Obligations" shall mean (a) the due and punctual payment of principal of and interest on the Tranche A Loans and the reimbursement of all amounts drawn under Letters of Credit and (b) the due and punctual payment of the fees and all other present and future, fixed or contingent, monetary obligations of the Borrower and the Guarantors payable to the Agent and the Tranche A Lenders under the Loan Documents.
"Tranche B Commitment" shall mean the commitment of each Tranche B Lender to make Tranche B Loans hereunder.
"Tranche B Commitment Percentage" shall mean at any time, with respect to each Tranche B Lender, the percentage obtained by dividing its Tranche B Commitment at such time by the Total Tranche B Commitment at such time.
"Tranche B Lender" shall mean each Lender having a Tranche B Commitment.
"Tranche B Loans" shall have the meaning set forth in Section 2.01(c).
"Tranche B Obligations" shall mean (a) the due and punctual payment of principal of and interest on the Tranche B Loans and (b) the due and punctual payment of the fees and all other present and future, fixed or contingent, monetary obligations of the Borrower and the Guarantors payable to the Agent and the Tranche B Lenders under the Loan Documents.
"Transferee" shall have the meaning given such term in Section 2.18.
"Type" when used in respect of any Loan or Borrowing shall refer to the Rate of interest by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, "Rate" shall mean the Adjusted LIBOR Rate and the Alternate Base Rate.
"Unused Total Commitment" shall mean, at any time, (i) the Total Commitment less (ii) the sum of (x) the aggregate outstanding principal amount of all Loans and (y) the aggregate Letter of Credit Outstandings.
"Unused Total Tranche A Commitment" shall mean, at any time, (i) the Total Tranche A Commitments less (ii) the sum of (x) the aggregate outstanding principal amount of all Tranche A Loans and (y) the aggregate Letter of Credit Outstandings.
"Withdrawal Liability" shall have the meaning given such term under
Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02 TERMS GENERALLY. The definitions in Section 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. All references herein to Sections, Exhibits and Schedules shall be deemed references to Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided, however, that for purposes of determining compliance with any covenant set forth in Section 6, such terms shall be construed in accordance with GAAP as in effect on the date of this Agreement applied on a basis consistent with the application used in the Borrower's audited financial statements referred to in Section 3.04. Terms that are defined in the Uniform Commercial Code of the State of New York shall have the same meaning herein unless otherwise defined herein.
SECTION 2. AMOUNT AND TERMS OF CREDIT
SECTION 2.01 COMMITMENTS OF THE LENDERS.
(a) Each Tranche A Lender severally and not jointly with the other Tranche A Lenders agrees, upon the terms and subject to the conditions herein set forth (including, without limitation, the provisions of Section 2.28), to make revolving credit loans (each a "Tranche A Loan" and collectively, the "Tranche A Loans") to the Borrower at any time and from time to time during the period commencing on the date hereof and ending on the Termination Date in an aggregate principal amount not to exceed, when added to such Lender's Tranche A Commitment Percentage of the then aggregate Letter of Credit Outstandings (in excess of the amount of cash then held in the Letter of Credit Account pursuant to Section 2.03(b)), the Tranche A Commitment of such Lender, which Tranche A Loans may be repaid and reborrowed in accordance with the provisions of this Agreement. At no time shall the sum of the then outstanding aggregate principal amount of the Tranche A Loans plus the then aggregate Letter of Credit Outstandings exceed the lesser of (i) the Total Tranche A Commitment of up to $25,000,000, as the same may be reduced from time to time pursuant to Section 2.10 and Section 2.13 and (ii) the amount by which the Borrowing Base exceeds the Tranche B Obligations.
(b) Each Borrowing comprising a Tranche A Loan shall be made by the Tranche A Lenders pro rata in accordance with their respective Tranche A Commitments; provided, however, that the failure of any Tranche A Lender to make any Tranche A Loan shall not in itself relieve the other Tranche A Lenders of their obligations to lend.
(c) Each Tranche B Lender severally and not jointly with the other Tranche B Lenders agrees, upon the terms and subject to the conditions herein set forth, to make available to the Borrower, one or more term loans in an aggregate amount equal to such Lender's Tranche
B Commitment (the "Tranche B Loans"), which Tranche B Loans, once repaid, may not be reborrowed. At no time shall the sum of the then outstanding aggregate principal amount of Tranche B Loans exceed the Total Tranche B Commitment of up to $50,000,000, as the same may be reduced from time to time pursuant to Section 2.10 and Section 2.13.
(d) If the aggregate Commitments of the Initial Lenders, as set forth on Annex A, is less than the amount of $75,000,000, then the Borrower shall not be entitled to borrow in excess of the total of Commitments set forth on Annex A as of the date hereof until such time as additional financial institutions shall have become Lenders party hereto and shall have provided additional Commitments such that the amount of the Total Commitments shall be in excess of the Commitments of the Initial Lenders.
SECTION 2.02 BORROWING BASE. Notwithstanding any other provision of this Agreement to the contrary, the aggregate principal amount of all outstanding Tranche A Loans plus Tranche B Loans plus the then aggregate Letter of Credit Outstandings (in excess of the amount of cash then held in the Letter of Credit Account pursuant to Section 2.03(c)) shall not at any time exceed the Borrowing Base and no Loan shall be made or Letter of Credit issued in violation of the foregoing, provided that prior to the repurchase of the Existing Receivables Portfolio, aggregate extensions of credit hereunder may not exceed $20,000,000 (which shall be in the form of Letters of Credit or Tranche A Loans).
SECTION 2.03 LETTERS OF CREDIT.
(a) Upon the terms and subject to the conditions herein set forth, the Borrower may request a Fronting Bank, at any time and from time to time after the date hereof and prior to the Termination Date, to issue, and, subject to the terms and conditions contained herein, such Fronting Bank shall issue, for the account of the Borrower or a Guarantor one or more Letters of Credit (the "Letters of Credit"), provided that no Letter of Credit shall be issued if after giving effect to such issuance (i) the aggregate Letter of Credit Outstandings shall exceed $10,000,000, or (ii) the aggregate Letter of Credit Outstandings, when added to the aggregate outstanding principal amount of the Tranche A Loans, would exceed the Total Tranche A Commitment and, provided further that no Letter of Credit shall be issued if the Fronting Bank shall have received notice from the Agent or the Required Lenders that the conditions to such issuance have not been met.
(b) No Letter of Credit shall expire later than the Maturity Date, provided, that if any Letter of Credit shall be outstanding on the Termination Date, the Borrower shall, at or prior to the Termination Date, except as the Agent may otherwise agree in writing, (i) cause all Letters of Credit which expire after the Termination Date to be returned to the Fronting Bank undrawn and marked "cancelled" or (ii) if the Borrower is unable to do so in whole or in part, either (x) provide a "back-to-back" letter of credit to one or more Fronting Banks in a form satisfactory to such Fronting Bank and the Agent (in their sole discretion), issued by a bank satisfactory to such Fronting Bank and the Agent (in their sole discretion), and in an amount equal to 105% of the then undrawn stated amount of all outstanding Letters of Credit issued by such Fronting Banks (less the amount, if any, then on deposit in the Letter of Credit Account) or (y) deposit cash in the Letter of Credit Account in an amount equal to 105% of the then undrawn stated amount of all Letter of Credit Outstandings (less the amount, if any, then on deposit in the
Letter of Credit Account) as collateral security for the Borrower's reimbursement obligations in connection therewith, such cash to be remitted to the Borrower upon the expiration, cancellation or other termination or satisfaction of such reimbursement obligations ("Cash Collateralization").
(c) The Borrower shall pay to each Fronting Bank, in addition to such other fees and charges as are specifically provided for in Section 2.21 hereof, such fees and charges in connection with the issuance and processing of the Letters of Credit issued by such Fronting Bank as are customarily imposed by such Fronting Bank from time to time in connection with letter of credit transactions.
(d) Drafts drawn under each Letter of Credit shall be reimbursed by the Borrower in Dollars not later than the first Business Day following the date of draw and shall bear interest from the date of draw until the first Business Day following the date of draw at a rate per annum (i) equal to the Alternate Base Rate plus 3% and thereafter on the unreimbursed portion until reimbursed in full at a rate per annum equal to the Alternate Base Rate plus 5% (computed on the basis of the actual number of days elapsed over a year of 365 days or 366 days in a leap year). The Borrower shall effect such reimbursement (x) if such draw occurs prior to the Termination Date, in cash or through a Borrowing of a Tranche A Loan from the Tranche A Lenders pro rata in accordance with their Tranche A Commitment Percentage, without the satisfaction of the conditions precedent set forth in Section 4.02 or (y) if such draw occurs on or after the Termination Date, in cash. Each Tranche A Lender agrees to make the Tranche A Loans, described in clause (x) of the preceding sentence notwithstanding a failure to satisfy the applicable lending conditions thereto or the provisions of Sections 2.02 or 2.28.
(e) Immediately upon the issuance of any Letter of Credit by any Fronting Bank, such Fronting Bank shall be deemed to have sold to each Tranche A Bank (other than such Fronting Bank) and each such other Tranche A Bank shall be deemed unconditionally and irrevocably to have purchased from such Fronting Bank, without recourse or warranty, an undivided interest and participation, to the extent of such Lender's Tranche A Commitment Percentage, in such Letter of Credit, each drawing thereunder and the obligations of the Borrower and the Guarantors under this Agreement with respect thereto. Upon any change in the Tranche A Commitments pursuant to Section 10.03, it is hereby agreed that with respect to all Letter of Credit Outstandings, there shall be an automatic adjustment to the participations hereby created to reflect the new Tranche A Commitment Percentage of the assigning and assignee Lenders. Any action taken or omitted by a Fronting Bank under or in connection with a Letter of Credit, if taken or omitted in the absence of gross negligence or willful misconduct, shall not create for such Fronting Bank any resulting liability to any other Lender.
(f) In the event that a Fronting Bank makes any payment under any Letter of Credit and the Borrower shall not have reimbursed such amount in full to such Fronting Bank pursuant to this Section, the Fronting Bank shall promptly notify the Agent, which shall promptly notify each Tranche A Lender, of such failure, and each such Tranche A Lender shall promptly and unconditionally pay to the Agent for the account of the Fronting Bank the amount of such Lender's Tranche A Commitment Percentage of such unreimbursed payment in Dollars and in same day funds. If the Fronting Bank so notifies the Agent, and the Agent so notifies the Tranche A Lenders prior to 11:00 a.m. (New York City time) on any Business Day, such Lenders shall make available to the Fronting Bank such Lender's Tranche A Commitment
Percentage of the amount of such payment on such Business Day in same day funds. If and to the extent such Lender shall not have so made its Tranche A Commitment Percentage of the amount of such payment available to the Fronting Bank, such Lender agrees to pay to such Fronting Bank, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Agent for the account of such Fronting Bank at the Federal Funds Effective Rate. The failure of any Lender to make available to the Fronting Bank its Tranche A Commitment Percentage, of any payment under any Letter of Credit shall not relieve any other Lender of its obligation hereunder to make available to the Fronting Bank its Tranche A Commitment Percentage, of any payment under any Letter of Credit on the date required, as specified above, but no Lender shall be responsible for the failure of any other Lender to make available to such Fronting Bank such other Lender's Tranche A Commitment Percentage of any such payment. Whenever a Fronting Bank receives a payment of a reimbursement obligation as to which it has received any payments from the Lenders pursuant to this paragraph, such Fronting Bank shall pay to each Lender which has paid its Tranche A Commitment Percentage thereof, in Dollars and in same day funds, an amount equal to such Lender's Tranche A Commitment Percentage thereof.
SECTION 2.04 ISSUANCE. Whenever the Borrower desires a Fronting Bank to issue a Letter of Credit, it shall give to such Fronting Bank and the Agent prior written (including telegraphic, telex, facsimile or cable communication) notice reasonably in advance of the requested date of issuance specifying the date on which the proposed Letter of Credit is to be issued (which shall be a Business Day), the stated amount of the Letter of Credit so requested, the expiration date of such Letter of Credit and the name and address of the beneficiary thereof.
SECTION 2.05 NATURE OF LETTER OF CREDIT OBLIGATIONS ABSOLUTE. The
obligations of the Borrower to reimburse the Tranche A Lenders for drawings made
under any Letter of Credit shall be unconditional and irrevocable and shall be
paid strictly in accordance with the terms of this Agreement under all
circumstances, including, without limitation (it being understood that any such
payment by the Borrower shall be without prejudice to, and shall not constitute
a waiver of, any rights the Borrower might have or might acquire as a result of
the payment by the Fronting Bank of any draft or the reimbursement by the
Borrower thereof): (i) any lack of validity or enforceability of any Letter of
Credit; (ii) the existence of any claim, setoff, defense or other right which
the Borrower or any Guarantor may have at any time against a beneficiary of any
Letter of Credit or against any of the Lenders, whether in connection with this
Agreement, the transactions contemplated herein or any unrelated transaction;
(iii) any draft, demand, certificate or other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect;
(iv) payment by a Fronting Bank of any Letter of Credit against presentation of
a demand, draft or certificate or other document which does not comply with the
terms of such Letter of Credit; (v) any other circumstance or happening
whatsoever, which is similar to any of the foregoing; or (vi) the fact that any
Event of Default shall have occurred and be continuing.
SECTION 2.06 MAKING OF LOANS.
(a) Except as contemplated by Section 2.11, Tranche A Loans shall be either ABR Loans or Eurodollar Loans as the Borrower may request subject to and in accordance with
this Section, provided that all Tranche A Loans made pursuant to the same
Borrowing shall, unless otherwise specifically provided herein, be Tranche A
Loans of the same Type. Each Tranche A Lender may fulfill its Tranche A
Commitment with respect to any Eurodollar Loan or ABR Loan by causing any
lending office of such Tranche A Lender to make such Tranche A Loan; provided
that any such use of a lending office shall not affect the obligation of the
Borrower to repay such Tranche A Loan in accordance with the terms of this
Agreement. Each Tranche A Lender shall, subject to its overall policy
considerations, use reasonable efforts (but shall not be obligated) to select a
lending office which will not result in the payment of increased costs by the
Borrower pursuant to Section 2.15. Subject to the other provisions of this
Section and the provisions of Section 2.12, Borrowings of Tranche A Loans of
more than one Type may be incurred at the same time, provided that no more than
nine (9) Borrowings of Eurodollar Loans may be outstanding at any time.
(b) The Borrower shall give the Agent prior notice of each Borrowing hereunder of at least three Business Days for Eurodollar Loans and one Business Day for ABR Loans; such notice shall be irrevocable and shall specify the amount of the proposed Borrowing (which shall not be less than $1,000,000 in the case of Eurodollar Loans and $1,000,000 in the case of ABR Loans) and the date thereof (which shall be a Business Day) and shall contain disbursement instructions. Such notice, to be effective, must be received by the Agent not later than 1:00 p.m., New York City time, on the third Business Day in the case of Eurodollar Loans and 12:00 noon, New York City time on the first Business Day in the case of ABR Loans, preceding the date on which such Borrowing is to be made, provided that same day borrowings of ABR Loans in an aggregate amount of $10,000,000 will be available if notice is received by the agent no later than 11:00 a.m., New York City time, on such day. With respect to Borrowings other than same day Borrowings, such notice shall specify whether the Borrowing then being requested is to be a Borrowing of ABR Loans or Eurodollar Loans. If no election is made as to the Type of Loan, such notice shall be deemed a request for Borrowing of ABR Loans. The Agent shall promptly notify each Tranche A Lender of its proportionate share of such Borrowing, the date of such Borrowing, the Type of Borrowing or Tranche A Loans being requested and the Interest Period or Interest Periods applicable thereto, as appropriate. On the borrowing date specified in such notice, each Tranche A Lender shall make its share of the Borrowing available at the office of the Agent at 270 Park Avenue, New York, New York 10017, no later than 12:00 noon, New York City time, in immediately available funds. Upon receipt of the funds made available by the Tranche A Lenders to fund any borrowing hereunder, the Agent shall disburse such funds in the manner specified in the notice of borrowing delivered by the Borrower and shall use reasonable efforts to make the funds so received from the Tranche A Lenders available to the Borrower no later than 2:00 p.m. New York City time.
SECTION 2.07 REPAYMENT OF LOANS; EVIDENCE OF DEBT.
(a) The Borrower hereby unconditionally promises to pay to the Agent for the account of each Lender the then unpaid principal amount of each Loan on the Termination Date subject to the priorities set forth in Section 2.14.
(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from
each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.
(c) The Agent shall maintain accounts in which it shall record (i)
the amount of each Loan made hereunder, the Type thereof and the Interest Period
applicable thereto, (ii) the amount of any principal or interest due and payable
or to become due and payable from the Borrower to each Lender hereunder and
(iii) the amount of any sum received by the Agent hereunder for the account of
the Lenders and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, the Borrower shall execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) in a form furnished by the Agent and reasonably acceptable to the Borrower. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 10.03) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns).
SECTION 2.08 INTEREST ON LOANS.
(a) Subject to the provisions of Section 2.09, each ABR Loan shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days or, when the Alternate Base Rate is based on the Prime Rate, a year with 365 days or 366 days in a leap year) at a rate per annum equal to the Alternate Base Rate plus 3%.
(b) Subject to the provisions of Section 2.09, each Eurodollar Loan shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal, during each Interest Period applicable thereto, to the Adjusted LIBOR Rate for such Interest Period in effect for such Borrowing plus 4%.
(c) Accrued interest on all Loans shall be payable monthly in arrears on each Interest Payment Date applicable thereto, on the Termination Date, after the Termination Date on demand and (with respect to Eurodollar Loans) upon any repayment or prepayment thereof (on the amount prepaid).
SECTION 2.09 DEFAULT INTEREST. If the Borrower or any Guarantor, as the case may be, shall default in the payment of the principal of or interest on any Loan or in the payment of any other amount becoming due hereunder (including, without limitation, the reimbursement pursuant to Section 2.03(d) of any draft drawn under a Letter of Credit), whether at stated maturity, by acceleration or otherwise, the Borrower or such Guarantor, as the case may be, shall on demand from time to time pay interest, to the extent permitted by law, on such defaulted amount up to (but not including) the date of actual payment (after as well as before judgment) at
a rate per annum (computed on the basis of the actual number of days elapsed over a year of 360 days or when the Alternate Base Rate is applicable and is based on the Prime Rate, a year with 365 days or 366 days in a leap year) equal to (x) in the case of Borrowings consisting of Eurodollar Loans, the Adjusted LIBOR Rate in effect for such Borrowing plus 6% and (y) in the case of all other amounts, the Alternate Base Rate plus 5%.
SECTION 2.10 OPTIONAL TERMINATION OR REDUCTION OF COMMITMENT. Upon at
least two Business Days' prior written notice to the Agent, the Borrower may at
any time in whole permanently terminate, or from time to time in part
permanently reduce, the Unused Total Tranche A Commitment or the Total Tranche B
Commitment; provided, however, that at any time of any reduction or termination
of the Tranche B Commitment, the Total Tranche A Commitment shall have been
wholly and permanently terminated, all Tranche A Loans shall have been paid in
full and no Letters of Credit shall be outstanding, or, if outstanding, then
backed by Cash Collateralization. Each such reduction of the Commitments shall
be in the principal amount of $1,000,000 or any integral multiple thereof.
Simultaneously with each reduction or termination of the Tranche A Commitment,
the Borrower shall pay to the Agent for the account of each Tranche A Lender the
Tranche A Commitment Fee accrued and unpaid on the amount of the Tranche A
Commitment of such Tranche A Lender so terminated or reduced through the date
thereof. Any reduction of the Total Tranche A Commitment pursuant to this
Section shall be applied to reduce the Tranche A Commitment of each Lender pro
rata according to each such Lender's Tranche A Commitment Percentage. Any
termination or reduction of the Total Tranche B Commitment pursuant to this
Section 2.10 shall be applied to reduce pro rata the Total Tranche B Commitment
of each Tranche B Lender according to each such Lender's Tranche B Commitment
Percentage.
SECTION 2.11 ALTERNATE RATE OF INTEREST. In the event, and on each
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for a Eurodollar Loan, the Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower absent manifest
error) that reasonable means do not exist for ascertaining the applicable
Adjusted LIBOR Rate, the Agent shall, as soon as practicable thereafter, give
written, facsimile or telegraphic notice of such determination to the Borrower
and the Lenders, and any request by the Borrower for a Borrowing of Eurodollar
Loans (including pursuant to a refinancing with Eurodollar Loans) pursuant to
Section 2.06 or 2.12 shall be deemed a request for a Borrowing of ABR Loans.
After such notice shall have been given and until the circumstances giving rise
to such notice no longer exist, each request for a Borrowing of Eurodollar Loans
shall be deemed to be a request for a Borrowing of ABR Loans.
SECTION 2.12 REFINANCING OF LOANS. The Borrower shall have the right, at any time, on three Business Days' prior irrevocable notice to the Agent (which notice, to be effective, must be received by the Agent not later than 1:00 p.m., New York City time, on the third Business Day preceding the date of any refinancing), (x) to refinance (without the satisfaction of the conditions set forth in Section 4 as a condition to such refinancing) any outstanding Borrowing or Borrowings of Loans of one Type (or a portion thereof) with a Borrowing of Loans of the other Type or (y) to continue an outstanding Borrowing of Eurodollar Loans for an additional Interest Period, subject to the following:
(a) as a condition to the refinancing of ABR Loans with Eurodollar Loans and to the continuation of Eurodollar Loans for an additional Interest Period, no Event of Default shall have occurred and be continuing at the time of such refinancing;
(b) if less than a full Borrowing of Loans shall be refinanced, such refinancing shall be made pro rata among the Lenders in accordance with the respective principal amounts of the Loans comprising such Borrowing held by the Lenders immediately prior to such refinancing;
(c) the aggregate principal amount of Loans being refinanced shall be at least $1,000,000, provided that no partial refinancing of a Borrowing of Eurodollar Loans shall result in the Eurodollar Loans remaining outstanding pursuant to such Borrowing being less than $1,000,000 in aggregate principal amount;
(d) each Lender shall effect each refinancing by applying the proceeds of its new Eurodollar Loan or ABR Loan, as the case may be, to its Loan being refinanced;
(e) the Interest Period with respect to a Borrowing of Eurodollar Loans effected by a refinancing or in respect to the Borrowing of Eurodollar Loans being continued as Eurodollar Loans shall commence on the date of refinancing or the expiration of the current Interest Period applicable to such continuing Borrowing, as the case may be;
(f) a Borrowing of Eurodollar Loans may be refinanced only on the last day of an Interest Period applicable thereto; and
(g) each request for a refinancing with a Borrowing of Eurodollar Loans which fails to state an applicable Interest Period shall be deemed to be a request for an Interest Period of one month.
In the event that the Borrower shall not give notice to refinance any Borrowing of Eurodollar Loans, or to continue such Borrowing as Eurodollar Loans, or shall not be entitled to refinance or continue such Borrowing as Eurodollar Loans, in each case as provided above, such Borrowing shall automatically be refinanced with a Borrowing of ABR Loans at the expiration of the then-current Interest Period. The Agent shall, after it receives notice from the Borrower, promptly give each Tranche A Lender notice of any refinancing, in whole or part, of any Tranche A Loan made by such Lender.
SECTION 2.13 MANDATORY PREPAYMENT; COMMITMENT TERMINATION; CASH COLLATERAL.
(a) If at any time the aggregate principal amount of the outstanding Tranche A Loans plus the Letter of Credit Outstandings exceeds the lesser of (x) the Total Tranche A Commitment and (y) the Borrowing Base minus the Tranche B Obligations, the Borrower will within three Business Days (i) prepay the Tranche A Loans in an amount necessary to cause the aggregate principal amount of the outstanding Tranche A Loans plus the aggregate Letter of Credit Outstandings to be equal to or less than the Total Tranche A Commitment and/or the Borrowing Base minus the Tranche B Obligations, as the case may be, and (ii) if, after giving effect to the prepayment in full of the Tranche A Loans, the undrawn amount of outstanding
Letter of Credit Outstandings in excess of the amount of cash held in the Letter of Credit Account exceeds the Total Tranche A Commitment and/or the Borrowing Base minus the Tranche B Obligations, as the case may be, deposit into the Letter of Credit Account an amount equal to 105% of the amount by which the aggregate Letter of Credit Outstandings in excess of the amount of cash held in the Letter of Credit Account so exceeds the Total Tranche A Commitment or Borrowing Base minus the Tranche B Obligations, as the case may be.
(b) Upon the Termination Date, the Total Commitment shall be terminated in full and the Borrower shall pay the Loans in full (plus any accrued but unpaid interest and fees thereon) and, except as the Agent may otherwise agree in writing, if any Letter of Credit remains outstanding, shall comply with Section 2.03(b).
SECTION 2.14 OPTIONAL PREPAYMENT OF LOANS; REIMBURSEMENT OF LENDERS.
(a) The Borrower shall have the right at any time and from time to time to prepay any Loans, in whole or in part, (x) with respect to Eurodollar Loans, upon at least three Business Days' prior written or facsimile notice to the Agent and (y) with respect to ABR Loans on the same Business Day if written or facsimile notice is received by the Agent prior to 12:00 noon, New York City time, and thereafter upon at least one Business Day's prior written or facsimile notice to the Agent; provided, however, that (i) any prepayment permitted by this Section 2.14(a) shall be applied first to Tranche A Loans (without a reduction of the Tranche A Commitment) and, after the Tranche A Loans have been prepaid in full, to Borrowings under the Tranche B Loans; (ii) each such partial prepayment shall be in multiples of $1,000,000, (iii) no prepayment of Eurodollar Loans shall be permitted pursuant to this Section 2.14(a) other than on the last day of an Interest Period applicable thereto unless such prepayment is accompanied by the payment of the amounts described in clause (i) of the first sentence of Section 2.14(b), and (iv) no partial prepayment of a Borrowing of Eurodollar Loans shall result in the aggregate principal amount of the Eurodollar Loans remaining outstanding pursuant to such Borrowing being less than $1,000,000. Each notice of prepayment shall specify the prepayment date, the principal amount of the Loans to be prepaid and in the case of Eurodollar Loans, the Borrowing or Borrowings pursuant to which made, shall be irrevocable and shall commit the Borrower to prepay such Loan by the amount and on the date stated therein. The Agent shall, promptly after receiving notice from the Borrower hereunder, notify each Tranche A or Tranche B Lender, as the case may be, of the principal amount of the Tranche A Loans or Tranche B Loans, as the case may be, held by such Lender which are to be prepaid, the prepayment date and the manner of application of the prepayment.
(b) The Borrower shall reimburse each Lender on demand for any loss incurred or to be incurred by it in the reemployment of the funds released (i) resulting from any prepayment (for any reason whatsoever, including, without limitation, refinancing with ABR Loans) of any Eurodollar Loan required or permitted under this Agreement, if such Loan is prepaid other than on the last day of the Interest Period for such Loan (including, without limitation, any such prepayment in connection with the syndication of the credit facility evidenced by this Agreement) or (ii) in the event that after the Borrower delivers a notice of borrowing under Section 2.06 in respect of Eurodollar Loans, such Loans are not made on the first day of the Interest Period specified in such notice of borrowing for any reason other than a breach by such Lender of its obligations hereunder. Such loss shall be the amount as reasonably
determined by such Lender as the excess, if any, of (A) the amount of interest which would have accrued to such Lender on the amount so paid or not borrowed at a rate of interest equal to the Adjusted LIBOR Rate for such Loan, for the period from the date of such payment or failure to borrow to the last day (x) in the case of a payment or refinancing with ABR Loans other than on the last day of the Interest Period for such Loan, of the then current Interest Period for such Loan, or (y) in the case of such failure to borrow, of the Interest Period for such Loan which would have commenced on the date of such failure to borrow, over (B) the amount of interest which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the London interbank market. Each Lender shall deliver to the Borrower from time to time one or more certificates setting forth the amount of such loss as determined by such Lender.
(c) In the event the Borrower fails to prepay any Loan on the date specified in any prepayment notice delivered pursuant to Section 2.14(a), the Borrower on demand by any Lender shall pay to the Agent for the account of such Lender any amounts required to compensate such Lender for any loss incurred by such Lender as a result of such failure to prepay, including, without limitation, any loss, cost or expenses incurred by reason of the acquisition of deposits or other funds by such Lender to fulfill deposit obligations incurred in anticipation of such prepayment, but without duplication of any amounts paid under Section 2.14(b). Each Lender shall deliver to the Borrower from time to time one or more certificates setting forth the amount of such loss as determined by such Lender.
(d) Except as otherwise provided herein, any partial prepayment of the Loans by the Borrower pursuant to Sections 2.13 or 2.14 shall be applied as specified by the Borrower or, in the absence of such specification, as determined by the Agent, provided that in the latter case no Eurodollar Loans shall be prepaid pursuant to Section 2.13 to the extent that such Loan has an Interest Period ending after the required date of prepayment unless and until all outstanding ABR Loans and Eurodollar Loans with Interest Periods ending on such date have been repaid in full.
SECTION 2.15 RESERVE REQUIREMENTS; CHANGE IN CIRCUMSTANCES.
(a) Notwithstanding any other provision herein, if after the date of this Agreement any change in applicable law or regulation or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof (whether or not having the force of law) shall change the basis of taxation of payments to any Lender of the principal of or interest on any Eurodollar Loan made by such Lender or any fees or other amounts payable hereunder (other than changes in respect of Taxes, Other Taxes and taxes imposed on, or measured by, the net income or overall gross receipts or franchise taxes of such Lender by the national jurisdiction in which such Lender has its principal office or in which the applicable lending office for such Eurodollar Loan is located or by any political subdivision or taxing authority therein, or by any other jurisdiction or by any political subdivision or taxing authority therein other than a jurisdiction in which such Lender would not be subject to tax but for the execution and performance of this Agreement), or shall impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of or credit extended by such Lender (except any such reserve requirement which is reflected in the Adjusted LIBOR Rate) or shall impose on such Lender or the London
interbank market any other condition affecting this Agreement or the Eurodollar Loans made by such Lender, and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise) by an amount deemed by such Lender to be material, then the Borrower will pay to such Lender in accordance with paragraph (c) below such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.
(b) If any Lender shall have determined that the adoption or effectiveness after the date hereof of any law, rule, regulation or guideline regarding capital adequacy, or any change in any of the foregoing or in the interpretation or administration of any of the foregoing by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or any lending office of such Lender) or any Lender's holding company with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of this Agreement, the Loans made by such Lender pursuant hereto, such Lender's Commitment hereunder or the issuance of, or participation in, any Letter of Credit by such Lender to a level below that which such Lender or such Lender's holding company could have achieved but for such adoption, change or compliance (taking into account Lender's policies and the policies of such Lender's holding company with respect to capital adequacy) by an amount deemed by such Lender to be material (except to the extent that such amount is reflected in the Adjusted LIBOR Rate), then from time to time the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such reduction suffered.
(c) A certificate of each Lender setting forth such amount or amounts as shall be necessary to compensate such Lender or its holding company as specified in paragraph (a) or (b) above, as the case may be, shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay each Lender the amount shown as due on any such certificate delivered to it within 10 days after its receipt of the same. Any Lender receiving any such payment shall promptly make a refund thereof to the Borrower if the law, regulation, guideline or change in circumstances giving rise to such payment is subsequently deemed or held to be invalid or inapplicable.
(d) Failure on the part of any Lender to demand compensation for any
increased costs or reduction in amounts received or receivable or reduction in
return on capital with respect to any period shall not constitute a waiver of
such Lender's right to demand compensation with respect to such period or any
other period, provided that the Borrower shall not be required to compensate a
Lender pursuant to this Section for any increased costs or reductions incurred
more than 270 days prior to the date that such Lender notifies the Borrower of
the circumstance giving rise to such increased costs or reductions and of such
Lender's intention to claim compensation therefor. The protection of this
Section shall be available to each Lender regardless of any possible contention
of the invalidity or inapplicability of the law, rule, regulation, guideline or
other change or condition which shall have occurred or been imposed.
SECTION 2.16 CHANGE IN LEGALITY.
(a) Notwithstanding anything to the contrary contained elsewhere in this Agreement, if (x) any change after the date of this Agreement in any law or regulation or in the interpretation thereof by any Governmental Authority charged with the administration thereof shall make it unlawful for a Lender to make or maintain a Eurodollar Loan or to give effect to its obligations as contemplated hereby with respect to a Eurodollar Loan or (y) at any time any Lender determines that the making or continuance of any of its Eurodollar Loans has become impracticable as a result of a contingency occurring after the date hereof which adversely affects the London interbank market or the position of such Lender in such market, then, by written notice to the Borrower, such Lender may (i) declare that Eurodollar Loans will not thereafter be made by such Lender hereunder, whereupon any request by the Borrower for a Eurodollar Borrowing shall, as to such Lender only, be deemed a request for an ABR Loan unless such declaration shall be subsequently withdrawn; and (ii) require that all outstanding Eurodollar Loans made by it be converted to ABR Loans, in which event all such Eurodollar Loans shall be automatically converted to ABR Loans as of the effective date of such notice as provided in paragraph (b) below. In the event any Lender shall exercise its rights under clause (i) or (ii) of this paragraph (a), all payments and prepayments of principal which would otherwise have been applied to repay the Eurodollar Loans that would have been made by such Lender or the converted Eurodollar Loans of such Lender shall instead be applied to repay the ABR Loans made by such Lender in lieu of, or resulting from the conversion of, such Eurodollar Loans.
(b) For purposes of this Section 2.16, a notice to the Borrower by any Lender pursuant to paragraph (a) above shall be effective, if lawful, and if any Eurodollar Loans shall then be outstanding, on the last day of the then-current Interest Period, otherwise, such notice shall be effective on the date of receipt by the Borrower.
SECTION 2.17 PRO RATA TREATMENT, ETC. All payments and repayments of principal and interest in respect of the Tranche A Loans or Tranche B Loans (except as provided in Sections 2.15 and 2.16) shall be made pro rata among the Tranche A Lenders or the Tranche B Lenders, as the case may be, in accordance with the then outstanding principal amount of the Tranche A Loans or the Tranche B Loans, as the case may be, and/or participations in Letter of Credit Outstandings hereunder and all payments of Commitment Fees and Letter of Credit Fees (other than those payable to a Fronting Bank) shall be made pro rata among the Tranche A Lenders in accordance with their Tranche A Commitments. All payments by the Borrower hereunder shall be (i) net of any tax applicable to the Borrower or Guarantor and (ii) made in Dollars in immediately available funds at the office of the Agent by 12:00 noon, New York City time, on the date on which such payment shall be due. Interest in respect of any Loan hereunder shall accrue from and including the date of such Loan to but excluding the date on which such Loan is paid in full or converted to a Loan of a different Type.
SECTION 2.18 TAXES. (a) Any and all payments by or on account of any obligation of the Borrower hereunder shall be made free and clear of, and without deduction for, any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Agent, Lender or Fronting Bank (as
the case may be) receives an amount equal to the sum it would have received had
no such deductions been made, (ii) the Borrower shall make such deductions and
(iii) the Borrower shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.
(c) The Borrower will indemnify the Agent, each Lender and the Fronting Bank, within 10 days after written demand therefore, for the full amount of any Indemnified Taxes or Other Taxes paid by the Agent, such Lender or the Fronting Bank, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder (including Indemnified taxes or Other Taxes imposed or asserted on or attributable to amount payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or the Fronting Bank, or by the Agent on its own behalf or on behalf of a Lender or the Fronting Bank, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Agent.
(e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate.
SECTION 2.19 CERTAIN FEES. The Borrower shall pay to the Agent, for the respective accounts of the Agent and the Lenders, the fees set forth in that certain joint fee letter dated January 29, 2003 among the Agent, J.P.Morgan Securities Inc., General Electric Capital Corporation, Bank One, NA and the Borrower at the times set forth therein.
SECTION 2.20 COMMITMENT FEE. The Borrower shall pay to the Lenders a commitment fee (the "Commitment Fee") for the period commencing on the Closing Date to the Termination Date or the earlier date of termination of the Commitment, computed (on the basis of the actual number of days elapsed over a year of 360 days) at the rate of 3/4 of one percent (1%) per annum on the average daily Unused Total Commitment. Such Commitment Fee, to the extent then accrued, shall be payable (x) monthly, in arrears, on the last calendar day of each month, (y) on the Termination Date and (z) as provided in Section 2.10 hereof, upon any reduction or termination in whole or in part of the Total Tranche A Commitment.
SECTION 2.21 LETTER OF CREDIT FEES. The Borrower shall pay with respect to each Letter of Credit (i) to the Agent on behalf of the Lenders a fee calculated (on the basis of the actual number of days elapsed over a year of 360 days) at the rate of (x) (4%) per annum on the daily average Letter of Credit Outstandings and (ii) to the Fronting Bank such Fronting Bank's customary fees for issuance, amendments and processing referred to in Section 2.03. In addition, the Borrower agrees to pay each Fronting Bank for its account a fronting fee of one quarter of one percent (1/4%) per annum in respect of each Letter of Credit issued by such Fronting Bank, for the period from and including the date of issuance of such Letter of Credit to and including the date of termination of such Letter of Credit, computed at a rate, and payable at times, to be determined by such Fronting Bank, the Borrower and the Agent. Accrued fees described in clause (i) of the first sentence of this paragraph in respect of each Letter of Credit shall be due and payable monthly in arrears on the last calendar day of each month and on the Termination Date. Accrued fees described in clause (ii) of the first sentence of this paragraph in respect of each Letter of Credit shall be payable at times to be determined by the Fronting Bank, the Borrower and the Agent.
SECTION 2.22 NATURE OF FEES. All Fees shall be paid on the dates due, in
immediately available funds, to the Agent for the respective accounts of the
Agent and the Lenders, as provided herein and in the fee letter described in
Section 2.19. Once paid, none of the Fees shall be refundable under any
circumstances.
SECTION 2.23 PRIORITY AND LIENS.
(a) The Borrower and each of the Guarantors hereby covenants, represents and warrants that, upon entry of the Interim Order, the Obligations of the Borrower and the Guarantors hereunder and under the Loan Documents and in respect of Obligations described in Section 6.03(v): (i) pursuant to Section 364(c)(1) of the Bankruptcy Code, shall at all times constitute allowed administrative expense claims in the Cases having priority over all administrative expenses of the kind specified in Sections 503(b) or 507(b) of the Bankruptcy Code; (ii) pursuant to Section 364(c)(2) of the Bankruptcy Code, shall at all times be secured by a perfected first priority Lien on all present and future receivables of the Borrower and the Guarantors (including, without limitation, the receivables that are repurchased from ACLFC with the proceeds of a portion of the initial Loans hereunder), and on all other unencumbered property of the Borrower and the Guarantors and on all cash maintained in the Letter of Credit Account and any direct investments of the funds contained therein; (iii) pursuant to Section 364(c)(3) of the Bankruptcy Code, shall be secured by a perfected Lien upon all property of the Borrower and the Guarantors (provided that, as set forth in clause (iv) of this sentence, the existing Liens that presently secure the obligations of the Borrower and the Guarantors under the Existing Agreement will be primed by the Lien in favor of the Agent and the Lenders) that is subject to valid and perfected Liens in existence on the Filing Date or to valid Liens in existence on the Filing Date that are perfected subsequent to the Filing Date as permitted by Section 546(b) of the Bankruptcy Code or to Permitted Liens, junior to such valid and perfected Liens; and (iv) pursuant to Section 364(d)(1) of the Bankruptcy Code, shall be secured by a perfected first priority, senior priming Lien on all of the tangible and intangible property of the Borrower and the Guarantors (including without limitation, towboats, barges, drydocks, rigging flats, terminals, contracts (which shall include, but are not limited, to cargo contracts of affreightment), accounts receivable, inventory, patents, copyrights, trademarks, tradenames and all other intellectual
property, and the capital stock of all direct subsidiaries of the Borrower and
each Guarantor and the proceeds thereof) that is subject to existing Liens that
presently secure the Borrower's and the Guarantors' pre-petition Indebtedness
under the Existing Agreement (but subject to any Liens in existence on the
Filing Date to which the Liens being primed hereby are subject or become subject
subsequent to the Filing Date as permitted by Section 546(b) of the Bankruptcy
Code) and any Liens granted after the Filing Date to provide adequate protection
in respect of the Existing Agreement; in the case of each of clauses (i) through
(iv) subject only to (x) in the event of the occurrence and during the
continuance of an Event of Default or an event that would constitute an Event of
Default with the giving of notice or lapse of time or both, the payment of
allowed and unpaid professional fees and disbursements incurred by the Borrower,
the Guarantors and any statutory committees appointed in the Cases in an
aggregate amount not in excess of $1,000,000 (plus all unpaid professional fees
and disbursements incurred prior to the occurrence of an Event of Default or an
event that would constitute an Event of Default with the giving of notice or
lapse of time or both and reflected on the most recent Borrowing Base
Certificate delivered to the Agent prior to such occurrence to the extent
allowed by the Bankruptcy Court at any time) and (y) the payment of unpaid fees
pursuant to 28 U.S.C. ss. 1930 and to the Clerk of the Bankruptcy Court
(collectively, the "Carve-Out"), provided that following the Termination Date
amounts in the Letter of Credit Account shall not be subject to the Carve-Out,
and provided, further, that, except as otherwise provided in the Orders, no
portion of the Carve-Out shall be utilized for the payment of professional fees
and disbursements incurred in connection with any challenge to the amount,
extent, priority, validity, perfection or enforcement of the indebtedness of the
Borrower and the Guarantors owing to the Existing Lenders or to the collateral
securing such indebtedness. The Lenders agree that so long as no Event of
Default or event which with the giving of notice or lapse of time or both would
constitute an Event of Default shall have occurred, the Borrower and the
Guarantors shall be permitted to pay compensation and reimbursement of expenses
allowed and payable under 11 U.S.C. ss. 330 and 11 U.S.C. ss. 331, as the same
may be due and payable, and the same shall not reduce the Carve-Out.
(b) Subject to the priorities set forth in subsection (a) above and to the Carve-Out, as to all real property the title to which is held by the Borrower or any of the Guarantors, or the possession of which is held by the Borrower or any of the Guarantors pursuant to leasehold interest, and which secures the obligations under the Existing Agreement, the Borrower and each Guarantor hereby assigns and conveys as security, grants a security interest in, hypothecates, mortgages, pledges and sets over unto the Agent on behalf of the Lenders all of the right, title and interest of the Borrower and such Guarantor in all of such owned real property and in all such leasehold interests, together in each case with all of the right, title and interest of the Borrower and such Guarantor in and to all buildings, improvements, and fixtures related thereto, any lease or sublease thereof, all general intangibles relating thereto and all proceeds thereof. The Borrower and each Guarantor acknowledges that, pursuant to the Orders, the Liens in favor of the Agent on behalf of the Lenders in all of such real property and leasehold instruments shall be perfected without the recordation of any instruments of mortgage or assignment. The Borrower and each Guarantor further agrees that, upon the request of the Agent, the Borrower and such Guarantor shall enter into separate fee and leasehold mortgages in recordable form with respect to such properties on terms reasonably satisfactory to the Agent.
SECTION 2.24 RIGHT OF SET-OFF. Subject to the provisions of Section 7.01, upon the occurrence and during the continuance of any Event of Default, the Agent and each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law and without further order of or application to the Bankruptcy Court, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Agent and each such Lender to or for the credit or the account of the Borrower or any Guarantor against any and all of the obligations of such Borrower or Guarantor now or hereafter existing under the Loan Documents, irrespective of whether or not such Lender shall have made any demand under any Loan Document and although such obligations may not have been accelerated. Each Lender and the Agent agrees promptly to notify the Borrower and Guarantors after any such set-off and application made by such Lender or by the Agent, as the case may be, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender and the Agent under this Section are in addition to other rights and remedies which such Lender and the Agent may have upon the occurrence and during the continuance of any Event of Default.
SECTION 2.25 SECURITY INTEREST IN LETTER OF CREDIT ACCOUNT. Pursuant to
Section 364(c)(2) of the Bankruptcy Code, the Borrower and the Guarantors hereby
assign and pledge to the Agent, for its benefit and for the ratable benefit of
the Lenders and hereby grant to the Agent, for its benefit and for the ratable
benefit of the Lenders, a first priority security interest, senior to all other
Liens, if any, in all of the Borrower and the Guarantors' right, title and
interest in and to the Letter of Credit Account and any direct investment of the
funds contained therein. Cash held in the Letter of Credit Account shall not be
available for use by the Borrower, whether pursuant to Section 363 of the
Bankruptcy Code or otherwise and shall be released to the Borrower as described
in clause (ii)(y) of Section 2.03(b).
SECTION 2.26 PAYMENT OF OBLIGATIONS. Subject to the provisions of Section 7.01, upon the maturity (whether by acceleration or otherwise) of any of the Obligations under this Agreement or any of the other Loan Documents of the Borrower and the Guarantors, the Lenders shall be entitled to immediate payment of such Obligations without further application to or order of the Bankruptcy Court; provided, however, any such payments shall be made first to the Tranche A Lenders until the Tranche A Commitment shall have been wholly and permanently terminated, all Tranche A Loans shall have been paid in full and no Letters of Credit shall be outstanding, or, if outstanding, then backed by Cash Collateralization, and second to the Tranche B Lenders.
SECTION 2.27 NO DISCHARGE; SURVIVAL OF CLAIMS. Each of the Borrower and the Guarantors agrees that (i) its obligations hereunder shall not be discharged by the entry of an order confirming a Reorganization Plan (and each of the Borrower and the Guarantors, pursuant to Section 1141(d)(4) of the Bankruptcy Code, hereby waives any such discharge) and (ii) the Superpriority Claim granted to the Agent and the Lenders pursuant to the Orders and described in Section 2.23 and the Liens granted to the Agent pursuant to the Orders and described in Sections 2.23 and 2.25 shall not be affected in any manner by the entry of an order confirming a Reorganization Plan.
SECTION 2.28 USE OF CASH COLLATERAL. Notwithstanding anything to the contrary contained herein, the Borrower shall not be permitted (i) to request a Borrowing under Section
2.06 or request the issuance of a Letter of Credit under Section 2.04 unless the Bankruptcy Court shall have entered the Interim Order or (ii) to request a Borrowing under Section 2.06 unless the Borrower and the Guarantors shall at that time have the use of all cash collateral subject to the Orders for the purposes described in Section 3.09.
SECTION 3. REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to make Loans and issue and/or participate in Letters of Credit hereunder, the Borrower and each of the Guarantors jointly and severally represent and warrant as follows:
SECTION 3.01 ORGANIZATION AND AUTHORITY. Each of the Borrower and the Guarantors (i) is a corporation or limited liability company, as applicable, duly organized and validly existing under the laws of the State of its formation or incorporation and is duly qualified as a foreign corporation or limited liability company, as applicable, and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on the financial condition, operations, business, properties, assets or prospects of the Borrower and the Guarantors taken as a whole; (ii) subject to the entry by the Bankruptcy Court of the Interim Order (or the Final Order, when applicable) has the requisite corporate or limited liability company power and authority to effect the transactions contemplated hereby, and by the other Loan Documents to which it is a party, and (iii) subject to the entry by the Bankruptcy Court of the Interim Order (or the Final Order, when applicable) has all requisite corporate or limited liability company (as applicable) power and authority and the legal right to own, pledge, mortgage and operate its properties, and to conduct its business as now or currently proposed to be conducted.
SECTION 3.02 DUE EXECUTION. Upon the entry by the Bankruptcy Court of the Interim Order (or the Final Order, when applicable), the execution, delivery and performance by each of the Borrower and the Guarantors of each of the Loan Documents to which it is a party (i) are within the respective corporate powers of each of the Borrower and the Guarantors, have been duly authorized by all necessary corporate or limited liability action including the consent of shareholders or member where required, and do not (A) contravene the charter, by-laws or limited liability company agreement of any of the Borrower or the Guarantors, (B) violate any law (including, without limitation, the Securities Exchange Act of 1934) or regulation (including, without limitation, Regulations T, U or X of the Board of Governors of the Federal Reserve System), or any order or decree of any court or Governmental Authority, (C) conflict with or result in a breach of, or constitute a default under, any material indenture, mortgage or deed of trust entered into after the Filing Date or any material lease, agreement or other instrument entered into after the Filing Date binding on the Borrower or the Guarantors or any of their properties, or (D) result in or require the creation or imposition of any Lien upon any of the property of any of the Borrower or the Guarantors other than the Liens granted pursuant to this Agreement, the other Loan Documents or the Orders; and (ii) do not require the consent, authorization by or approval of or notice to or filing or registration with any Governmental Authority other than the entry of the Orders. Upon the entry by the Bankruptcy Court of the Interim Order (or the Final Order, when applicable), this Agreement will have been duly executed and delivered by each of the Borrower and the Guarantors. This Agreement is, and each of the other Loan Documents to which the Borrower and each of the Guarantors is or will
be a party, when delivered hereunder or thereunder, will be, a legal, valid and binding obligation of the Borrower and each Guarantor, as the case may be, enforceable against the Borrower and the Guarantors, as the case may be, in accordance with its terms and the Orders.
SECTION 3.03 STATEMENTS MADE. The information that has been delivered in writing by the Borrower or any of the Guarantors to the Agent or to the Bankruptcy Court in connection with any Loan Document, and any financial statement delivered pursuant hereto or thereto (other than to the extent that any such statements constitute projections), taken as a whole and in light of the circumstances in which made, contains no untrue statement of a material fact and does not omit to state a material fact necessary to make such statements not misleading; and, to the extent that any such information constitutes projections, such projections were prepared in good faith on the basis of assumptions, methods, data, tests and information believed by the Borrower or such Guarantor to be reasonable at the time such projections were furnished.
SECTION 3.04 FINANCIAL STATEMENTS. The Borrower has furnished the Lenders with copies of the audited consolidated financial statement and schedules of the Borrower for the fiscal year ended December 27, 2001, and the unaudited consolidated financial statements of the Borrower and the Guarantors for the fiscal quarter ended September 27, 2002. Such financial statements present fairly the financial condition and results of operations of the Borrower and the Guarantors on a consolidated basis as of such date and for such period; such balance sheets and the notes thereto disclose all liabilities, direct or contingent, of the Borrower and the Guarantors as of the dates thereof required to be disclosed by GAAP and such financial statements were prepared in a manner consistent with GAAP. No material adverse change in the operations, business, properties, assets, prospects or condition (financial or otherwise) of the Borrower and the Guarantors, taken as a whole, has occurred from that set forth in the Borrower's consolidated financial statements for the fiscal year ended December 27, 2001, and the unaudited consolidated financial statements of the Borrower and the Guarantors for the fiscal quarter ended September 27, 2002, other than those which customarily occur as a result of events leading up to and following the commencement of a proceeding under Chapter 11 of the Bankruptcy Code and the commencement of the Cases (including, without limitation, those reflected in the financial projections heretofore made available to the Agent).
SECTION 3.05 OWNERSHIP. The Borrower is a direct wholly-owned Subsidiary of Holdings and (except as shown on Schedule 3.05) Holdings owns no other Subsidiaries, whether directly or indirectly, other than the Borrower and the Guarantors other than Holdings. Other than as set forth on Schedule 3.05, (i) each of the Persons listed on Schedule 3.05 is a wholly-owned, direct or indirect Subsidiary of the Borrower, and (ii) the Borrower owns no other Subsidiaries, whether directly or indirectly.
SECTION 3.06 LIENS. Except for Liens existing on the Filing Date as reflected on Schedule 3.06, there are no Liens of any nature whatsoever on any assets of the Borrower or any of the Guarantors other than: (i) Liens granted pursuant to the Existing Agreement; (ii) Permitted Liens; (iii) other Liens permitted pursuant to Section 6.01; and (iv) Liens in favor of the Agent and the Lenders. Neither the Borrower nor the Guarantors are parties to any contract, agreement, lease or instrument the performance of which, either unconditionally or upon the happening of an event, will result in or require the creation of a Lien on any assets of the Borrower or any
Guarantor or otherwise result in a violation of this Agreement other than the Liens granted to the Agent and the Lenders as provided for in this Agreement.
SECTION 3.07 COMPLIANCE WITH LAW.
(a) (i) The operations of the Borrower and the Guarantors comply in all material respects with all applicable environmental, health and safety statutes and regulations, including, without limitation, regulations promulgated under the Resource Conservation and Recovery Act (42 U.S.C. ss.ss. 6901 et seq.); (ii) to the Borrower's and each of the Guarantor's knowledge, none of the operations of the Borrower or the Guarantors is the subject of any Federal or state investigation evaluating whether any remedial action involving a material expenditure by the Borrower or any Guarantor is needed to respond to a release of any Hazardous Waste or Hazardous Substance (as such terms are defined in any applicable state or Federal environmental law or regulations) into the environment; and (iii) to the Borrower's and each of the Guarantor's knowledge, the Borrower and the Guarantors do not have any material contingent liability in connection with any release of any Hazardous Waste or Hazardous Substance into the environment.
(b) Neither the Borrower nor any Guarantor is, to the best of its knowledge, in violation of any law, rule or regulation, or in default with respect to any judgment, writ, injunction or decree of any Governmental Authority the violation of which, or a default with respect to which, would have a material adverse effect on the financial condition, operations, business, properties, assets or prospects of the Borrower and the Guarantors taken as a whole.
SECTION 3.08 INSURANCE. All policies of insurance of any kind or nature owned by or issued to the Borrower and the Guarantors, including, without limitation, policies of life, fire, theft, product liability, public liability, property damage, other casualty, employee fidelity, workers' compensation, employee health and welfare, title, property and liability insurance, are in full force and effect and are of a nature and provide such coverage as is customarily carried by companies of the size and character of the Borrower and the Guarantors (and all policies of insurance required to be maintained pursuant to the Existing Agreement and the preferred fleet mortgages granted thereunder).
SECTION 3.09 USE OF PROCEEDS. The proceeds of the Loans shall be used (i) to repurchase the Existing Receivables Portfolio and (ii) for working capital and for other general corporate purposes of the Borrower and the Guarantors.
SECTION 3.10 LITIGATION. Other than as set forth on Schedule 3.10, there are no unstayed actions, suits or proceedings pending or, to the knowledge of the Borrower or the Guarantors, threatened against or affecting the Borrower or the Guarantors or any of their respective properties, before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which is reasonably likely to be determined adversely to the Borrower or the Guarantors and, if so determined adversely to the Borrower or the Guarantors would have a material adverse effect on the financial condition, business, properties, prospects, operations or assets of the Borrower and the Guarantors, taken as a whole.
SECTION 4. CONDITIONS OF LENDING
SECTION 4.01 CONDITIONS PRECEDENT TO INITIAL LOANS AND INITIAL LETTERS OF CREDIT. The obligation of the Lenders to make the initial Loans or the Fronting Bank to issue the initial Letter of Credit, whichever may occur first, is subject to the satisfaction (or waiver by the Initial Lenders) of the following conditions precedent:
(a) Supporting Documents. The Agent shall have received for each of the Borrower and the Guarantors:
(i) a copy of such entity's certificate of incorporation or formation, as amended, certified as of a recent date by the Secretary of State of the state of its incorporation or formation;
(ii) a certificate of such Secretary of State, dated as of a recent date, as to the good standing of and payment of taxes by that entity and as to the charter documents on file in the office of such Secretary of State; and
(iii) a certificate of the Secretary or an Assistant Secretary of that entity dated the date of the initial Loans or the initial Letter of Credit hereunder, whichever first occurs, and certifying (A) that attached thereto is a true and complete copy of the by-laws or limited liability company agreement of that entity as in effect on the date of such certification, (B) that attached thereto is a true and complete copy of resolutions adopted by the Board of Directors or managers of that entity authorizing the Borrowings and Letter of Credit extensions hereunder, the execution, delivery and performance in accordance with their respective terms of this Agreement, the Loan Documents and any other documents required or contemplated hereunder or thereunder and the granting of the security interest in the Letter of Credit Account and other Liens contemplated hereby, (C) that the certificate of incorporation or formation of that entity has not been amended since the date of the last amendment thereto indicated on the certificate of the Secretary of State furnished pursuant to clause (i) above and (D) as to the incumbency and specimen signature of each officer or manager of that entity executing this Agreement and the Loan Documents or any other document delivered by it in connection herewith or therewith (such certificate to contain a certification by another officer or manager of that entity as to the incumbency and signature of the officer or manager signing the certificate referred to in this clause (iii)).
(b) Interim Order. At the time of the making of the initial Loans or at the time of the issuance of the initial Letters of Credit, whichever first occurs, the Agent and the Lenders shall have received a certified copy of an order of the Bankruptcy Court in substantially the form of Exhibit A-1 (the "Interim Order") approving the Loan Documents and granting the Superpriority Claim status and senior priming and other Liens described in Section 2.23 which Interim Order (i) shall have been entered, no later than 15 days following the Filing Date, upon an application or motion of the Borrower reasonably satisfactory in form and substance to the Initial Lenders, on such prior notice to such parties (including the Existing Lenders) as may in each case be reasonably satisfactory to the Agent and upon consent or non-objection of a preponderance of the financial institutions, as determined by the Initial Lenders, that are parties to the Existing Agreement, (ii) shall authorize extensions of credit in amounts not in excess of an
amount to be set forth in the Interim Order, which shall be satisfactory to the
Initial Lenders, until the entry of the Final Order hereinafter referred to,
(iii) shall approve the payment by the Borrower of all of the Fees set forth in
Section 2.19, (iv) shall be in full force and effect, (v) shall have authorized
the use by the Borrower and the Guarantors of any cash collateral in which any
Existing Lender under the Existing Agreement may have an interest and shall have
provided, as adequate protection for the use of such cash collateral and the
priming contemplated hereby, for (A) the monthly payment of current interest and
letter of credit fees (including the payment on the Closing Date of any such
interest and fees that are accrued and unpaid as of the Filing Date) at the
applicable non-default rates (including LIBOR pricing options) provided for
pursuant to the Existing Agreement (the payments described in this clause to be
without prejudice to the rights of any Existing Lender to assert a claim for the
payment of additional interest calculated at any other applicable rates of
interest, or on any other basis (including, without limitation, on the "PIK"
basis set forth in the Existing Agreement), set forth in the Existing Agreement
or to the rights of the Borrower to contest such assertion), (B) a superpriority
claim as contemplated by Section 507(b) of the Bankruptcy Code immediately
junior to the claims under Section 364(c)(1) of the Bankruptcy Code held by the
Agent and the Lenders, (C) a Lien on substantially all of the assets of the
Borrower and the Guarantors having a priority immediately junior to the priming
and other Liens granted in favor of the Agent and the Lenders hereunder and
under the other Loan Documents, and (D) the payment on a current basis of the
reasonable fees and disbursements of respective professionals (including, but
not limited to, the reasonable fees and disbursements of counsel and internal
and third-party consultants, including financial consultants, and auditors) for
the Pre-Petition Agent (including the payment on the Closing Date or as soon
thereafter as is practicable of any unpaid pre-petition fees and expenses) and
the continuation of the payment to the Pre-Petition Agent on a current basis of
the administration fees that are provided for under the Existing Agreement) and
(vi) shall not have been stayed, reversed, modified or amended in any respect
without the prior written consent of the Initial Lenders; and, if the Interim
Order is the subject of a pending appeal in any respect, neither the making of
such Loans nor the issuance of such Letter of Credit nor the performance by the
Borrower or any of the Guarantors of any of their respective obligations
hereunder or under the Loan Documents or under any other instrument or agreement
referred to herein shall be the subject of a presently effective stay pending
appeal.
(c) Existing Receivables Portfolio. At the time of or concurrently with such extension of credit, the Existing Receivables Portfolio shall have been repurchased by the Borrower or a Guarantor if such repurchase shall have been approved pursuant to the Interim Order.
(d) Security and Pledge Agreement, and Mortgage. The Borrower and each of the Guarantors shall have duly executed and delivered to the Agent a Security and Pledge Agreement in substantially the form of Exhibit B (the "Security and Pledge Agreement"). In addition, each of the Borrower, Houston Fleet LLC, and Louisiana Dock Company LLC and any other Guarantor owning a vessel that is registered with the United States Coast Guard shall have executed and delivered a preferred fleet mortgage in substantially the form of Exhibit B-1 (the "Mortgage") covering towboats, barges and other vessels owned by it to secure all of the obligations of the Borrower and the Guarantors under and in connection with this Agreement (it being understood that, with the consent of the Initial Lenders, the execution and recordation with
the United States Coast Guard of the Mortgage may be deferred for a period of up to 30 days following the initial extension of credit hereunder).
(e) First Day Orders. All of the "first day orders" entered by the Bankruptcy Court at the time of the commencement of the Cases shall be reasonably satisfactory in form and substance to the Initial Lenders.
(f) Opinion of Counsel. The Agent and the Initial Lenders shall have received the favorable written opinion of counsel to the Borrower and the Guarantors reasonably acceptable to the Agent, dated the date of the initial Loans or the issuance of the initial Letter of Credit, whichever first occurs, substantially in the form of Exhibit E.
(g) Payment of Fees. The Borrower shall have paid to the Agent the then unpaid balance of all accrued and unpaid Fees due under and pursuant to this Agreement and the letter referred to in Section 2.19.
(h) Corporate and Judicial Proceedings. All corporate and judicial proceedings and all instruments and agreements in connection with the transactions among the Borrower, the Guarantors, the Agent and the Lenders contemplated by this Agreement shall be reasonably satisfactory in form and substance to the Agent, and the Agent shall have received all information and copies of all documents and papers, including records of corporate and judicial proceedings, which the Agent may have reasonably requested in connection therewith, such documents and papers where appropriate to be certified by proper corporate, governmental or judicial authorities.
(i) Information. The Initial Lenders shall have received such information (financial or otherwise) as may be reasonably requested by the Agent and shall have discussed the Borrower's business plan heretofore delivered to the Agent with the Borrower's management and shall be satisfied with the nature and substance of such discussions.
(j) Business Plan. The Agent and the Initial Lenders shall have received from the Borrower the Borrower's business plan for the period through the Maturity Date which shall be satisfactory in form and substance to the Agent and the Initial Lenders.
(k) Forecast. The Agent and the Lenders shall have received from the Borrower a forecast of the Borrower's anticipated cash receipts and disbursements for the period through the Maturity Date on a monthly basis and a 13-week cash flow projection, in each case, satisfactory in form and substance to the Agent and the Initial Lenders.
(l) Compliance with Environmental Laws. The Borrower and the
Guarantors shall have granted the Agent access to and the right to inspect all
reports, audits and other internal information of the Borrower and the
Guarantors relating to environmental matters, and any third party verification
of certain matters relating to compliance with environmental laws and
regulations requested by the Agent, and the Agent shall be reasonably satisfied
(x) that the Borrower and the Guarantors are in compliance in all material
respects with all applicable environmental laws and regulations and (y) that the
Borrower has made adequate provision for the costs of maintaining such
compliance.
(m) UCC Searches. The Agent shall have received UCC searches conducted in the jurisdictions in which the Borrower and the Guarantors are organized and have their principal offices and offices where they keep books and records related to receivables in each case satisfactory to the Agent (dated as of a date reasonably satisfactory to the Agent), reflecting the absence of Liens and encumbrances on the assets of the Borrower and the Guarantors other than liens granted with respect to the Existing Receivables Portfolio and such other Liens as may be satisfactory to the Agent.
(n) Commitments of Initial Lenders. Annex A hereto shall reflect Commitments of the Initial Lenders in an amount of not less than $60,000,000.
(o) Closing Documents. The Agent shall have received all documents required by Section 4.01 reasonably satisfactory in form and substance to the Agent and each Initial Lender.
(p) Vessel Liens. The Initial Lenders shall be satisfied with the nature and extent of Liens on towboats owned by the Borrower having an aggregate appraised value of no less than $125,000,000 (based on the most recent appraisal furnished to the Agent by Merrill Marine Services, Inc.).
(q) Account Letter. The Borrower shall have delivered to National City Bank a letter of instruction directing National City Bank to remit collected balances in the Borrower's account(s) with National City Bank to the Agent on a daily basis, and such letter of instruction shall be satisfactory in form and substance to the Agent.
(r) Certificate as to Vessels. The Agent shall have received a certificate of a Financial Officer certifying as to all of the vessels that are owned by the Borrower and the Guarantors that are registered with the United States Coast Guard.
SECTION 4.02 CONDITIONS PRECEDENT TO EACH LOAN AND EACH LETTER OF CREDIT. The obligation of the Lenders to make each Loan and of the Fronting Bank to issue each Letter of Credit, including the initial Loan and the initial Letter of Credit, is subject to the following conditions precedent:
(a) Notice. The Agent shall have received a notice with respect to such borrowing or issuance, as the case may be, as required by Section 2.
(b) Representations and Warranties. All representations and warranties contained in this Agreement and the other Loan Documents (and prior to the execution of the Mortgage, in the preferred fleet mortgages delivered pursuant to the Existing Agreement) shall be true and correct in all material respects on and as of the date of each Borrowing or the issuance of each Letter of Credit hereunder with the same effect as if made on and as of such date except to the extent such representations and warranties expressly relate to an earlier date.
(c) No Default. On the date of each Borrowing hereunder or the issuance of each Letter of Credit, no Event of Default or event which upon notice or lapse of time or both would constitute an Event of Default shall have occurred and be continuing (and prior to the
execution of the Mortgage, the Borrower and the Guarantors shall be in compliance with the preferred fleet mortgages delivered pursuant to the Existing Agreement).
(d) Orders. The Interim Order shall be in full force and effect and shall not have been stayed, reversed, modified or amended in any respect without the prior written consent of the Agent and the Required Lenders, provided, that at the time of the making of any Loan or the issuance of any Letter of Credit the aggregate amount of either of which, when added to the sum of the principal amount of all Loans then outstanding and the Letter of Credit Outstandings, would exceed the amount authorized by the Interim Order (collectively, the "Additional Credit"), the Agent and each of the Lenders shall have received a certified copy of an order of the Bankruptcy Court in substantially the form of the Interim Order with only such changes therefrom as may be satisfactory to the Required Lenders (the "Final Order"), which Final Order shall have been entered by the Bankruptcy Court no later than 45 days after the entry of the Interim Order and at the time of the extension of any Additional Credit the Final Order shall be in full force and effect, and shall not have been stayed, reversed, modified or amended in any respect without the prior written consent of the Agent and the Required Lenders (and if the repurchase of the Existing Receivables Portfolio shall not have been approved pursuant to the Interim Order, such repurchase shall have been approved on terms satisfactory to the Agent by the Final Order or by a separate order of the Court that is satisfactory in form and substance to the Agent and each Initial Lender and that is entered at the time of, or prior to, the entry of the Final Order); and if either the Interim Order or the Final Order is the subject of a pending appeal in any respect, neither the making of the Loans nor the issuance of any Letter of Credit nor the performance by the Borrower or any Guarantor of any of their respective obligations under any of the Loan Documents shall be the subject of a presently effective stay pending appeal.
(e) Payment of Fees. The Borrower shall have paid to the Agent the then unpaid balance of all accrued and unpaid Fees then payable under and pursuant to this Agreement and the letter referred to in Section 2.19.
(f) Borrowing Base Certificate. The Agent shall have received the timely delivery of the most recent Borrowing Base Certificate (dated no more than seven (7) days prior to the making of a Loan or the issuance of a Letter of Credit) required to be delivered hereunder.
The request by the Borrower for, and the acceptance by the Borrower of, each extension of credit hereunder shall be deemed to be a representation and warranty by the Borrower that the conditions specified in this Section have been satisfied or waived at that time.
SECTION 5. AFFIRMATIVE COVENANTS
From the date hereof and for so long as any Commitment shall be in effect or any Letter of Credit shall remain outstanding (in a face amount in excess of the amount of cash then held in the Letter of Credit Account, or in excess of the face amount of back-to-back letters of credit delivered, in each case pursuant to Section 2.03(b)), or any amount shall remain outstanding or unpaid under this Agreement, the Borrower and each of the Guarantors agree that, unless the Required Lenders shall otherwise consent in writing, the Borrower and each of the Guarantors will:
SECTION 5.01 FINANCIAL STATEMENTS, REPORTS, ETC. In the case of the Borrower and the Guarantors, deliver to the Agent and each of the Lenders:
(a) within 90 days after the end of each fiscal year, the Borrower's consolidated balance sheet and related statement of income and cash flows, showing the financial condition of the Borrower and the Guarantors on a consolidated basis as of the close of such fiscal year and the results of their respective operations during such year, the consolidated statement of the Borrower to be audited for the Borrower and the Guarantors by Ernst & Young or other independent public accountants of recognized national standing and accompanied by an opinion of such accountants (which shall not be qualified in any material respect other than with respect to the Cases or a going concern qualification) and to be certified by a Financial Officer of the Borrower to the effect that such consolidated financial statements fairly present the financial condition and results of operations of the Borrower and the Guarantors on a consolidated basis in accordance with GAAP;
(b) within 45 days after the end of each of the first three fiscal quarters, the Borrower's consolidated balance sheets and related statements of income and cash flows, showing the financial condition of the Borrower and its Subsidiaries on a consolidated basis as of the close of such fiscal quarter and the results of their operations during such fiscal quarter and the then elapsed portion of the fiscal year, each certified by a Financial Officer as fairly presenting the financial condition and results of operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP, subject to normal year-end audit adjustments;
(c) commencing with the first fiscal month following the closing Date, as soon as practicable, but in no event later than 30 days after the end of each fiscal month of the Borrower, monthly unaudited consolidated balance sheets of the Borrower and its Subsidiaries and related consolidated statements of earnings and cash flows of the Borrower and its Subsidiaries for the prior fiscal month and the then elapsed portion of the fiscal quarter, each certified by a Financial Officer of the Borrower;
(d) (i) concurrently with any delivery of financial statements under
(a) and (b) above, a certificate of a Financial Officer certifying such
statements (A) certifying that no Event of Default or event which upon notice or
lapse of time or both would constitute an Event of Default has occurred, or, if
such an Event of Default or event has occurred, specifying the nature and extent
thereof and any corrective action taken or proposed to be taken with respect
thereto and (B) setting forth computations in reasonable detail satisfactory to
the Agent demonstrating compliance with the provisions of Sections 6.03, 6.04,
6.05 and 6.10 and (ii) concurrently with any delivery of financial statements
under (a) above, a certificate (which certificate may be limited to accounting
matters and disclaim responsibility for legal interpretations) of the
accountants auditing the consolidated financial statements delivered under (a)
above certifying that, in the course of the regular audit of the business of the
Borrower and its Subsidiaries, such accountants have obtained no knowledge that
an Event of Default has occurred and is continuing, or if, in the opinion of
such accountants, an Event of Default has occurred and is continuing, specifying
the nature thereof and all relevant facts with respect thereto;
(e) as soon as possible, and in any event within 30 days after the Closing Date, an analysis of the Borrower's and Guarantor's vessel and other leases, with such detail as
may be reasonably satisfactory to the Agent, including but not limited to identification of the leased property, payment terms, tenor and other significant terms;
(f) concurrently with any delivery of financial statements under (b) above, monthly financial projections for the following six fiscal month periods;
(g) as soon as possible, and in any event within 45 days of the Closing Date, a consolidated pro forma balance sheet of the Borrower's and the Guarantors' financial condition as of the Filing Date;
(h) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by it with the Securities and Exchange Commission, or any governmental authority succeeding to any of or all the functions of said commission, or with any national securities exchange, as the case may be;
(i) as soon as available and in any event (A) within 30 days after the Borrower or any of its ERISA Affiliates knows or has reason to know that any Termination Event described in clause (i) of the definition of Termination Event with respect to any Single Employer Plan of the Borrower or such ERISA Affiliate has occurred and (B) within 10 days after the Borrower or any of its ERISA Affiliates knows or has reason to know that any other Termination Event with respect to any such Plan has occurred, a statement of a Financial Officer of the Borrower describing the full details of such Termination Event and the action, if any, which the Borrower or such ERISA Affiliate is required or proposes to take with respect thereto, together with any notices required or proposed to be given to or filed with or by the Borrower, the ERISA Affiliate, the PBGC, a Plan participant or the Plan administrator with respect thereto;
(j) promptly and in any event within 10 days after receipt thereof by the Borrower or any of its ERISA Affiliates from the PBGC copies of each notice received by the Borrower or any such ERISA Affiliate of the PBGC's intention to terminate any Single Employer Plan of the Borrower or such ERISA Affiliate or to have a trustee appointed to administer any such Plan;
(k) if requested by the Agent, promptly and in any event within 30 days after the filing thereof with the Internal Revenue Service, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Single Employer Plan of the Borrower or any of its ERISA Affiliates;
(l) within 10 days after notice is given or required to be given to the PBGC under Section 302(f)(4)(A) of ERISA of the failure of the Borrower or any of its ERISA Affiliates to make timely payments to a Plan, a copy of any such notice filed and a statement of a Financial Officer of the Borrower setting forth (A) sufficient information necessary to determine the amount of the lien under Section 302(f)(3), (B) the reason for the failure to make the required payments and (C) the action, if any, which the Borrower or any of its ERISA Affiliates proposed to take with respect thereto;
(m) promptly and in any event within 10 days after receipt thereof by the Borrower or any ERISA Affiliate from a Multiemployer Plan sponsor, a copy of each notice received by the Borrower or any ERISA Affiliate concerning (A) the imposition of Withdrawal
Liability by a Multiemployer Plan, (B) the determination that a Multiemployer Plan is, or is expected to be, in reorganization within the meaning of Title IV of ERISA, (C) the termination of a Multiemployer Plan within the meaning of Title IV of ERISA, or (D) the amount of liability incurred, or which may be incurred, by the Borrower or any ERISA Affiliate in connection with any event described in clause (A), (B) or (C) above;
(n) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of the Borrower or any Guarantor (including, without limitation, (i) periodic updates of the forecast delivered to the Agent pursuant to Section 4.01(k) and (ii) weekly rolling 13-week cash flow projections), or compliance with the terms of any material loan or financing agreements, as the Agent, at the request of any Lender, may reasonably request;
(o) furnish to the Agent and its counsel promptly after the same is available, copies of all pleadings, motions, applications, judicial information, financial information and other documents filed by or on behalf of the Borrower or any of the Guarantors with the Bankruptcy Court in the Cases, or distributed by or on behalf of the Borrower or any of the Guarantors to any official committee appointed in the Cases; and
(p) be available to discuss the business plan delivered pursuant to
Section 4.01(j) with the Agent and Lenders upon the Agents' reasonable request.
SECTION 5.02 CORPORATE EXISTENCE. Preserve and maintain in full force and effect all governmental rights, privileges, qualifications, permits, licenses and franchises necessary or desirable in the normal conduct of its business except (i)(A) if in the reasonable business judgment of the Borrower or its subsidiary, as the case may be, it is in its best economic interest not to preserve and maintain such rights, privileges, qualifications, permits, licenses and franchises, and (B) such failure to preserve the same could not, in the aggregate, reasonably be expected to have a material adverse effect on the operations, business, properties, assets, prospects or condition (financial or otherwise) of the Borrower and the Guarantors, taken as a whole, and (ii) as otherwise permitted in connection with sales of assets permitted by Section 6.11.
SECTION 5.03 INSURANCE. (a) Keep its insurable properties insured at all times, against such risks, including fire and other risks insured against by extended coverage, as is customary with companies of the same or similar size in the same or similar businesses; and maintain in full force and effect public liability insurance against claims for personal injury or death or property damage occurring upon, in, about or in connection with the use of any properties owned, occupied or controlled by the Borrower or any Guarantor, as the case may be, in such amounts (giving effect to self-insurance) and with such deductibles as are customary with companies of the same or similar size in the same or similar businesses and in the same geographic area (and in any event, maintain such insurance as is required by the preferred fleet mortgages delivered pursuant to the Existing Agreement); and (b) maintain such other insurance or self insurance as may be required by law.
SECTION 5.04 OBLIGATIONS AND TAXES. With respect to the Borrower and each Guarantor, pay all its material obligations arising after the Filing Date promptly and in accordance with their terms and pay and discharge promptly all material taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property arising after the Filing Date, before the same shall become in default, as well as all material lawful claims for labor, materials and supplies or otherwise arising after the Filing Date which, if unpaid, would become a Lien or charge upon such properties or any part thereof; provided, however, that the Borrower and each Guarantor shall not be required to pay and discharge or to cause to be paid and discharged any such obligation, tax, assessment, charge, levy or claim so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings (if the Borrower and the Guarantors shall have set aside on their books adequate reserves therefor).
SECTION 5.05 NOTICE OF EVENT OF DEFAULT, ETC. Promptly give to the Agent notice in writing of any Event of Default or the occurrence of any event or circumstance which with the passage of time or giving of notice or both would constitute an Event of Default.
SECTION 5.06 ACCESS TO BOOKS AND RECORDS. Maintain or cause to be maintained at all times true and complete books and records in accordance with GAAP of the financial operations of the Borrower and the Guarantors; and provide the Agent and its representatives access to all such books and records during regular business hours, in order that the Agent may upon reasonable prior notice examine and make abstracts from such books, accounts, records and other papers for the purpose of verifying the accuracy of the various reports delivered by the Borrower or the Guarantors to the Agent or the Lenders pursuant to this Agreement or for otherwise ascertaining compliance with this Agreement; and at any reasonable time and from time to time during regular business hours, upon reasonable notice, permit the Agent and any agents or representatives (including, without limitation, appraisers) thereof to visit the properties of the Borrower and the Guarantors and to conduct examinations and appraisals of and to monitor the Collateral held by the Agent (in each case at the Borrower's expense).
SECTION 5.07 MAINTENANCE OF CONCENTRATION ACCOUNT. By no later than thirty
(30) days following the Closing Date (or such longer period to which the Agent
and the Initial Lenders in their sole discretion may agree in writing), and at
all times thereafter, maintain with the Agent an account or accounts to be used
by the Borrower and the Guarantors as their principal concentration account for
day-to-day operations conducted by the Borrower and the Guarantors, it being
understood that the arrangements to be implemented to sweep funds into the
concentration account maintained with the Agent must be satisfactory to the
Agent.
SECTION 5.08 BORROWING BASE CERTIFICATE. Furnish to the Agent as soon as
available and in any event (i) on or before Wednesday of each week, a weekly
Borrowing Base Certificate as of the last day of the immediately preceding week,
(ii) with respect to each fiscal monthly period ending after the Closing Date,
within 15 days after the end of each such fiscal month, a Borrowing Base
Certificate that demonstrates the calculation of the Borrowing Base as of the
close of business on the last day of such fiscal monthly period, (iii) if
requested by the Agent at any other time when the Agent reasonably believes that
the then existing Borrowing Base Certificate is materially inaccurate, as soon
as reasonably available but in no event later than five (5) Business Days after
such request, a Borrowing Base Certificate showing the
Borrowing Base as of the date so requested, in each case with supporting documentation (including, without limitation, the documentation described on Schedule 1 to Exhibit D), and (iv) such other supporting documentation and additional reports with respect to the Borrowing Base as the Agent shall reasonably request.
SECTION 5.09 COLLATERAL MONITORING AND REVIEW. At any time upon the reasonable request of the Agent or the Required Lenders through the Agent, permit the Agent or professionals (including consultants, accountants and appraisers) retained by the Agent or its professionals to conduct evaluations and appraisals of (i) the Borrower's practices in the computation of the Borrowing Base and (ii) the assets included in the Borrowing Base, and pay the reasonable fees and expenses in connection therewith (including, without limitation, the reasonable and customary fees and expenses associated with the Agent's Collateral Agent Services Group). In connection with any collateral monitoring or review and appraisal relating to the computation of the Borrowing Base, the Borrower shall make such adjustments to the Borrowing Base as the Agent shall reasonably require based upon the terms of this Agreement and results of such collateral monitoring, review or appraisal.
SECTION 5.10 CERTIFICATES OF OWNERSHIP AND ENCUMBRANCE. By no later than forty-five (45) days following the Closing Date, furnish to the Agent abstracts of title with respect to the towboats, barges and other vessels owned by the Borrower and the Guarantors certified by the United States Coast Guard, satisfactory to the Agent, reflecting the absence of Liens and encumbrances on such assets other than Permitted Liens, Liens granted pursuant to the Existing Agreement and such other Liens as may be satisfactory to the Agent and the Super-majority Lenders.
SECTION 6. NEGATIVE COVENANTS
From the date hereof and for so long as any Commitment shall be in effect or any Letter of Credit shall remain outstanding (in a face amount in excess of the amount of cash then held in the Letter of Credit Account, or in excess of the face amount of back-to-back letters of credit delivered, in each case pursuant to Section 2.03(b)) or any amount shall remain outstanding or unpaid under this Agreement, unless the Required Lenders shall otherwise consent in writing, the Borrower and each of the Guarantors will not (and will not apply to the Bankruptcy Court for authority to):
SECTION 6.01 LIENS. Incur, create, assume or suffer to exist any Lien on
any asset of the Borrower or the Guarantors, now owned or hereafter acquired by
the Borrower or any of such Guarantors, other than (i) Liens which were existing
on the Filing Date as reflected on Schedule 3.06 hereto and Liens granted
pursuant to the Existing Agreement; (ii) Liens in favor of the Existing Lenders
as adequate protection granted pursuant to the Orders, which Liens are junior to
the Liens contemplated hereby in favor of the Agent and the Lenders, provided
that the Interim Order and the Final Order provide that the holder of such
junior Liens shall not be permitted to take any action to foreclose with respect
to such junior Liens so long as any amounts shall remain outstanding hereunder
or any Commitment shall be in effect; (iii) Permitted Liens; (iv) Liens in favor
of the Agent and the Lenders; and (v) a junior Lien (subject and subordinate to
(x) the Liens granted to the Agent on behalf of the Lenders hereunder and under
the Orders and (y) the Liens securing amounts outstanding under the Existing
Agreement or providing adequate protection therefor) on vessels owned by the
Borrower and the Guarantors in favor of certain critical vendors who may assert
maritime liens referred to in Section 7.01(m)(y), provided that (1) such junior
Lien may only be granted to creditors asserting maritime Liens in particular
vessels who agree to release such maritime Liens in return for the junior Liens
described herein and may only secure such portion of the pre-petition claims of
such creditors as remain unpaid after giving effect to the payments permitted by
Section 7.01(m)(y), (2) the holders of such junior Lien shall not be permitted
to exercise any remedies with respect thereto unless all of the Obligations and
all amounts outstanding under the Existing Agreement have been paid in full and
the Lenders have no further Commitment hereunder, (3) such junior Lien shall be
released without any further action by any party upon the Consummation Date, (4)
the holders of such junior Lien shall have agreed to extend post-petition credit
to the Debtors on terms that are satisfactory to the Debtors, (5) the order of
the Bankruptcy Court approving such junior Lien shall provide that,
notwithstanding the grant of such junior Lien, the holders thereof shall be
included in a class with unsecured pre-petition trade creditors for purposes of
voting on any proposed Reorganization Plan, and (6) the instruments and
agreements pursuant to which such junior Lien is created and the order approving
the same shall be satisfactory in form and substance to the Initial Lenders.
SECTION 6.02 MERGER, ETC. Consolidate or merge with or into another Person (except that any Guarantor may merge or consolidate with any other Guarantor).
SECTION 6.03 INDEBTEDNESS. Contract, create, incur, assume or suffer to
exist any Indebtedness, except for (i) Indebtedness under the Loan Documents;
(ii) Indebtedness incurred prior to the Filing Date (including existing
Capitalized Leases); (iii) intercompany indebtedness between the Borrower and
the Guarantors, (iv) Indebtedness arising from Investments among the Borrower
and the Guarantors that are permitted hereunder; (v) Indebtedness owed to any
Lender or any of its banking Affiliates in respect of overdrafts and related
liabilities arising from treasury, depository and cash management services, or
in connection with any automated clearing house transfers of funds and (vi)
other unsecured Indebtedness in an aggregate amount not to exceed $5,000,000.
SECTION 6.04 CAPITAL EXPENDITURES. Make Capital Expenditures (x) during each fiscal quarter listed below in an aggregate amount in excess of the amount specified opposite such fiscal quarter:
Fiscal Quarter Ending Maximum Capital Expenditures --------------------- ---------------------------- March 31, 2003 $ 2,000,000 June 30, 2003 $ 7,000,000 September 30, 2003 $ 6,000,000 December 31, 2003 $ 5,000,000 March 31, 2004 $ 6,000,000 June 30, 2004 $10,000,000 |
or (y) during the month ending July 31, 2004 in an aggregate amount in excess of $3,000,000. Capital Expenditures that are listed opposite any fiscal quarter set forth in clause (x) above that
are not spent during such fiscal quarter may be carried forward to and spent in the succeeding fiscal quarter.
SECTION 6.05 EBITDA.
Permit cumulative EBITDA for each period listed below to be less than the amount specified opposite such period:
Period EBITDA ------ ------ Three month period ending March 31, 2003 $(3,000,000) Six month period ending June 20, 2003 $17,000,000 Nine month period ending September 30, 2003 $44,000,000 Twelve month period ending December 31, 2003 $73,000,000 Twelve month period ending March 31, 2004 $81,000,000 Twelve month period ending June 30, 2004 $86,000,000 |
SECTION 6.06 GUARANTEES AND OTHER LIABILITIES. Purchase or repurchase (or agree, contingently or otherwise, so to do) the Indebtedness of, or assume, guarantee (directly or indirectly or by an instrument having the effect of assuring another's payment or performance of any obligation or capability of so doing, or otherwise), endorse or otherwise become liable, directly or indirectly, in connection with the obligations, stock or dividends of any Person, except (i) for any guaranty of Indebtedness or other obligations of any Borrower or Guarantor if the Guarantor could have incurred such Indebtedness or obligations under this Agreement, (ii) by endorsement of negotiable instruments for deposit or collection in the ordinary course of business and (iii) for liabilities under leasehold interests that are assigned by the Borrower or any Guarantor to the extent permitted by this Agreement.
SECTION 6.07 CHAPTER 11 CLAIMS. Incur, create, assume, suffer to exist or permit any other Superpriority Claim which is pari passu with or senior to the claims of the Agent and the Lenders against the Borrower and the Guarantors hereunder (or as described in Section 6.03(v)), except for the Carve-Out.
SECTION 6.08 DIVIDENDS; CAPITAL STOCK. Declare or pay, directly or indirectly, any dividends or make any other distribution or payment, whether in cash, property, securities or a combination thereof, with respect to (whether by reduction of capital or otherwise) any shares of capital stock (or any options, warrants, rights or other equity securities or agreements relating to any capital stock), or set apart any sum for the aforesaid purposes, provided that any Subsidiary Guarantor may pay dividends to the Borrower and to any other Subsidiary Guarantor that is its direct parent.
SECTION 6.09 TRANSACTIONS WITH AFFILIATES. Sell or transfer any property or assets to, or otherwise engage in any other material transactions with, any of its Affiliates (other than the Borrower and the Guarantors), other than in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrower or such Guarantor than could be obtained on an arm's-length basis from unrelated third parties other than pursuant to the Proposed Plan.
SECTION 6.10 INVESTMENTS, LOANS AND ADVANCES. Purchase, hold or acquire any capital stock, evidences of indebtedness or other securities of, make or permit to exist any loans or advances to, or make or permit to exist any investment in, any other Person (all of the foregoing, "Investments"), except for (i) ownership by the Borrower of the capital stock of each of the Guarantors listed on Schedule 3.05, (ii) Permitted Investments, (iii) advances and loans among the Borrower and the Guarantors in the ordinary course of business, provided that the aggregate outstanding principal amount of such advances and loans to Jeffboat LLC made after the Filing Date may not exceed $2,000,000 at any time; (iv) advances and loans to ACBL Venezuela Ltd. and GMS Venezuela Terminal Holdings LLC (and its subsidiaries) made after the Filing Date in an aggregate principal amount not in excess of $2,000,000 at any one time outstanding (provided that at the time of the making of any such advance or loan, and after giving effect thereto, the Unused Total Commitment shall be no less than $5,000,000 and all of such Unused Total Commitment shall be available for borrowing as shown on the most recent Borrowing Base Certificate delivered to the Agent and (v) other investments in existence at the commencement of the Cases as set forth on Schedule 6.10.
SECTION 6.11 DISPOSITION OF ASSETS. Sell or otherwise dispose of any assets (including, without limitation, the capital stock of any subsidiary) except for (i) sales of inventory, fixtures and equipment in the ordinary course of business and (ii) dispositions of surplus, obsolete or damaged equipment, including for scrap (provided that the aggregate amount of the net proceeds from sales of such scrap shall not exceed $5,000,000).
SECTION 6.12 NATURE OF BUSINESS. Modify or alter in any material manner the nature and type of its business as conducted at or prior to the Filing Date or the manner in which such business is conducted (except as required by the Bankruptcy Code), it being understood that asset sales permitted by Section 6.11 shall not constitute such a material modification or alteration.
SECTION 7. EVENTS OF DEFAULT
SECTION 7.01 EVENTS OF DEFAULT. In the case of the happening of any of the following events and the continuance thereof beyond the applicable period of grace if any (each, an "Event of Default"):
(a) any material representation or warranty made by the Borrower or any Guarantor in this Agreement or in any Loan Document or in connection with this Agreement or the credit extensions hereunder or any material statement or representation made in any report, financial statement, certificate or other document furnished by the Borrower or any Guarantors to the Lenders under or in connection with this Agreement, shall prove to have been false or misleading in any material respect when made or delivered; or
(b) default shall be made in the payment of any (i) Fees or interest on the Loans when due, and such default shall continue unremedied for more than two (2) Business Days or (ii) principal of the Loans or other amounts payable by the Borrower hereunder (including, without limitation, reimbursement obligations or cash collateralization in respect of Letters of Credit), when and as the same shall become due and payable, whether at the due date
thereof (including the Prepayment Date) or at a date fixed for prepayment thereof or by acceleration thereof or otherwise; or
(c) default shall be made by the Borrower or any Guarantor in the due observance or performance of any covenant, condition or agreement contained in Section 6 hereof; or
(d) default shall be made by the Borrower or any Guarantor in the due observance or performance of any other covenant, condition or agreement to be observed or performed pursuant to the terms of this Agreement, any of the Orders or any of the other Loan Documents and such default shall continue unremedied for more than ten (10) days; or
(e) any of the Cases shall be dismissed or converted to a case under Chapter 7 of the Bankruptcy Code or the Borrower or any Guarantor shall file a motion or other pleading seeking the dismissal of any of the Cases under Section 1112 of the Bankruptcy Code or otherwise; a trustee under Chapter 7 or Chapter 11 of the Bankruptcy Code, a responsible officer or an examiner with enlarged powers relating to the operation of the business (powers beyond those set forth in Section 1106(a)(3) and (4) of the Bankruptcy Code) under Section 1106(b) of the Bankruptcy Code shall be appointed in any of the Cases and the order appointing such trustee, responsible officer or examiner shall not be reversed or vacated within 30 days after the entry thereof; or an application shall be filed by the Borrower or any Guarantor for the approval of any other Superpriority Claim (other than the Carve-Out) in any of the Cases which is pari passu with or senior to the claims of the Agent and the Lenders against the Borrower or any Guarantor hereunder, or there shall arise or be granted any such pari passu or senior Superpriority Claim; or
(f) the Bankruptcy Court shall enter an order or orders granting relief from the automatic stay applicable under Section 362 of the Bankruptcy Code to the holder or holders of any security interest to permit foreclosure (or the granting of a deed in lieu of foreclosure or the like) on any assets of the Borrower or any of the Guarantors which have a value in excess of $500,000 in the aggregate; or
(g) a Change of Control shall occur prior to the effective date of a Reorganization Plan; or
(h) the Borrower shall fail to deliver a certified Borrowing Base Certificate when due and such default shall continue unremedied for more than three (3) Business Days; or
(i) any material provision of any Loan Document shall, for any reason, cease to be valid and binding on the Borrower or any of the Guarantors, or the Borrower or any of the Guarantors shall so assert in any pleading filed in any court; or
(j) an order of the Bankruptcy Court shall be entered reversing, staying for a period in excess of 10 days, vacating or (without the written consent of the Agent) otherwise amending, supplementing or modifying any of the Orders or terminating the use of cash collateral by the Borrower or the Guarantors pursuant to the Orders; or
(k) any judgment or order as to a post-petition liability or debt for the payment of money in excess of $1,000,000 not covered by insurance shall be rendered against the Borrower or any of the Guarantors and the enforcement thereof shall not have been stayed; or
(l) any non-monetary judgment or order with respect to a post-petition event shall be rendered against the Borrower or any of the Guarantors which does or would reasonably be expected to (i) cause a material adverse change in the financial condition, business, prospects, operations or assets of the Borrower and the Guarantors taken as a whole on a consolidated basis, (ii) have a material adverse effect on the ability of the Borrower or any of the Guarantors to perform their respective obligations under any Loan Document, or (iii) have a material adverse effect on the rights and remedies of the Agent or any Lender under any Loan Document, and there shall be any period of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or
(m) except as permitted by the Orders, the Borrower or the
Guarantors shall make any Pre-Petition Payment other than Pre-Petition Payments
authorized by the Bankruptcy Court (x) in accordance with other "first day"
orders reasonably satisfactory to the Agent, (y) not in excess of $14,800,000 in
respect of certain critical vendors who may assert maritime Liens or $2,200,000
in respect of certain other critical vendors who don't hold maritime Liens, and
(z) in respect of accrued payroll and related expenses and employee benefits as
of the Filing Date; or
(n) any Termination Event described in clauses (iii) or (iv) of the definition of such term shall have occurred and shall continue unremedied for more than 10 days and the sum (determined as of the date of occurrence of such Termination Event) of the Insufficiency of the Plan in respect of which such Termination Event shall have occurred and be continuing and the Insufficiency of any and all other Plans with respect to which such a Termination Event (described in such clauses (iii) or (iv)) shall have occurred and then exist is equal to or greater than $5,000,000; or
(o) (i) the Borrower or any ERISA Affiliate thereof shall have been notified by the sponsor or trustee of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan, (ii) the Borrower or such ERISA Affiliate does not have reasonable grounds, in the opinion of the Agent, to contest such Withdrawal Liability and is not in fact contesting such Withdrawal Liability in a timely and appropriate manner, and (iii) the amount of such Withdrawal Liability specified in such notice, when aggregated with all other amounts required to be paid to Multiemployer Plans in connection with Withdrawal Liabilities (determined as of the date of such notification), exceeds $5,000,000 allocable to post-petition obligations or requires payments exceeding $500,000 per annum in excess of the annual payments made with respect to such Multiemployer Plans by the Borrower or such ERISA Affiliate for the plan year immediately preceding the plan year in which such notification is received; or
(p) the Borrower or any ERISA Affiliate thereof shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if as a result of such reorganization or termination the aggregate annual contributions of the Borrower and its ERISA Affiliates to all Multiemployer Plans that are then in reorganization or being terminated have been or will be
increased over the amounts contributed to such Multiemployer Plans for the plan years that include the date hereof by an amount exceeding $5,000,000; or
(q) the Borrower or any ERISA Affiliate shall have committed a failure described in Section 302(f)(1) of ERISA (other than the failure to make any contribution accrued and unpaid as of the Filing Date) and the amount determined under Section 302(f)(3) of ERISA is equal to or greater than $5,000,000; or
(r) it shall be determined (whether by the Bankruptcy Court or by any other judicial or administrative forum) that the Borrower or any Guarantor is liable for the payment of claims arising out of any failure to comply (or to have complied) with applicable environmental laws or regulations the payment of which will have a material adverse effect on the financial condition, business, properties, operations, assets or prospects of the Borrower or the Guarantors, taken as a whole, and the enforcement thereof shall not have been stayed;
then, and in every such event and at any time thereafter during the continuance
of such event, and without further order of or application to the Bankruptcy
Court, the Agent may, and at the request of the Required Lenders, shall, by
notice to the Borrower (with a copy to counsel for the Official Creditors'
Committee appointed in the Cases, to counsel for the Pre-Petition Agent and to
the United States Trustee for the Southern District of Indiana), take one or
more of the following actions, at the same or different times (provided, that
with respect to clause (iv) below and the enforcement of Liens or other remedies
with respect to the Collateral under clause (v) below, the Agent shall provide
the Borrower (with a copy to counsel for the Official Creditors' Committee in
the Cases, to counsel for the Pre-Petition Agent and to the United States
Trustee for the Southern District of Indiana) with five (5) Business Days'
written notice prior to taking the action contemplated thereby and provided,
further, that upon receipt of notice referred to in the immediately preceding
clause with respect to the accounts referred to in clause (iv) below, the
Borrower may continue to make ordinary course disbursements from such accounts
(other than the Letter of Credit Account) but may not withdraw or disburse any
other amounts from such accounts): (i) terminate forthwith the Total Commitment;
(ii) declare the Loans then outstanding to be forthwith due and payable,
whereupon the principal of the Loans together with accrued interest thereon and
any unpaid accrued Fees and all other liabilities of the Borrower accrued
hereunder and under any other Loan Document, shall become forthwith due and
payable, without presentment, demand, protest or any other notice of any kind,
all of which are hereby expressly waived by the Borrower and the Guarantors,
anything contained herein or in any other Loan Document to the contrary
notwithstanding; (iii) require the Borrower and the Guarantors upon demand to
forthwith deposit in the Letter of Credit Account cash in an amount which,
together with any amounts then held in the Letter of Credit Account, is equal to
the sum of 105% of the then Letter of Credit Outstandings (and to the extent the
Borrower and the Guarantors shall fail to furnish such funds as demanded by the
Agent, the Agent shall be authorized to debit the accounts of the Borrower and
the Guarantors maintained with the Agent in such amount five (5) Business Days
after the giving of the notice referred to above); (iv) set-off amounts in the
Letter of Credit Account or any other accounts maintained with the Agent and
apply such amounts to the obligations of the Borrower and the Guarantors
hereunder and in the other Loan Documents; and (v) exercise any and all remedies
under the Loan Documents and under applicable law available to the Agent and the
Lenders.
SECTION 8. THE AGENT
SECTION 8.01 ADMINISTRATION BY AGENT. The general administration of the Loan Documents shall be by the Agent. Each Lender hereby irrevocably authorizes the Agent, at its discretion, to take or refrain from taking such actions as agent on its behalf and to exercise or refrain from exercising such powers under the Loan Documents as are delegated by the terms hereof or thereof, as appropriate, together with all powers reasonably incidental thereto (including the release of Collateral in connection with any transaction that is expressly permitted by the Loan Documents). The Agent shall have no duties or responsibilities except as set forth in this Agreement and the remaining Loan Documents.
SECTION 8.02 ADVANCES AND PAYMENTS.
(a) On the date of each Loan, the Agent shall be authorized (but not obligated) to advance, for the account of each of the Lenders, the amount of the Loan to be made by it in accordance with its Commitment hereunder. Should the Agent do so, each of the Lenders agrees forthwith to reimburse the Agent in immediately available funds for the amount so advanced on its behalf by the Agent, together with interest at the Federal Funds Effective Rate if not so reimbursed on the date due from and including such date but not including the date of reimbursement.
(b) Any amounts received by the Agent in connection with this Agreement (other than amounts to which the Agent is entitled pursuant to Sections 2.19, 8.06, 10.05 and 10.06), the application of which is not otherwise provided for in this Agreement shall be applied, first, in accordance with each Tranche A Lender's Commitment Percentage to pay accrued but unpaid Commitment Fees or Letter of Credit Fees, second, in accordance with each Tranche A Lender's Commitment Percentage to pay accrued but unpaid interest and the principal balance outstanding and all unreimbursed Letter of Credit drawings and third in accordance with each Tranche B Lender's Tranche B Commitment Percentage to pay accrued but unpaid interest and the principal balance outstanding. All amounts to be paid to a Lender by the Agent shall be credited to that Lender, after collection by the Agent, in immediately available funds either by wire transfer or deposit in that Lender's correspondent account with the Agent, as such Lender and the Agent shall from time to time agree.
SECTION 8.03 SHARING OF SETOFFS. Each Lender agrees that if it shall, through the exercise of a right of banker's lien, setoff or counterclaim against the Borrower, including, but not limited to, a secured claim under Section 506 of the Bankruptcy Code or other security or interest arising from, or in lieu of, such secured claim and received by such Lender under any applicable bankruptcy, insolvency or other similar law, or otherwise, obtain payment in respect of its Tranche A or Tranche B Loans as a result of which the unpaid portion of its Tranche A or Tranche B Loans is proportionately less than the unpaid portion of the Tranche A or Tranche B Loans of any other Tranche A or Tranche B Lender (a) it shall promptly purchase at par (and shall be deemed to have thereupon purchased) from such other Tranche A or Tranche B Lender a participation in the Tranche A or Tranche B Loans of such other Tranche A or Tranche B Lender, so that the aggregate unpaid principal amount of each Lender's Tranche A or Tranche B Loans and its participation in Tranche A or Tranche B Loans of the other Lenders shall be in the same proportion to the aggregate unpaid principal amount of all Tranche A or Tranche B Loans
then outstanding as the principal amount of its Tranche A or Tranche B Loans
prior to the obtaining of such payment was to the principal amount of all
Tranche A or Tranche B Loans outstanding prior to the obtaining of such payment
and (b) such other adjustments shall be made from time to time as shall be
equitable to ensure that the Tranche A or Tranche B Lenders share such payment
pro-rata, provided that if any such non-pro-rata payment is thereafter recovered
or otherwise set aside such purchase of participations shall be rescinded
(without interest). The Borrower expressly consents to the foregoing
arrangements and agrees that any Lender holding (or deemed to be holding) a
participation in a Loan may exercise any and all rights of banker's lien, setoff
(in each case, subject to the same notice requirements as pertain to clause (iv)
of the remedial provisions of Section 7.01) or counterclaim with respect to any
and all moneys owing by the Borrower to such Lender as fully as if such Lender
held a Note and was the original obligee thereon, in the amount of such
participation.
SECTION 8.04 AGREEMENT OF REQUIRED LENDERS. Upon any occasion requiring or permitting an approval, consent, waiver, election or other action on the part of the Required Lenders, action shall be taken by the Agent for and on behalf or for the benefit of all Lenders upon the direction of the Required Lenders, and any such action shall be binding on all Lenders. No amendment, modification, consent, or waiver shall be effective except in accordance with the provisions of Section 10.10.
SECTION 8.05 LIABILITY OF AGENT.
(a) The Agent when acting on behalf of the Lenders, may execute any of its respective duties under this Agreement by or through any of its respective officers, agents, and employees, and neither the Agent nor its directors, officers, agents, employees or Affiliates shall be liable to the Lenders or any of them for any action taken or omitted to be taken in good faith, or be responsible to the Lenders or to any of them for the consequences of any oversight or error of judgment, or for any loss, unless the same shall happen through its gross negligence or willful misconduct. The Agent and its respective directors, officers, agents, employees and Affiliates shall in no event be liable to the Lenders or to any of them for any action taken or omitted to be taken by them pursuant to instructions received by them from the Required Lenders or in reliance upon the advice of counsel selected by it. Without limiting the foregoing, neither the Agent, nor any of its respective directors, officers, employees, agents or Affiliates shall be responsible to any Lender for the due execution, validity, genuineness, effectiveness, sufficiency, or enforceability of, or for any statement, warranty, or representation in, this Agreement, any Loan Document or any related agreement, document or order, or shall be required to ascertain or to make any inquiry concerning the performance or observance by the Borrower of any of the terms, conditions, covenants, or agreements of this Agreement or any of the Loan Documents.
(b) Neither the Agent nor any of its respective directors, officers, employees, agents or Affiliates shall have any responsibility to the Borrower or the Guarantors on account of the failure or delay in performance or breach by any Lender or by the Borrower or the Guarantors of any of their respective obligations under this Agreement or any of the Loan Documents or in connection herewith or therewith.
(c) The Agent, in its capacity as Agent hereunder, shall be entitled to rely on any communication, instrument, or document reasonably believed by such person to be genuine
or correct and to have been signed or sent by a person or persons believed by such person to be the proper person or persons, and such person shall be entitled to rely on advice of legal counsel, independent public accountants, and other professional advisers and experts selected by such person.
SECTION 8.06 REIMBURSEMENT AND INDEMNIFICATION. Each Lender agrees (i) to
reimburse (x) the Agent for such Lender's Commitment Percentage of any expenses
and fees incurred for the benefit of the Lenders under this Agreement and any of
the Loan Documents, including, without limitation, counsel fees and compensation
of agents and employees paid for services rendered on behalf of the Lenders, and
any other expense incurred in connection with the operations or enforcement
thereof not reimbursed by the Borrower or the Guarantors and (y) the Agent for
such Lender's Commitment Percentage of any expenses of the Agent incurred for
the benefit of the Lenders that the Borrower has agreed to reimburse pursuant to
Section 10.05 and has failed to so reimburse and (ii) to indemnify and hold
harmless the Agent and any of its directors, officers, employees, agents or
Affiliates, on demand, in the amount of its proportionate share, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses, or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against it
or any of them in any way relating to or arising out of this Agreement or any of
the Loan Documents or any action taken or omitted by it or any of them under
this Agreement or any of the Loan Documents to the extent not reimbursed by the
Borrower or the Guarantors (except such as shall result from their respective
gross negligence or willful misconduct).
SECTION 8.07 RIGHTS OF AGENT. It is understood and agreed that JPMorgan Chase shall have the same rights and powers hereunder (including the right to give such instructions) as the other Lenders and may exercise such rights and powers, as well as its rights and powers under other agreements and instruments to which it is or may be party, and engage in other transactions with the Borrower or any Guarantor, as though it were not the Agent of the Lenders under this Agreement.
SECTION 8.08 INDEPENDENT LENDERS. Each Lender acknowledges that it has decided to enter into this Agreement and to make the Loans hereunder based on its own analysis of the transactions contemplated hereby and of the creditworthiness of the Borrower and the Guarantors and agrees that the Agent shall bear no responsibility therefor.
SECTION 8.09 NOTICE OF TRANSFER. The Agent may deem and treat a Lender party to this Agreement as the owner of such Lender's portion of the Loans for all purposes, unless and until a written notice of the assignment or transfer thereof executed by such Lender shall have been received by the Agent.
SECTION 8.10 SUCCESSOR AGENT. The Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Agent, which shall be reasonably satisfactory to the Borrower. If no successor Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment, within 30 days after the retiring Agent's giving of notice of resignation, the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States of
America or of any State thereof and having a combined capital and surplus of a least $100,000,000, which shall be reasonably satisfactory to the Borrower. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement.
SECTION 9. GUARANTY
SECTION 9.01 GUARANTY.
(a) Each of the Guarantors unconditionally and irrevocably guarantees the due and punctual payment by the Borrower of the Obligations. Each of the Guarantors further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and it will remain bound upon this guaranty notwithstanding any extension or renewal of any of the Obligations. The Obligations of the Guarantors shall be joint and several.
(b) Each of the Guarantors waives presentation to, demand for
payment from and protest to the Borrower or any other Guarantor, and also waives
notice of protest for nonpayment. The Obligations of the Guarantors hereunder
shall not be affected by (i) the failure of the Agent or a Lender to assert any
claim or demand or to enforce any right or remedy against the Borrower or any
other Guarantor under the provisions of this Agreement or any other Loan
Document or otherwise; (ii) any extension or renewal of any provision hereof or
thereof; (iii) any rescission, waiver, compromise, acceleration, amendment or
modification of any of the terms or provisions of any of the Loan Documents;
(iv) the release, exchange, waiver or foreclosure of any security held by the
Agent for the Obligations or any of them; (v) the failure of the Agent or a
Lender to exercise any right or remedy against any other Guarantor; or (vi) the
release or substitution of any Guarantor or any other Guarantor.
(c) Each of the Guarantors further agrees that this guaranty constitutes a guaranty of payment when due and not just of collection, and waives any right to require that any resort be had by the Agent or a Lender to any security held for payment of the Obligations or to any balance of any deposit, account or credit on the books of the Agent or a Lender in favor of the Borrower or any other Guarantor, or to any other Person.
(d) Each of the Guarantors hereby waives any defense that it might have based on a failure to remain informed of the financial condition of the Borrower and of any other Guarantor and any circumstances affecting the ability of the Borrower to perform under this Agreement.
(e) Each Guarantor's guaranty shall not be affected by the genuineness, validity, regularity or enforceability of the Obligations or any other instrument evidencing any Obligations, or by the existence, validity, enforceability, perfection, or extent of any collateral therefor or by any other circumstance relating to the Obligations which might otherwise constitute a defense to this Guaranty. Neither of the Agent, nor any of the Lenders makes any
representation or warranty in respect to any such circumstances or shall have any duty or responsibility whatsoever to any Guarantor in respect of the management and maintenance of the Obligations.
(f) Subject to the provisions of Section 7.01, upon the Obligations becoming due and payable (by acceleration or otherwise), the Lenders shall be entitled to immediate payment of such Obligations by the Guarantors upon written demand by the Agent, without further application to or order of the Bankruptcy Court.
SECTION 9.02 NO IMPAIRMENT OF GUARANTY. The obligations of the Guarantors hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including, without limitation, any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations. Without limiting the generality of the foregoing, the obligations of the Guarantors hereunder shall not be discharged or impaired or otherwise affected by the failure of the Agent or a Lender to assert any claim or demand or to enforce any remedy under this Agreement or any other agreement, by any waiver or modification of any provision thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of the Guarantors or would otherwise operate as a discharge of the Guarantors as a matter of law, unless and until the Obligations are paid in full.
SECTION 9.03 SUBROGATION. Upon payment by any Guarantor of any sums to the Agent or a Lender hereunder, all rights of such Guarantor against the Borrower arising as a result thereof by way of right of subrogation or otherwise, shall in all respects be subordinate and junior in right of payment to the prior final and indefeasible payment in full of all the Obligations. If any amount shall be paid to such Guarantor for the account of the Borrower, such amount shall be held in trust for the benefit of the Agent and the Lenders and shall forthwith be paid to the Agent and the Lenders to be credited and applied to the Obligations, whether matured or unmatured.
SECTION 10. MISCELLANEOUS
SECTION 10.01 NOTICES. Notices and other communications provided for
herein shall be in writing (including facsimile communication) and shall be
mailed, transmitted by facsimile or delivered to the Borrower or any Guarantor
at 1701 East Market Street, Jeffersonville, Indiana, 47130-4717, Attention:
Chief Financial Officer (with a copy to General Counsel) and to a Lender or the
Agent to it at its address set forth on Annex A, or such other address as such
party may from time to time designate by giving written notice to the other
parties hereunder. All notices and other communications given to any party
hereto in accordance with the provisions of this Agreement shall be deemed to
have been given on the fifth Business Day after the date when sent by registered
or certified mail, postage prepaid, return receipt requested, if by mail; or
when receipt is acknowledged, if by any facsimile equipment of the sender; in
each case addressed to such party as provided in this Section 10.01 or in
accordance with the latest unrevoked written direction from such party;
provided, however, that in the case of notices to the
Agent notices pursuant to the preceding sentence with respect to change of address and pursuant to Section 2 shall be effective only when received by the Agent.
SECTION 10.02 SURVIVAL OF AGREEMENT, REPRESENTATIONS AND WARRANTIES, ETC. All warranties, representations and covenants made by the Borrower or any Guarantor herein or in any certificate or other instrument delivered by it or on its behalf in connection with this Agreement shall be considered to have been relied upon by the Lenders and shall survive the making of the Loans herein contemplated regardless of any investigation made by any Lender or on its behalf and shall continue in full force and effect so long as any amount due or to become due hereunder is outstanding and unpaid and so long as the Commitments have not been terminated. All statements in any such certificate or other instrument shall constitute representations and warranties by the Borrower and the Guarantors hereunder with respect to the Borrower.
SECTION 10.03 SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Agent and the Lenders and their respective successors and assigns. Neither the Borrower nor any of the Guarantors may assign or transfer any of their rights or obligations hereunder without the prior written consent of all of the Lenders. Each Lender may sell participations to any Person in all or part of any Loan, or all or part of its Commitment, in which event, without limiting the foregoing, the provisions of Section 2.15 shall inure to the benefit of each purchaser of a participation (provided that such participant shall look solely to the seller of such participation for such benefits and the Borrower's and the Guarantors' liability, if any, under Sections 2.15 and 2.18 shall not be increased as a result of the sale of any such participation) and the pro rata treatment of payments, as described in Section 2.17, shall be determined as if such Lender had not sold such participation. In the event any Lender shall sell any participation, such Lender shall retain the sole right and responsibility to enforce the obligations of the Borrower and each of the Guarantors relating to the Loans, including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement (provided that such Lender may grant its participant the right to consent to such Lender's execution of amendments, modifications or waivers which (i) reduce any Fees payable hereunder to the Lenders, (ii) reduce the amount of any scheduled principal payment on any Loan or reduce the principal amount of any Loan or the rate of interest payable hereunder or (iii) extend the maturity of the Borrower's obligations hereunder). The sale of any such participation shall not alter the rights and obligations of the Lender selling such participation hereunder with respect to the Borrower.
(b) Each Lender may assign to one or more Lenders or Eligible Assignees all or a portion of its interests, rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment and the same portion of the related Loans at the time owing to it), provided, however, that (i) other than in the case of an assignment to a Person at least 50% owned by the assignor Lender, or to a Lender Affiliate of such assignor Lender, or by a common parent of both, or to another Lender, the Agent and the Fronting Bank must give their respective prior written consent to such assignment, which consent will not be unreasonably withheld, (ii) the aggregate amount of the Commitment and/or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with
respect to such assignment is delivered to the Agent) shall, unless otherwise agreed to in writing by the Borrower and the Agent, in no event be less than $1,000,000 or the remaining portion of such Lender's Commitment and/or Loans, if less and (iii) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register (as defined below), an Assignment and Acceptance with blanks appropriately completed, together with a processing and recordation fee of $3,500 (for which the Borrower shall have no liability). Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be within ten Business Days after the execution thereof (unless otherwise agreed to in writing by the Agent), (A) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (B) the Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto).
(c) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, such Lender assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any of the other Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any of the other Loan Documents; (ii) such Lender assignor makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or any Guarantor or the performance or observance by the Borrower or any Guarantor of any of its obligations under this Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement and the other Loan Documents, together with copies of the financial statements referred to in Section 3.04 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Agent, such Lender assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms thereto, together with such powers as are reasonably incidental hereof; and (vi) such assignee agrees that it will perform in accordance with their terms all obligations that by the terms of this Agreement are required to be performed by it as a Lender.
(d) The Agent shall maintain at its office a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders and the Commitments of, and principal amount of the Loans owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Guarantors, the Agent and the Lenders shall treat each Person the name of which is recorded in the Register as a Lender hereunder for all purposes of
this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and the assignee thereunder together with the fee payable in respect thereto, the Agent shall, if such Assignment and Acceptance has been completed with blanks appropriately filled and consented to by the Agent and the Fronting Bank (to the extent such consent is required hereunder), (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt written notice thereof to the Borrower (together with a copy thereof). No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.
(f) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 10.03, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Borrower or any of the Guarantors furnished to such Lender by or on behalf of the Borrower or any of the Guarantors; provided that prior to any such disclosure, each such assignee or participant or proposed assignee or participant shall agree in writing to be bound by the provisions of Section 10.04.
(g) The Borrower hereby agrees, to the extent set forth in the Commitment Letter, to actively assist and cooperate with the Agent in the Agent's efforts to sell participations herein (as described in Section 10.03(a)) and assign to one or more Lenders or Eligible Assignees a portion of its interests, rights and obligations under this Agreement (as set forth in Section 10.03(b)).
SECTION 10.04 CONFIDENTIALITY. Each Lender agrees to keep any information delivered or made available by the Borrower or any of the Guarantors to it confidential from anyone other than persons employed or retained by such Lender who are or are expected to become engaged in evaluating, approving, structuring or administering the Loans; provided that nothing herein shall prevent any Lender from disclosing such information (i) to any of its Affiliates or to any other Lender, provided such Affiliate agrees to keep such information confidential to the same extent required by the Lenders hereunder, (ii) upon the order of any court or administrative agency, (iii) upon the request or demand of any regulatory agency or authority, (iv) which has been publicly disclosed other than as a result of a disclosure by the Agent or any Lender or any Affiliate thereof which is not permitted by this Agreement, (v) in connection with any litigation to which the Agent, any Lender, or their respective Affiliates may be a party to the extent reasonably required, (vi) to the extent reasonably required in connection with the exercise of any remedy hereunder, (vii) to such Lender's legal counsel and independent auditors, and (viii) to any actual or proposed participant or assignee of all or part of its rights hereunder subject to the proviso in Section 10.03(f). Each Lender shall use reasonable efforts to notify the Borrower of any required disclosure under clause (ii) of this Section.
SECTION 10.05 EXPENSES. Whether or not the transactions hereby contemplated shall be consummated, the Borrower and the Guarantors agree to pay all reasonable and documented out-of-pocket expenses incurred by the Agent (including but not limited to the reasonable fees and disbursements of Morgan, Lewis & Bockius LLP, special counsel for the Agent, any other
counsel that the Agent shall retain and any internal or third-party appraisers, consultants, financial advisors and auditors advising the Agent and J.P. Morgan Securities Inc.) in connection with the preparation, execution, delivery and administration of this Agreement and the other Loan Documents, the making of the Loans and the issuance of the Letters of Credit, the perfection of the Liens contemplated hereby, the syndication of the transactions contemplated hereby, the reasonable and customary costs, fees and expenses internally allocated charges and expenses relating to the Agent's initial and ongoing Borrowing Base examinations, of the Agent in connection with its weekly and other periodic collateral reviews, monitoring of assets (including reasonable and customary internal collateral monitoring fees), all reasonable out of pocket expenses incurred by the Initial Lenders (including the reasonable fees and disbursements of respective counsel for the Initial Lenders) in connection with the preparation, execution and delivery of this Agreement and the other Loan Documents, the making of the Loans and the issuance of the Letters of Credit, and, following the occurrence of an Event of Default, all reasonable out-of-pocket expenses incurred by the Lenders and the Agent in the enforcement or protection of the rights of any one or more of the Lenders or the Agent in connection with this Agreement or the other Loan Documents, including but not limited to the reasonable fees and disbursements of any counsel for the Lenders or the Agent. Such payments shall be made on the date of the Interim Order and thereafter on demand upon delivery of a statement setting forth such costs and expenses. Whether or not the transactions hereby contemplated shall be consummated, the Borrower and the Guarantors agree to reimburse the Agent, the Initial Lenders and J.P. Morgan Securities Inc. for the expenses set forth in the Commitment Letter and the reimbursement provisions thereof are hereby incorporated herein by reference. The obligations of the Borrower and the Guarantors under this Section shall survive the termination of this Agreement and/or the payment of the Loans.
SECTION 10.06 INDEMNITY. The Borrower and each of the Guarantors agree to indemnify and hold harmless the Agent, JPMSI and the Lenders and their directors, officers, employees, agents and Affiliates (each an "Indemnified Party") from and against any and all expenses, losses, claims, damages and liabilities incurred by such Indemnified Party arising out of claims made by any Person in any way relating to the transactions contemplated hereby, but excluding therefrom all expenses, losses, claims, damages, and liabilities to the extent that they are determined by the final judgment of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnified Party. The obligations of the Borrower and the Guarantors under this Section shall survive the termination of this Agreement and/or the payment of the Loans.
SECTION 10.07 CHOICE OF LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK AND (TO THE EXTENT APPLICABLE) THE BANKRUPTCY CODE.
SECTION 10.08 NO WAIVER. No failure on the part of the Agent or any of the Lenders to exercise, and no delay in exercising, any right, power or remedy hereunder or any of the other Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law.
SECTION 10.09 EXTENSION OF MATURITY. Should any payment of principal of or interest or any other amount due hereunder become due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, in the case of principal, interest shall be payable thereon at the rate herein specified during such extension.
SECTION 10.10 AMENDMENTS, ETC.
(a) No modification, amendment or waiver of any provision of this Agreement or the Security and Pledge Agreement or any other Loan Document, and no consent to any departure by the Borrower or any Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given; provided, however, that no such modification or amendment shall without the written consent of the Lender affected thereby (x) increase the Tranche A Commitment or the Tranche B Commitment of a Lender (it being understood that a waiver of an Event of Default shall not constitute an increase in the Tranche A Commitment or the Tranche B Commitment of a Lender), or (y) reduce the principal amount of any Loan or the rate of interest payable thereon, or extend any date for the payment of interest hereunder or reduce any Fees payable hereunder or extend the final maturity of the Borrower's obligations hereunder; and, provided, further, that no such modification or amendment shall without the written consent of all of the Lenders (i) amend or modify any provision of this Agreement which provides for the unanimous consent or approval of the Lenders, (ii) amend this Section 10.10 or the definition of Required Lenders, (iii) amend or modify the Superpriority Claim status of the Lenders contemplated by Section 2.23 or (iv) release or subordinate all or any substantial portion of the Liens granted to the Agent hereunder, under the Orders or under any other Loan Document, or release all or substantially all of the Guarantors. No such amendment or modification may adversely affect the rights and obligations of the Agent or any Fronting Bank hereunder or any Lender in the capacity referred to in Section 6.03(v) without its prior written consent. No notice to or demand on the Borrower or any Guarantor shall entitle the Borrower or any Guarantor to any other or further notice or demand in the same, similar or other circumstances. Each assignee under Section 10.03(b) shall be bound by any amendment, modification, waiver, or consent authorized as provided herein, and any consent by a Lender shall bind any Person subsequently acquiring an interest on the Loans held by such Lender. No amendment to this Agreement shall be effective against the Borrower or any Guarantor unless signed by the Borrower or such Guarantor, as the case may be.
(b) Notwithstanding anything to the contrary contained in Section 10.10(a), in the event that the Borrower requests that this Agreement be modified or amended in a manner which would require the unanimous consent of all of the Lenders and such modification or amendment is agreed to by the Super-majority Lenders (as hereinafter defined), then with the consent of the Borrower and the Super-majority Lenders, the Borrower and the Super-majority Lenders shall be permitted to amend the Agreement without the consent of the Lender or Lenders which did not agree to the modification or amendment requested by the Borrower (such Lender or Lenders, collectively the "Minority Lenders") to provide for (w) the termination of the Commitment of each of the Minority Lenders, (x) the addition to this Agreement of one or more other financial institutions (each of which shall be an Eligible Assignee), or an increase in the Commitment of one or more of the Super-majority Lenders, so that the Total Commitment after
giving effect to such amendment shall be in the same amount as the Total Commitment immediately before giving effect to such amendment, (y) if any Loans are outstanding at the time of such amendment, the making of such additional Loans by such new financial institutions or Super-majority Lender or Lenders, as the case may be, as may be necessary to repay in full the outstanding Loans of the Minority Lenders immediately before giving effect to such amendment and (z) such other modifications to this Agreement as may be appropriate. As used herein, the term "Super-majority Lenders" shall mean, at any time, Lenders holding Loans representing at least 66-2/3% of the aggregate principal amount of the Loans outstanding, or if no Loans are outstanding, Lenders having Commitments representing at least 66-2/3% of the Total Commitment.
SECTION 10.11 SEVERABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 10.12 HEADINGS. Section headings used herein are for convenience only and are not to affect the construction of or be taken into consideration in interpreting this Agreement.
SECTION 10.13 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same instrument.
SECTION 10.14 PRIOR AGREEMENTS. This Agreement represents the entire agreement of the parties with regard to the subject matter hereof and the terms of any letters and other documentation entered into between the Borrower or a Guarantor and any Lender or the Agent prior to the execution of this Agreement which relate to Loans to be made hereunder shall be replaced by the terms of this Agreement (except as otherwise expressly provided herein with respect to the Commitment Letter and the fee letter referred to therein, including without limitation the Borrower's agreement to actively assist the Agent in the syndication of the transactions contemplated hereby referred to in Section 10.03(g) and including also the provisions of Section 2.19).
SECTION 10.15 FURTHER ASSURANCES. Whenever and so often as reasonably requested by the Agent, the Borrower and the Guarantors will promptly execute and deliver or cause to be executed and delivered all such other and further instruments, documents or assurances, and promptly do or cause to be done all such other and further things as may be necessary and reasonably required in order to further and more fully vest in the Agent all rights, interests, powers, benefits, privileges and advantages conferred or intended to be conferred by this Agreement and the other Loan Documents.
SECTION 10.16 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE GUARANTORS, THE AGENT AND EACH LENDER HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and the year first written.
BORROWER:
AMERICAN COMMERCIAL LINES LLC
GUARANTORS:
AMERICAN COMMERCIAL LINES
HOLDINGS LLC
LOUISIANA DOCK COMPANY LLC
AMERICAN COMMERCIAL TERMINALS
LLC
JEFFBOAT LLC
ACL CAPITAL CORP.
Signature Pages to Credit Agreement
AMERICAN COMMERCIAL BARGE LINE
LLC
AMERICAN COMMERCIAL LINES
INTERNATIONAL LLC
ACBL LIQUID SALES LLC
AMERICAN COMMERCIAL LOGISTICS
LLC
HOUSTON FLEET LLC
LEMONT HARBOR & FLEETING
SERVICES LLC
AMERICAN COMMERCIAL
TERMINALS - MEMPHIS
Signature Pages to Credit Agreement
ORINOCO TASA LLC
ORINOCO TASV LLC
JPMORGAN CHASE BANK
INDIVIDUALLY AND AS AGENT
270 Park Avenue New York, New York 10017
BANK ONE, NA
INDIVIDUALLY AND AS CO-SYNDICATION
AGENT
120 South LaSalle Street Chicago, Illinois 60603
GENERAL ELECTRIC CAPITAL CORPORATION
INDIVIDUALLY AND AS CO-SYNDICATION
AGENT
500 West Monroe Street Chicago, Illinois 60661
Signature Pages to Credit Agreement
ANNEX A
to
REVOLVING CREDIT AND GUARANTY AGREEMENT
Dated as of January 31, 2003
TRANCHE A TRANCHE B
COMMITMENT COMMITMENT COMMITMENT
LENDER AMOUNT AMOUNT PERCENTAGE
------ ------ ------ ----------
JPMorgan Chase Bank $6,666,666.68 $13,333,333.34 33-1/3%
270 Park Avenue
New York, New York 10017
Attn: _____________
_____________
Bank One, NA $6,666,666.66 $13,333,333.33 33-1/3%
120 South LaSalle Street
Chicago, Illinois 60603
General Electric Capital Corporation $6,666,666.66 $13,333,333.33 33-1/3%
500 West Monroe Street
Chicago, Illinois 60661
Total $20,000,000 $40,000,000 100%
|
Exhibit A to the Revolving Credit and Guaranty Agreement
FORM OF INTERIM ORDER
Exhibit B to the Revolving Credit and Guaranty Agreement
FORM OF SECURITY AND
PLEDGE AGREEMENT
Exhibit B-1 to the Revolving Credit and Guaranty Agreement
FORM OF PREFERRED FLEET MORTGAGE
Exhibit C to the Revolving Credit and Guaranty Agreement
FORM OF ASSIGNMENT AND ACCEPTANCE
Exhibit D to the Revolving Credit and Guaranty Agreement
[FORM OF BORROWING BASE CERTIFICATE]
Exhibit E to the Revolving Credit and Guaranty Agreement
[FORM OF OPINION OF COUNSEL]
SCHEDULE 3.05
SUBSIDIARIES
[TO BE SATISFACTORY TO THE AGENT]
SCHEDULE 3.06
LIENS
[TO BE SATISFACTORY TO THE AGENT]
SCHEDULE 3.10
LITIGATION
[TO BE SATISFACTORY TO THE AGENT]
SCHEDULE 6.10
EXISTING INVESTMENTS
SCHEDULE 6.11
ASSET SALES
[TO BE SATISFACTORY TO THE AGENT]
EXHIBIT 4.32
FIRST AMENDMENT
TO REVOLVING CREDIT AND
GUARANTY AGREEMENT
FIRST AMENDMENT, dated as of March 13, 2003 (the "Amendment"),
to the REVOLVING CREDIT AND GUARANTY AGREEMENT, dated as of January 31, 2003,
among AMERICAN COMMERCIAL LINES LLC, a Delaware limited liability company (the
"Borrower"), a debtor and debtor-in-possession under Chapter 11 of the
Bankruptcy Code, the Guarantors named therein (the "Guarantors"), JPMORGAN CHASE
BANK, a New York banking corporation ("JPMorgan Chase"), each of the other
financial institutions party thereto (together with JPMorgan Chase, the
"Lenders") and JPMORGAN CHASE BANK, as Agent for the Lenders (in such capacity,
the "Agent") and BANK ONE, NA and GENERAL ELECTRIC CAPITAL CORPORATION, as
Co-Syndication Agents (in such capacities, the "Co-Syndication Agents"):
W I T N E S S E T H:
WHEREAS, the Borrower, the Guarantors, the Lenders, the Agent and the Co-Syndication Agents are parties to that certain Revolving Credit and Guaranty Agreement, dated as of January 31, 2003 (as the same may be further amended, modified or supplemented from time to time, the "Credit Agreement"); and
WHEREAS, the Borrower and the Guarantors have requested that from and after the Effective Date (as hereinafter defined) of this Amendment, the Credit Agreement be amended subject to and upon the terms and conditions set forth herein;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. As used herein, all terms that are defined in the Credit Agreement shall have the same meanings herein.
2. Section 5.10 of the Credit Agreement is hereby amended by deleting the words "forty-five (45) days" appearing therein and inserting in lieu thereof the words "ninety (90) days"
3. Section 6.01 of the Credit Agreement is hereby amended by (A) deleting the word "and" following clause (iv) thereof and (B) inserting the following new clause (vi) at the end thereof:
"; and (vi) Liens on cash collateral in an amount not in excess of $1,500,000 in the aggregate at any one time posted to secure obligations of the Borrower or the Guarantors in connection with fuel hedging arrangements"
4. Section 6.05 of the Credit Agreement is amended in its entirety to read as follows:
"SECTION 6.05 EBITDA.
Permit cumulative EBITDA for each period listed below
to be less than the amount specified opposite such period:
Period EBITDA
------ ------
Three month period ending March 31, 2003 $(13,000,000)
Six month period ending June 30, 2003 $ 5,000,000
Nine month period ending September 30, 2003 $ 30,000,000
Twelve month period ending December 31, 2003 $ 63,000,000
Twelve month period ending March 31, 2004 $ 81,000,000
Twelve month period ending June 30, 2004 $ 86,000,000"
|
5. This Amendment shall not become effective until the date (the "Effective Date") on which this Amendment shall have been executed by the Borrower, the Guarantors and the Required Lenders and the Agent shall have received evidence satisfactory to it of such execution.
6. Except to the extent hereby specifically amended, the Credit Agreement and each of the Loan Documents remain valid and in full force and effect and are hereby ratified and affirmed.
7. The Borrower agrees that its obligations set forth in
Section 10.05 of the Credit Agreement shall extend to the preparation, execution
and delivery of this Amendment, including the reasonable fees and disbursements
of special counsel to the Agent.
8. This Amendment shall be limited precisely as written and shall not be deemed (a) to be a consent granted pursuant to, or a waiver or modification of, any other term or condition of the Credit Agreement or any of the instruments or agreements referred to therein or (b) to prejudice any right or rights which the Agent or the Lenders may now have or have in the future under or in connection with the Credit Agreement or any of the instruments or agreements referred to therein. Whenever the Credit Agreement is referred to in the Credit Agreement or any of the instruments, agreements or other documents or papers executed or delivered in connection therewith, such reference shall be deemed to mean the Credit Agreement as modified by this Amendment.
9. This Amendment may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument.
10. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and the year first written.
BORROWER:
AMERICAN COMMERCIAL LINES LLC
GUARANTORS:
AMERICAN COMMERCIAL LINES HOLDINGS LLC
LOUISIANA DOCK COMPANY LLC
AMERICAN COMMERCIAL TERMINALS LLC
JEFFBOAT LLC
Signature Page to First Amendment
ACL CAPITAL CORP.
AMERICAN COMMERCIAL BARGE LINE LLC
AMERICAN COMMERCIAL LINES INTERNATIONAL LLC
ACBL LIQUID SALES LLC
AMERICAN COMMERCIAL LOGISTICS LLC
HOUSTON FLEET LLC
LEMONT HARBOR & FLEETING SERVICES LLC
Signature Page to First Amendment
AMERICAN COMMERCIAL TERMINALS - MEMPHIS LLC
ORINOCO TASA LLC
ORINOCO TASV LLC
Signature Page to First Amendment
LENDERS:
JPMORGAN CHASE BANK
INDIVIDUALLY AND AS AGENT
BANK ONE, NA
INDIVIDUALLY AND AS CO-SYNDICATION AGENT
GENERAL ELECTRIC CAPITAL CORPORATION
INDIVIDUALLY AND AS CO-SYNDICATION AGENT
Signature Page to First Amendment
EXHIBIT 4.33
SECOND AMENDMENT
TO REVOLVING CREDIT AND
GUARANTY AGREEMENT
SECOND AMENDMENT, dated as of March 31, 2003 (the
"Amendment"), to the REVOLVING CREDIT AND GUARANTY AGREEMENT, dated as of
January 31, 2003, among AMERICAN COMMERCIAL LINES LLC, a Delaware limited
liability company (the "Borrower"), a debtor and debtor-in-possession under
Chapter 11 of the Bankruptcy Code, the Guarantors named therein (the
"Guarantors"), JPMORGAN CHASE BANK, a New York banking corporation ("JPMorgan
Chase"), BANK ONE, NA ("Bank One"), GENERAL ELECTRIC CAPITAL CORPORATION
("GECC", and together with JPMorgan Chase and Bank One, the "Original Lenders")
each of the other financial institutions from time to time party thereto
(together with the Original Lenders, the "Lenders"), and JPMORGAN CHASE BANK, as
Administrative Agent for the Lenders (in such capacity, the "Agent"), and BANK
ONE and GECC, as Co-Syndication Agents (in such capacities, the "Co-Syndication
Agents"):
W I T N E S S E T H:
WHEREAS, the Borrower, the Guarantors, the Original Lenders, the Agent and the Co-Syndication Agents are parties to that certain Revolving Credit and Guaranty Agreement, dated as of January 31, 2003, as amended by that certain First Amendment to Revolving Credit and Guaranty Agreement dated as of March 13, 2003 (as the same may be further amended, modified or supplemented from time to time, the "Credit Agreement"); and
WHEREAS, the Borrower and the Guarantors have requested that from and after the Effective Date (as hereinafter defined) of this Amendment, the Credit Agreement be amended (including increasing the Total Commitment from $60,000,000 to $75,000,000) subject to and upon the terms and conditions set forth herein; and
WHEREAS, Section 10.03(b) of the Credit Agreement provides
that each Lender may assign to one or more Eligible Assignees all or a portion
of its interests, rights and obligations under the Credit Agreement (including,
without limitation, all or a portion of its Commitment and the same portion of
the related Loans at the time owing to it) by executing and delivering with such
Eligible Assignee an Assignment and Acceptance in substantially the form of
Exhibit C to the Credit Agreement (a copy of which is annexed hereto as Schedule
I); and
WHEREAS, the Original Lenders wish to (i) assign to each of the financial institutions (other than the Original Lenders) that is shown on Annex A hereto as having a Tranche A Commitment (such financial institutions other than the Original Lenders, collectively, the "Tranche A New Lenders"), and each of the Tranche A New Lenders wishes to assume, a pro rata portion of the Original Lenders' interests, rights and obligations under the Credit Agreement, and each Original Lender and Tranche A New Lender wishes to assume a portion of the Tranche A Commitments as increased from $20,000,000 to $25,000,000 such that upon the Effective Date of this Amendment the Original Lenders and the Tranche A New Lenders shall
have the respective Tranche A Commitments that are shown on Annex A hereto, and
(ii) assign to each of the financial institutions (other than the Original
Lenders) that is shown on Annex A hereto as having a Tranche B Commitment (such
financial institutions other than the Original Lenders, collectively, the
"Tranche B New Lenders"), and each of the Tranche B New Lenders wishes to
assume, a pro rata portion of the Original Lenders' interests, rights and
obligations under the Credit Agreement, and each Original Lender and Tranche B
New Lender wishes to assume a portion of the Tranche B Commitments as increased
from $40,000,000 to $50,000,000 such that upon the Effective Date of this
Amendment the Original Lenders and the Tranche B New Lenders shall have the
respective Tranche B Commitments that are shown on Annex A hereto; and
WHEREAS, the Borrower, the Guarantors, the Original Lenders, the Tranche A New Lenders, the Tranche B New Lenders, the Agent and the Co-Syndication Agents have determined that the execution and delivery of this Amendment to effectuate a reallocation of the Total Commitment under the Credit Agreement as in effect on the date hereof will be more expeditious and administratively efficient than the execution and delivery of a separate Assignment and Acceptance between each of the Original Lenders and each of the Tranche A New Lenders, and each of the Original Lenders and each of the Tranche B New Lenders, respectively;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. As used herein, all terms that are defined in the Credit Agreement (in effect immediately prior to the Effective Date of this Amendment) shall have the same meanings herein.
2. The Total Tranche A Commitment is hereby increased from $20,000,000 to $25,000,000 and the Total Tranche B Commitment is hereby increased from $40,000,000 to $50,000,000.
3. Annex A to the Credit Agreement is hereby replaced in its entirety by Annex A hereto.
4. The signature pages of the Credit Agreement are hereby amended to conform to the signature pages hereto.
5. (i) Each of the Original Lenders hereby irrevocably sells and assigns to the Tranche A New Lenders, without recourse to the Original Lenders, and each of the Tranche A New Lenders hereby irrevocably purchases and assumes from the Original Lenders, without recourse to the Original Lenders, as of the Effective Date, a pro rata portion of the Original Lenders' interests, rights and obligations under the Credit Agreement in a principal amount such that the Original Lenders and the Tranche A New Lenders shall have the respective Tranche A Commitments that are shown on Annex A hereto (after giving effect to the increase in the Total Tranche A Commitment contemplated hereby), and (ii) Each of the Original Lenders hereby irrevocably sells and assigns to the Tranche B New Lenders, without recourse to the Original Lenders, and each of the Tranche B New Lenders hereby irrevocably purchases and assumes from the Original Lenders, without recourse to the Original Lenders, as of the Effective Date, a
pro rata portion of the Original Lenders' interests, rights and obligations under the Credit Agreement in a principal amount such that the Original Lenders and the Tranche B New Lenders shall have the respective Tranche B Commitments that are shown on Annex A hereto (after giving effect to the increase in the Total Tranche B Commitment contemplated hereby).
6. Upon the occurrence of the Effective Date of this Amendment, (i) each of the Tranche A New Lenders and Tranche B New Lenders shall be a party to the Credit Agreement as a "Lender" and shall have the rights and obligations of a Lender thereunder, (ii) the respective Tranche A Commitments of each of the Original Lenders and Tranche A New Lenders under the Credit Agreement shall be in the amount set forth opposite its name on Annex A hereto under the heading "Tranche A Commitment", and (iii) the respective Tranche B Commitment of each of the Original Lenders and the Tranche B New Lenders under the Credit Agreement shall be in the amount set forth opposite its name on Annex A hereto under the heading "Tranche B Commitment", as each of the same may be reduced from time to time pursuant to Section 2.10 of the Credit Agreement;
7. By its execution and delivery hereof, each of the Original
Lenders shall be deemed to have made each of the statements set forth in clauses
(i) and (ii) of paragraph 2 of the Assignment and Acceptance as if such
statements were fully set forth herein at length.
8. By its execution and delivery hereof, each of the Tranche A New Lenders and Tranche B New Lenders shall be deemed to have made each of the statements and covenants set forth in clauses (i), (ii), (iii), (iv), and (v) of paragraph 3 of the Assignment and Acceptance as if such statements were fully set forth herein at length.
9. On the Effective Date, (i) each Tranche A New Lender will pay to the Agent (for the accounts of the Original Lenders) such amount as represents such Tranche A New Lender's pro rata portion of the aggregate principal amount of the Tranche A Loans, if any, that are outstanding on the Effective Date and such Tranche A New Lender's pro rata portion of the aggregate amount of the then unreimbursed drafts, if any, that were theretofore drawn under Letters of Credit, (ii) each Tranche B New Lender will pay to the Agent (for the accounts of the Original Lenders) such amount as represents such Tranche B New Lender's pro rata portion of the aggregate principal amount of the Tranche B Loans and (iii) the Agent shall pay to each of the Tranche A New Lenders and Tranche B New Lenders such fees as have been previously agreed to between the Agent and such Tranche A New Lenders and the Agent and such Tranche B New Lenders, respectively. Promptly following the occurrence of the Effective Date, and in accordance with Section 10.03(e) of the Credit Agreement, the Agent shall record in the Register the names and addresses of each Tranche A New Lender and Tranche B New Lender and the principal amount equal to such Tranche A Lender's Tranche A Commitment, or such Tranche B Lender's Tranche B Commitment, as the case may be, reflected on Annex A hereto.
10. By its execution and delivery hereof, each of the Tranche A New Lenders and Tranche B New Lenders (i) agrees that any interest on the Loans, Commitment Fees and Letter of Credit Fees (pursuant to Sections 2.08, 2.20 and 2.21 of the Credit Agreement) that accrued prior to the Effective Date shall not be payable to such Tranche A New Lender or Tranche B New Lender and authorizes and directs the Agent to deduct such amounts from any interest, Commitment Fees or Letter of Credit Fees paid after the date hereof and to pay such
amounts to the Original Lenders (it being understood that interest on the Loans, Commitment Fees and Letter of Credit Fees respecting the Total Tranche A Commitment of the Original Lenders, each Tranche A New Lender and each Tranche B New Lender which accrue on or after the Effective Date shall be payable to such Lender in accordance with its Total Commitment), (ii) acknowledges that if such Tranche A New Lender or Tranche B New Lender is organized under the laws of a jurisdiction outside of the United States, such Tranche A New Lender or Tranche B New Lender has heretofore furnished to the Agent the forms prescribed by the Internal Revenue Service of the United States certifying as to such Tranche A New Lender's or Tranche B New Lender's exemption from United States withholding taxes with respect to any payments to be made to such Tranche A New Lender or Tranche B New Lender under the Credit Agreement (or such other documents as are necessary to indicate that all such payments are subject to such tax at a rate reduced by an applicable tax treaty) and (iii) acknowledges that such Tranche A New Lender or Tranche B New Lender has heretofore supplied to the Agent the information requested on the administrative questionnaire in the form previously furnished by JPMorgan Chase.
11. The Agent shall promptly deliver to the Borrower the forms and other documents furnished to it pursuant to paragraph 10(ii) hereof.
12. This Amendment shall not become effective (the "Effective Date") until (i) the date on which this Amendment shall have been executed by the Borrower, the Guarantors, the Original Lenders, the Tranche A New Lenders, the Tranche B New Lenders, the Agent and the Co-Syndication Agents, and the Agent shall have received evidence satisfactory to it of such execution and (ii) the payments provided for in the first sentence of paragraph 9 hereof shall have been made.
13. Except to the extent hereby amended, the Credit Agreement and each of the Loan Documents remain in full force and effect and are hereby ratified and affirmed.
14. The Borrower agrees that its obligations set forth in
Section 10.05 of the Credit Agreement shall extend to the preparation, execution
and delivery of this Amendment, including the reasonable fees and disbursements
of special counsel to the Agent.
15. This Amendment shall be limited precisely as written and shall not be deemed (a) to be a consent granted pursuant to, or a waiver or modification of, any other term or condition of the Credit Agreement or any of the instruments or agreements referred to therein or (b) to prejudice any right or rights which the Agent, the Co-Syndication Agents or the Lenders may now have or have in the future under or in connection with the Credit Agreement or any of the instruments or agreements referred to therein. Whenever the Credit Agreement is referred to in the Credit Agreement or any of the instruments, agreements or other documents or papers executed or delivered in connection therewith, such reference shall be deemed to mean the Credit Agreement as modified by this Amendment.
16. This Amendment may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument.
17. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York.
[SIGNATURE PAGES TO FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the day and the year first written.
BORROWER:
AMERICAN COMMERCIAL LINES LLC
GUARANTORS:
AMERICAN COMMERCIAL LINES HOLDINGS LLC
LOUISIANA DOCK COMPANY LLC
AMERICAN COMMERCIAL TERMINALS LLC
JEFFBOAT LLC
ACL CAPITAL CORP.
Signature Pages to Second Amendment
AMERICAN COMMERCIAL BARGE LINE LLC
AMERICAN COMMERCIAL LINES INTERNATIONAL LLC
ACBL LIQUID SALES LLC
AMERICAN COMMERCIAL LOGISTICS LLC
HOUSTON FLEET LLC
LEMONT HARBOR & FLEETING SERVICES LLC
AMERICAN COMMERCIAL TERMINALS - MEMPHIS LLC
Signature Pages to Second Amendment
ORINOCO TASA LLC
ORINOCO TASV LLC
Signature Pages to Second Amendment
LENDERS:
JPMORGAN CHASE BANK
INDIVIDUALLY AND AS AGENT
270 Park Avenue New York, New York 10017
BANK ONE, NA
INDIVIDUALLY AND AS CO-SYNDICATION AGENT
120 South LaSalle Street Chicago, Illinois 60603
TRS 1 LLC
90 Hudson Street Jersey City, NJ 07302
PB CAPITAL CORPORATION
590 Madison Avenue New York, NY 10022
Signature Pages to Second Amendment
THE TRAVELLERS INSURANCE COMPANY
242 Trumbull Street P.O. Box 150449, 7th Floor Hartford, CT 06115-0449
Signature Pages to Second Amendment
GENERAL ELECTRIC CAPITAL CORPORATION
INDIVIDUALLY AND AS CO-SYNDICATION AGENT
500 West Monroe Street Chicago, Illinois 60661
Signature Pages to Second Amendment
Annex A
ANNEX A
to
REVOLVING CREDIT AND GUARANTY AGREEMENT
Dated as of January 31, 2003 (as amended)
TRANCHE A TRANCHE B TERM
TRANCHE A REVOLVING REVOLVING LOAN
COMMITMENT COMMITMENT TRANCHE B TERM LOAN COMMITMENT
BANK AMOUNT PERCENTAGE COMMITMENT AMOUNT PERCENTAGE
---- ------ ---------- ----------------- ----------
JPMorgan Chase Bank
270 Park Avenue
New York, NY 10017
Attn: Patrick Daniello $ 9,666,666.66 38.67% $17,333,333.34 34.67%
Bank One, NA
120 S. Lasalle
Chicago, IL 60603
Attn: Joseph Heskett
Steven C. Gross $ 6,666,666.67 26.67% $13,333,333.33 26.67%
General Electric Capital Corp.
500 West Monroe Street
Chicago, IL 60661
Attn: Jeffrey Kurtzweil $ 6,666,666.67 26.67% $13,333,333.33 26.67%
TRS 1 LLC
90 Hudson Street
Jersey City, NJ 07302
Attn: John Pineiro $ 0.00 0.00% $ 4,000,000.00 8.00%
PB Capital Corporation
590 Madison Avenue
New York, New York 10022
Attn: Sharon Fong $ 1,333,333.33 5.33% $ 666,666.67 1.33%
The Travellers Insurance Company
242 Trumbull Street
P.O. Box 150449, 7th Floor
Hartford, CT 06115-0449
Attn: John J. Console $ 666,666.67 2.67% $ 1,333,333.33 2.67%
TOTALS: $ 25,000,000.00 100.00% $50,000,000.00 100.00%
|
SCHEDULE I
EXHIBIT C
TO REVOLVING CREDIT
AND GUARANTY AGREEMENT
ASSIGNMENT AND ACCEPTANCE
DATED: _______ __ , 200__
Reference is made to the Revolving Credit and Guaranty Agreement, dated as of January __, 2003 (as restated, amended, modified, supplemented and in effect from time to time, the "Credit Agreement"), among AMERICAN COMMERCIAL LINES LLC, a Delaware corporation, as Debtor and Debtor-in-Possession (the "Borrower"), the Guarantors named therein, the Lenders named therein and JPMORGAN CHASE BANK, as agent for the Lenders (the "Agent"). Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Credit Agreement. This Assignment and Acceptance between the Assignor (as set forth on Schedule I hereto and made a part hereof) and the Assignee (as set forth on Schedule I hereto and made a part hereof) is dated as of the Effective Date (as set forth on Schedule I hereto and made a part hereof).
1. The Assignor hereby irrevocably sells and assigns to the Assignee without recourse to the Assignor, and the Assignee hereby irrevocably purchases and assumes from the Assignor without recourse to the Assignor, as of the Effective Date, an undivided interest (the "Assigned Interest") in and to all the Assignor's rights and obligations under the Credit Agreement in a principal amount as set forth on Schedule I.
2. The Assignor (i) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or any other of the Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, any other of the Loan Documents or any other instrument or document furnished pursuant thereto, other than that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, or the performance or observance by the Borrower of any of its obligations under the Credit Agreement, any of the other Loan Documents or any other instrument or document furnished pursuant thereto; and (iii) requests that the Agent evidence the Assigned Interest by recording the information contained on Schedule I in the Register which reflects the assignment being made hereby (and after giving effect to any other assignments which have become effective on the Effective Date).
3. The Assignee (i) represents and warrants that it is legally authorized to enter into this Assignment and Acceptance and that it is an Eligible Assignee; (ii) confirms that it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.01 thereof, and such other documents and information as it has deemed appropriate to make its own credit analysis; (iii) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iv) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement and the other Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (v) agrees that it will be bound by the provisions of the Credit Agreement and will perform in accordance with its terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Bank; (vi) if the Assignee is organized under the laws of a jurisdiction outside the United States, attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assignee's exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Credit Agreement; and (vii) has supplied the information requested on the administrative questionnaire heretofore supplied by the Agent.
4. Following the execution of this Assignment and Acceptance, it will be delivered to the Agent, together with a processing and recordation fee of $3,500, for acceptance by it and recording by the Agent pursuant to Section 10.03 of the Credit Agreement, effective as of the Effective Date (which Effective Date shall, unless otherwise agreed to by the Agent, be within ten Business Days after the execution of this Assignment and Acceptance).
5. Upon such acceptance and recording, from and after the Effective Date, the Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignee, whether such amounts have accrued prior to the Effective Date or accrue subsequent to the Effective Date. The Assignor and Assignee shall make all appropriate adjustments in payments for periods prior to the Effective Date by the Agent or with respect to the making of this assignment directly between themselves.
6. From and after the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Bank thereunder, and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement provided that Assignor hereby represents and warrants that the restrictions set forth in Section 10.03 of the Credit Agreement pertaining to the minimum amount of assignments have been satisfied.
7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed by their respective duly authorized officers on Schedule I hereto.
Schedule I to Assignment and Acceptance Respecting the Revolving Credit and Guaranty Agreement, dated as of January __, 2002, among American Commercial Lines LLC, the Guarantors named therein, the Lenders named therein and JPMorgan Chase Bank, as Agent
Legal Name of Assignor:
Legal Name of Assignee:
Effective Date of Assignment:
Percentage Assigned (to at least 8 decimals)
Principal Amount shown as a percentage of aggregate
Assigned principal amount of all Lenders
-------- -------------------------------
$ %
------------ ---------------
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CONSENTED TO AND ACCEPTED:
JPMORGAN CHASE BANK, ,
as Agent ------------------------------
as Assignor
By By
----------------------------- ---------------------------
Name: Name:
Title: Title:
, ,
------------------------------- ------------------------------
as Fronting Bank as Assignee
By By
----------------------------- ---------------------------
Name: Name:
|
Title: Title:
EXHIBIT 4.34
THIRD AMENDMENT
TO REVOLVING CREDIT AND
GUARANTY AGREEMENT
THIRD AMENDMENT, dated as of December 22, 2003 (the "Amendment"), to the REVOLVING CREDIT AND GUARANTY AGREEMENT, dated as of January 31, 2003, among AMERICAN COMMERCIAL LINES LLC, a Delaware limited liability company (the "Borrower"), a debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code, the Guarantors named therein (the "Guarantors"), JPMORGAN CHASE BANK, a New York banking corporation ("JPMorgan Chase"), each of the other financial institutions from time to time party thereto (the "Lenders"), and JPMORGAN CHASE BANK, as Administrative Agent for the Lenders (in such capacity, the "Agent"), and BANK ONE, N.A. and GENERAL ELECTRIC CAPITAL CORPORATION, as Co-Syndication Agents (in such capacities, the "Co-Syndication Agents"):
W I T N E S S E T H:
WHEREAS, the Borrower, the Guarantors, the Lenders, the Agent and the Co-Syndication Agents are parties to that certain Revolving Credit and Guaranty Agreement, dated as of January 31, 2003, as amended by that certain First Amendment to Revolving Credit and Guaranty Agreement, dated as of March 13, 2003, and that Second Amendment to Revolving Credit and Guaranty Agreement, dated as of March 31, 2003 (as the same may be further amended, modified or supplemented from time to time, the "Credit Agreement"); and
WHEREAS, the Borrower, the Guarantors and the Lenders have agreed to amend certain provisions of the Credit Agreement as set forth herein, subject to the terms and conditions set forth herein; and
NOW, THEREFORE, it is agreed as follows:
As used herein, all terms that are defined in the Credit Agreement shall have the same meanings herein.
1. Amendments. The Credit Agreement is hereby amended as follows:
(a) Section 6.10 of the Credit Agreement is amended by adding the following parenthetical clause at the end of subsection (iii) thereof:
(provided, further, that, during the period beginning December 22, 2003 and ending on March 15, 2004, the aggregate outstanding principal amount of such advances and loans to Jeffboat LLC may not exceed $4,000,000),
2. Miscellaneous.
This Amendment shall not become effective until the date on which this Amendment shall have been executed by the Borrower, the Guarantors and the Required Lenders, and the Agent shall have received evidence satisfactory to it of such execution (the "Effective Date").
Except to the extent hereby amended, the Credit Agreement and each of the Loan Documents remain in full force and effect and are hereby ratified and affirmed.
The Borrower agrees that its obligations set forth in Section 10.05 of the Credit Agreement shall extend to the preparation, execution and delivery of this Amendment, including the reasonable fees and disbursements of special counsel to the Agent.
This Amendment shall be limited precisely as written and shall not be deemed (a) to be a consent granted pursuant to, or a waiver or modification of, any other term or condition of the Credit Agreement or any of the instruments or agreements referred to therein or (b) to prejudice any right or rights which the Agent, the Co-Syndication Agents or the Lenders may now have or have in the future under or in connection with the Credit Agreement or any of the instruments or agreements referred to therein. Whenever the Credit Agreement is referred to in the Credit Agreement or any of the instruments, agreements or other documents or papers executed or delivered in connection therewith, such reference shall be deemed to mean the Credit Agreement as modified by this Amendment.
This Amendment may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument.
This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York.
[SIGNATURE PAGES TO FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the day and the year first written.
BORROWER:
AMERICAN COMMERCIAL LINES LLC
GUARANTORS:
AMERICAN COMMERCIAL LINES HOLDINGS LLC
LOUISIANA DOCK COMPANY LLC
AMERICAN COMMERCIAL TERMINALS LLC
JEFFBOAT LLC
ACL CAPITAL CORP.
AMERICAN COMMERCIAL BARGE LINE LLC
AMERICAN COMMERCIAL LINES INTERNATIONAL LLC
ACBL LIQUID SALES LLC
AMERICAN COMMERCIAL LOGISTICS LLC
HOUSTON FLEET LLC
LEMONT HARBOR & FLEETING SERVICES LLC
AMERICAN COMMERCIAL TERMINALS - MEMPHIS LLC
ORINOCO TASA LLC
ORINOCO TASV LLC
LENDERS:
EXHIBIT 4.35
FOURTH AMENDMENT
TO REVOLVING CREDIT AND
GUARANTY AGREEMENT
FOURTH AMENDMENT, dated as of February 24, 2004 (the "Amendment and Waiver"), to the REVOLVING CREDIT AND GUARANTY AGREEMENT, dated as of January 31, 2003, among AMERICAN COMMERCIAL LINES LLC, a Delaware limited liability company (the "Borrower"), a debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code, the Guarantors named therein (the "Guarantors"), JPMORGAN CHASE BANK, a New York banking corporation ("JPMorgan Chase"), each of the other financial institutions from time to time party thereto (the "Lenders"), and JPMORGAN CHASE BANK, as Administrative Agent for the Lenders (in such capacity, the "Agent"), and BANK ONE, N.A. and GENERAL ELECTRIC CAPITAL CORPORATION, as Co-Syndication Agents (in such capacities, the "Co-Syndication Agents"):
W I T N E S S E T H:
WHEREAS, the Borrower, the Guarantors, the Lenders, the Agent and the Co-Syndication Agents are parties to that certain Revolving Credit and Guaranty Agreement, dated as of January 31, 2003, as amended by that certain First Amendment to Revolving Credit and Guaranty Agreement, dated as of March 13, 2003, that Second Amendment to Revolving Credit and Guaranty Agreement, dated as of March 31, 2003 and that Third Amendment to Revolving Credit Agreement, dated as of December 22, 2003 (as the same may be further amended, modified or supplemented from time to time, the "Credit Agreement"); and
WHEREAS, the Borrower, the Guarantors and the Lenders have agreed to amend certain provisions of the Credit Agreement as set forth herein, subject to the terms and conditions set forth herein; and
NOW, THEREFORE, it is agreed as follows:
As used herein, all terms that are defined in the Credit Agreement shall have the same meanings herein.
1. Amendment.
(a) Section 2.13(a) of the Credit Agreement is hereby amended by deleting the words "three Business Days" appearing in the fourth line thereof and inserting in lieu thereof the words "one Business Day"; and
(b) The parenthetical clause appearing at the end of subsection (iii) of Section 6.10 of the Credit Agreement is hereby amended in its entirety to read as follows:
(provided, further, that the aggregate outstanding principal amount of such advances and loans to Jeffboat LLC may not exceed (x) $4,000,000 during
the period beginning on December 22, 2003 and ending on February 23, 2004 or (y) $6,500,000 during the period beginning on February 24, 2004 and ending on May 31, 2004).
2. Borrowing Base Compliance. The Borrower hereby represents and warrants that although the aggregate principal amount of outstanding Loans plus the aggregate Letter of Credit Outstandings exceeded the Borrowing Base during the period from February 13, 2004 to February 20, 2004, after giving effect to the $6,000,000 prepayment of Tranche B Loans on February 20, 2004 the aggregate principal amount of all outstanding Loans plus the aggregate Letter of Credit Outstandings does not exceed the Borrowing Base.
3. Miscellaneous.
This Amendment shall not become effective until the date on which this Amendment and Waiver shall have been executed by the Borrower, the Guarantors and the Required Lenders, and the Agent shall have received evidence satisfactory to it of such execution.
Except to the extent hereby amended, the Credit Agreement and each of the Loan Documents remain in full force and effect and are hereby ratified and affirmed.
The Borrower agrees that its obligations set forth in Section 10.05 of the Credit Agreement shall extend to the preparation, execution and delivery of this Amendment, including the reasonable fees and disbursements of special counsel to the Agent.
This Amendment shall be limited precisely as written and shall not be deemed (a) to be a consent granted pursuant to, or a waiver or modification of, any other term or condition of the Credit Agreement or any of the instruments or agreements referred to therein or (b) to prejudice any right or rights which the Agent, the Co-Syndication Agents or the Lenders may now have or have in the future under or in connection with the Credit Agreement or any of the instruments or agreements referred to therein. Whenever the Credit Agreement is referred to in the Credit Agreement or any of the instruments, agreements or other documents or papers executed or delivered in connection therewith, such reference shall be deemed to mean the Credit Agreement as modified by this Amendment.
This Amendment may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument.
This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York.
[SIGNATURE PAGES TO FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment and Waiver to be duly executed as of the day and the year first written.
BORROWER:
AMERICAN COMMERCIAL LINES LLC
GUARANTORS:
AMERICAN COMMERCIAL LINES HOLDINGS LLC
LOUISIANA DOCK COMPANY LLC
AMERICAN COMMERCIAL TERMINALS LLC
ACL CAPITAL CORP.
AMERICAN COMMERCIAL BARGE LINE LLC
AMERICAN COMMERCIAL LINES INTERNATIONAL LLC
ACBL LIQUID SALES LLC
AMERICAN COMMERCIAL LOGISTICS LLC
HOUSTON FLEET LLC
LEMONT HARBOR & FLEETING SERVICES LLC
AMERICAN COMMERCIAL TERMINALS - MEMPHIS LLC
ORINOCO TASA LLC
ORINOCO TASV LLC
LENDERS:
EXHIBIT 4.36
EXECUTION COPY
FIRST PREFERRED FLEET MORTGAGE
MADE BY
AMERICAN COMMERCIAL LINES LLC
A DEBTOR AND A DEBTOR-IN-POSSESSION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
IN FAVOR OF
JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT, DOCUMENTATION AGENT AND COLLATERAL AGENT UNDER A REVOLVING CREDIT AND GUARANTY AGREEMENT DATED AS OF JANUARY 31, 2003 AMONG AMERICAN COMMERCIAL LINES LLC, A DEBTOR AND A DEBTOR-IN-POSSESSION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE, AS BORROWER, AMERICAN COMMERCIAL LINES HOLDINGS LLC AND THE SUBSIDIARIES OF THE BORROWER NAMED THEREIN, EACH A DEBTOR-IN-POSSESSION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE, THE BANKS PARTY THERETO AND JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT, DOCUMENTATION AGENT AND COLLATERAL AGENT
DATED AND EFFECTIVE AS OF FEBRUARY 3, 2003
TABLE OF CONTENTS
PAGE
ARTICLE I GENERAL PROVISIONS....................................................................... 3
SECTION 1.1 Definitions..................................................................... 3
ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE MORTGAGOR............................... 3
SECTION 2.1 Payment and Performance Obligations............................................. 3
SECTION 2.2 Organization; Authority; Enforceability......................................... 3
SECTION 2.3 Citizenship..................................................................... 3
SECTION 2.4 Ownership of Vessels; Warranty and Defense of Title............................. 3
SECTION 2.5 Perfection...................................................................... 4
SECTION 2.6 Environmental Compliance........................................................ 4
SECTION 2.7 Liens........................................................................... 4
SECTION 2.8 Notice of Mortgage.............................................................. 5
SECTION 2.9 Libel or Attachment............................................................. 5
SECTION 2.10 Maintenance of Vessels.......................................................... 5
SECTION 2.11 Documentation; Operation of Vessels............................................. 6
SECTION 2.12 Inspection...................................................................... 7
SECTION 2.13 Taxes, Fees, etc................................................................ 7
SECTION 2.14 Sale, Assignment, Mortgage, Charter or Other Disposition of Vessel.............. 7
SECTION 2.15 Requisition of Title or Use..................................................... 8
SECTION 2.16 Notice of Loss, Requisition or Damage........................................... 8
SECTION 2.17 Insurance....................................................................... 9
SECTION 2.18 Reimbursement of Mortgagee's Costs.............................................. 14
ARTICLE III EVENTS OF DEFAULT AND REMEDIES........................................................... 14
SECTION 3.1 Event of Default and Remedies................................................... 14
SECTION 3.2 Application of Proceeds......................................................... 16
SECTION 3.3 Certain Rights of Mortgagor..................................................... 17
ARTICLE IV GENERAL POWERS OF MORTGAGEE.............................................................. 17
SECTION 4.1 Arrest or Detention of Vessel................................................... 17
SECTION 4.2 Suits........................................................................... 18
SECTION 4.3 Powers and Remedies Cumulative; No Waiver....................................... 18
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TABLE OF CONTENTS
(continued)
PAGE
ARTICLE V RELEASE OF VESSELS AND MORTGAGE OF ADDITIONAL VESSELS.................................... 19
SECTION 5.1 Definitions..................................................................... 19
SECTION 5.2 Release of Vessels.............................................................. 19
SECTION 5.3 Mortgage of Additional Vessels.................................................. 19
SECTION 5.4 Costs........................................................................... 20
ARTICLE VI SUNDRY PROVISIONS........................................................................ 20
SECTION 6.1 Amount of Fleet Mortgage........................................................ 20
SECTION 6.2 Counterparts.................................................................... 20
SECTION 6.3 Currency........................................................................ 20
SECTION 6.4 Assignment; Successors.......................................................... 20
SECTION 6.5 Agents of Mortgagee............................................................. 21
SECTION 6.6 Severability.................................................................... 21
SECTION 6.7 Amendments; Supplements......................................................... 21
SECTION 6.8 Governing Law................................................................... 21
SECTION 6.9 Recordation of Mortgage......................................................... 21
SECTION 6.10 No Waiver of Preferred Status................................................... 21
SECTION 6.11 Waiver.......................................................................... 21
SECTION 6.12 Further Assurances.............................................................. 21
SECTION 6.13 Notices......................................................................... 22
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FIRST PREFERRED FLEET MORTGAGE
FIRST PREFERRED FLEET MORTGAGE, made effective this 3rd day of February, 2003, by AMERICAN COMMERCIAL LINES LLC, a Delaware limited liability company whose address is 1701 E. Market Street, P.O. Box 610, Jeffersonville, Indiana 47130-0610, (the "Mortgagor"), a debtor and a debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, to JPMORGAN CHASE BANK, a New York banking corporation, whose address is 270 Park Avenue, New York, New York 10017, as administrative agent, documentation agent and collateral agent under the Revolving Credit and Guaranty Agreement defined below (the "Mortgagee").
WHEREAS:
A. On January 31, 2003, the Mortgagor and the Guarantors (as defined in the Revolving Credit and Guaranty Agreement defined below) filed voluntary petitions with the Bankruptcy Court initiating the Cases (as defined in the Revolving Credit and Guaranty Agreement defined below) and have continued in the possession of their assets and in the management of their business pursuant to Sections 1107 and 1108 of the Bankruptcy Code.
B. The Mortgagor is the sole owner of the whole (100%) of each of the vessels identified in Schedule I hereof and more fully described in the Granting Clause hereof.
C. For purposes of 46 U.S.C. Section 31321(b)(3), the amount of the direct or contingent obligations that are or may be secured by this Fleet Mortgage (excluding interest, expenses and fees) is $75,000,000 plus interest, expenses, fees, indemnities and costs of performance of the covenants contained in this Fleet Mortgage, the Revolving Credit and Guaranty Agreement defined below and in the other Loan Documents (as defined in the Revolving Credit and Guaranty Agreement defined below).
D. The Mortgagor is executing and delivering this Fleet
Mortgage pursuant to a Revolving Credit and Guaranty Agreement dated as of
January 31, 2003 (as at any time amended, the "Revolving Credit and Guaranty
Agreement"), among the Mortgagor as borrower, American Commercial Lines Holdings
LLC ("Holdings"), and certain of the direct or indirect subsidiaries of the
Mortgagor signatory hereto (together with Holdings, each a "Guarantor" and
collectively, the "Guarantors"), JPMorgan Chase Bank, each of the other
financial institutions from time to time party thereto (together with JPMorgan
Chase Bank, the "Banks") and JP Morgan Chase Bank, as Administrative Agent,
Documentation Agent and Collateral Agent, pursuant to which (i) the Tranche A
Banks, severally, have agreed to make Tranche A Loans to the Mortgagor in an
aggregate principal amount of up to $25,000,000, from time to time during the
period commencing on the Closing Date and ending on the Termination Date and
(ii) the Tranche B Banks, severally, have agreed to make available Tranche B
Loans to the Mortgagor in an aggregate principal amount of up to $50,000,000 in
accordance with the Revolving Credit and Guaranty Agreement, a copy of which
Revolving Credit and Guaranty Agreement (without exhibits) is attached hereto as
Annex A and made a part hereof.
E. In order to secure (a) the due and punctual payment by the Mortgagor of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Mortgagor under the Revolving Credit and Guaranty Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including reasonable fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Mortgagor to the Banks and the Mortgagee under the Revolving Credit and Guaranty Agreement, this Fleet Mortgage and the other Loan Documents to which the Mortgagor is or is to be a party, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Mortgagor under or pursuant to the Revolving Credit and Guaranty Agreement, this Fleet Mortgage and the other Loan Documents to which the Mortgagor is or is to be a party, (c) the due and punctual performance of all covenants, agreements, obligations and liabilities of each Guarantor under or pursuant to the Loan Documents and (d) all other Obligations (as defined in the Revolving Credit and Guaranty Agreement)(all the obligations referred to in the preceding clauses (a) through (d) being referred to collectively, as the "Secured Obligations"), the Mortgagor has duly authorized the execution and delivery of this First Preferred Fleet Mortgage under and pursuant to Chapter 313 of Title 46 of the United States Code, as amended ("Chapter 313").
F. The Mortgagor is hereby granting to the Mortgagee this Fleet Mortgage covering the whole of each of the vessels identified on Schedule I hereof. By a supplement or supplements to this Fleet Mortgage, this Fleet Mortgage may hereafter cover one or more additional vessels, as shall be described in such supplement or supplements.
NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt of which is hereby acknowledged, and to secure the due and punctual payment and performance of the Secured Obligations, the Mortgagor, for itself, its successors and assigns does by these presents:
GRANT, CONVEY, MORTGAGE, PLEDGE AND CONFIRM UNTO THE MORTGAGEE, its successors and assigns, the whole of each of the vessels identified on Schedule I hereof, each of which is duly documented in the name of the Mortgagor under the laws and flag of the United States of America, including, without being limited to, all of the boilers, engines, machinery, masts, spars, rigging, boats, pumps, anchors, cables, chains, tackle, apparel, furniture, fittings, equipment and other appurtenances appertaining or belonging thereto, whether now owned or hereafter acquired, and all additions, improvements, and replacements hereafter made in or to any vessel, or any part thereof whether on board or not, including all items and appurtenances aforesaid and all rents, charters, charter parties, freights, sub-freights, cargoes, operating profits, and proceeds of the foregoing (each such vessel and all items thereof above enumerated being included in the term "Vessel" as used in this Fleet Mortgage);
TO HAVE AND TO HOLD the same unto and for the proper use and benefit of the Mortgagee, its successors and assigns, forever, upon the terms herein set forth;
PROVIDED, HOWEVER, and these presents are upon the condition that, if the Mortgagor or its successors and assigns shall duly and punctually pay in full and perform in full the Secured Obligations, then this Fleet Mortgage and the rights hereunder shall cease, determine and be void, otherwise to be and remain in full force and effect;
PROVIDED, FURTHER that any Vessel may be separately discharged from this Fleet Mortgage by the Mortgagee in accordance with Section 5.2 hereof; and
FURTHER COVENANT, DECLARE AND AGREE with the Mortgagee and its successors and assigns, that the Vessels are to be held subject to the further representations, warranties, covenants, terms and conditions hereinafter set forth.
ARTICLE I
GENERAL PROVISIONS
SECTION 1.1 Definitions. Capitalized terms used but not defined herein shall have the same meanings set forth with respect thereto in the Revolving Credit and Guaranty Agreement.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE MORTGAGOR
SECTION 2.1 Payment and Performance Obligations. The Mortgagor will duly and punctually pay or cause to be paid and duly perform, observe and comply with the Secured Obligations.
SECTION 2.2 Organization; Authority; Enforceability. The Mortgagor was duly organized and is now validly existing and in good standing as a limited liability company under the laws of the State of Delaware and shall so remain during the life of this Fleet Mortgage and so long as any of the Secured Obligations shall remain outstanding. The Mortgagor has all requisite authority, power and legal right to own and operate the Vessels, to mortgage the Vessels to the Mortgagee pursuant to this Fleet Mortgage, and to execute and deliver this Fleet Mortgage. All action necessary and required by law for the execution and delivery by the Mortgagor of this Fleet Mortgage has been duly and effectively taken, and this Fleet Mortgage is and will continue to be the valid and binding obligation of the Mortgagor enforceable in accordance with its terms. All consents and approvals required in respect of this Fleet Mortgage have been obtained and are in full force and effect.
SECTION 2.3 Citizenship. The Mortgagor warrants that the Mortgagor meets, and shall continue for the term of this Fleet Mortgage and until all of the Secured Obligations are paid and performed in full to meet, all citizenship requirements necessary for each of the Vessels to be eligible for documentation as a vessel of the United States, under the flag of the United States, pursuant to Title 46, Section 12102 of the United States Code.
SECTION 2.4 Ownership of Vessels; Warranty and Defense of Title. The Mortgagor warrants that it is the true, lawful and sole owner of the whole of each of the Vessels, and that its ownership of each Vessel is free and clear of all Liens except such Liens which arose prior to the date of this Fleet Mortgage that are incident to current operations or created by that certain First Preferred Fleet Mortgage, dated and effective as of June 30, 1998 (the "Existing Mortgage"), granted by the Mortgagor to The Chase Manhattan Bank, as collateral agent and security trustee (the "Existing Mortgagee") pursuant to a Credit Agreement dated as of June 30, 1998, as amended and restated as of April 11, 2002 and amended as of September 27, 2002, among the Mortgagor, the secured lenders from time to time party thereto and the Existing Mortgagee (the "Existing Agreement"); none of the Vessels are subject to a demise charter or to a time or voyage charter other than demise charters or time charters entered in the ordinary course of business and consistent with standard marine practice that are listed on Schedule 2.14 to this Fleet Mortgage; and that the Mortgagor will forever warrant and defend its title and possession of each Vessel for the benefit of the Mortgagee against any and all claims and demands.
SECTION 2.5 Perfection. The Mortgagor shall comply with and satisfy all applicable formalities and provisions of the laws and regulations of the United States of America, including but not limited to the provisions of Chapter 313, as amended, in order to perfect, establish, record and maintain this Fleet Mortgage, and any supplement or amendment thereto, upon each of the Vessels and upon all renewals, as a first preferred fleet mortgage thereunder and on all additions, improvements and replacements made in or to each of the Vessels and shall do such other acts and execute all such other instruments, deeds, conveyances, mortgages and assurances as the Mortgagee may reasonably require in order to subject each of the Vessels to the Lien of this Fleet Mortgage as aforesaid.
SECTION 2.6 Environmental Compliance. The Mortgagor has complied with
the representations and warranties in Section 3.07 of the Revolving Credit and
Guaranty Agreement in respect to each of the Vessels and shall comply with
Section 4.01(l) of the Revolving Credit and Guaranty Agreement regarding
compliance with environmental laws and regulations in respect to each of the
Vessels.
SECTION 2.7 Liens. The Mortgagor represents and agrees that it has not granted and will not grant any charterer, the master of any of the Vessels or any other person, and none thereof has or shall have, any right, power or authority to create, incur or permit to be placed or imposed upon the Vessels, or any of them, any Liens, other than the Lien of this Fleet Mortgage, Liens for crew's wages, wages for stevedores when employed directly by the Mortgagor or the master of the applicable Vessel and general average and salvage (including contract salvage), Liens created in the ordinary course of the Vessels' current operations which are for "necessaries" within the meaning of 46 U.S.C. Section 31301(4) and the Lien of the Existing Mortgage provided that such Liens are subordinate to the Lien of this Fleet Mortgage. The Mortgagor further agrees that it will not permit to be continued any Lien upon the Vessels, or any of them (other than this Fleet Mortgage and the Lien of the Existing Mortgage), for a period in excess of forty-five (45) days after the same becomes due and payable except for any Lien that is being contested by the Mortgagor in good faith by appropriate proceedings diligently conducted which are effective to stay the execution or other enforcement of such Lien and the Mortgagor shall have set aside on its books adequate reserves in accordance with GAAP with respect to such Lien.
SECTION 2.8 Notice of Mortgage. The Mortgagor shall at all times keep a properly certified copy of this Fleet Mortgage and any amendments and supplements hereto and any assignments hereof (i) at its address set forth above and (ii) in the case of a Vessel that is a self-propelled Vessel, with the ship's papers on board such Vessel and such papers shall be exhibited, on demand, to any person having business with such Vessel which might give rise to a maritime Lien on such Vessel, or to any representative of the Mortgagee; and a notice, reading as follows, printed in plain type of such size that the paragraph of reading matter shall cover a space not less than six inches wide by nine inches high, framed under glass, shall be placed and kept prominently displayed in the chart room and in the master's cabin of each of the Vessels that is a self-propelled Vessel:
"NOTICE OF MORTGAGE
This Vessel is owned by American Commercial Lines LLC (the "Mortgagor") and is subject to a First Preferred Fleet Mortgage, dated February 3, 2003, as the same may be amended or supplemented, in favor of JPMorgan Chase Bank, as administrative agent, documentation agent and collateral agent, pursuant to the provisions of Chapter 313 of Title 46 of the United States Code, as amended, and under the terms of said Fleet Mortgage the Mortgagor hereby gives notice that it has not granted any charterer, the master of this Vessel or any other person, and none thereof has, the right, power or authority to create, incur or permit to exist upon this Vessel any liens or encumbrances whatsoever, other than the lien of said Fleet Mortgage, liens for crew's wages, wages of stevedores when employed directly by the Mortgagor or the master of this Vessel and general average or salvage (including contract salvage). Any such right, power or authority is also prohibited under the terms of said Fleet Mortgage."
SECTION 2.9 Libel or Attachment. If a libel or complaint shall be filed against the Vessels, or any of them, or if the Vessels, or any of them, shall be levied upon or taken into custody, or detained by any proceeding in any court or tribunal or by any government or other authority, the Mortgagor, within ten (10) days thereafter, will cause such Vessel or Vessels to be released and any Lien thereon, other than the Lien of this Fleet Mortgage or of the Existing Mortgage, to be discharged. In the event the Vessels, or any of them, are levied upon or taken into custody or detained by any authority whatsoever, the Mortgagor agrees forthwith to notify the Mortgagee thereof by telex, confirmed by letter. The Mortgagor shall reimburse the Mortgagee for any amount paid by the Mortgagee, whether in settlement of a claim or in satisfaction of a judgment, and such amounts shall be Mortgagee's Costs, as defined in and in accordance with Section 2.18 hereof.
SECTION 2.10 Maintenance of Vessels. (a) The Mortgagor will at all times, without cost or expense to the Mortgagee, maintain and preserve the Vessels in all material respects, and cause the Vessels in all material respects to be tight, staunch, strong and well and sufficiently tackled, appareled, victualed, fitted, manned, furnished and equipped and to be maintained and preserved, in good running order and repair so that the Vessels in all material respects shall be well equipped and seaworthy, in good working order, repair and operating condition, ordinary wear and tear excepted. At all times, at its own cost and expense, the Mortgagor will exercise due diligence to maintain and preserve the Vessels in all material respects in as good condition, working order and repair as at the time of the execution of this Fleet Mortgage, ordinary wear
and tear and depreciation excepted, and will maintain the Vessels in all material respects in accordance with good marine maintenance practice and procedures and applicable legal or regulatory requirements for the service in which they then are or will be engaged, and in such condition as will enable the Vessels in all material respects to pass such inspection as may be required by marine underwriters as a condition of their writing such insurance and in such amounts as is required under this Fleet Mortgage. Furthermore, the Mortgagor will cause each Vessel to be periodically inspected, drydocked and recoated (hull paint), and its machinery overhauled in accordance with normal marine practices or as may be required by the United States Coast Guard. At the request of the Mortgagee, the Mortgagor shall cause a marine surveyor satisfactory to the Mortgagee to perform a survey, inspection or other actions as may be necessary on a representative sample of the Vessels (the number or location of such Vessels included in such representative sample to be determined by the Mortgagee in its discretion), to prove or establish that the Vessels in all material respects have been maintained and preserved in accordance with the provisions of this Section 2.10(a). In addition, the Mortgagor shall provide at the end of each six-month period commencing six weeks following the date hereof to the Mortgagee a certificate of the chief marine operations officer (currently James J. Farley, Senior Vice President Transportation Services) of the Mortgagor stating that the Vessels have been maintained and preserved in accordance with the requirements of this Section 2.10(a).
(b) The Mortgagor may make structural changes, alterations or additions to the Vessels, or any of them, but only to the extent that any such change, alteration or addition is made at the Mortgagor's expense and risk and does not diminish the value, utility, capacity, operating condition and seaworthiness of the applicable Vessel.
(c) The Mortgagor shall certify as often as required by the Mortgagee that all wage and other claims which give rise to Liens have been paid.
(d) The Mortgagor shall furnish the Mortgagee within fifteen (15) days after receipt by the Mortgagor, copies of all Certificates of Inspection delivered by the United States Coast Guard.
(e) At the request of the Mortgagee, the Mortgagor shall at its expense deliver to the Mortgagee an appraisal of the current charter-free fair market value (determined on the basis of a willing buyer and willing seller) in Dollars of each Vessel by an independent valuer acceptable to the Mortgagee.
SECTION 2.11 Documentation; Operation of Vessels. (a) The Mortgagor will keep each vessel duly documented as a Vessel of the United States, under the flag of the United States, and will not cause or permit any Vessel to be operated in any manner prohibited by any law, regulation or contract applicable to such Vessel, and shall have on board as and when required thereby valid certificates showing compliance therewith. The Mortgagor will not cause or permit the Vessels, or any of them, to engage in any unlawful trade or carry any cargo that will expose the Vessels, or any of them, to penalty, forfeiture or capture, and will not do, or suffer or permit to be done, anything which can or may injuriously affect the registration or enrollment or flag of the Vessels, or any of them, under the laws and regulations of the United States.
(b) The Mortgagor will (and will cause any charterer of the Vessels, or any of them, to) comply with and satisfy all of the provisions of any applicable law, regulation, proclamation or order concerning financial responsibility for liabilities imposed on the Mortgagor or the Vessels, or any of them, with respect to pollution by any state or nation or political subdivision thereof, including but not limited to the United States Federal Water Pollution Control Act and the United States Oil Pollution Act of 1990, as any of the foregoing may at any time be amended, and will (and will cause any charterer of the Vessels, or any of them, to) maintain all certificates or other evidence of financial responsibility as may be required by any such law, regulation, proclamation or order with respect to the trade in which the Vessels, or any of them, is from time to time engaged and the cargo carried thereby.
SECTION 2.12 Inspection. The Mortgagor will permit representatives of the Mortgagee to inspect or survey the Vessels, at the Mortgagor's expense, to ascertain the condition of such Vessel or Vessels and whether such Vessel or Vessels are being properly repaired and maintained. Such inspection or survey shall be made on reasonable notice and at reasonable times and places so as not to interfere with the safe, efficient and normal operation of such Vessel or Vessels. The Mortgagor will cause to be made all such repairs as shall be required by this Fleet Mortgage, without expense to the Mortgagee, its successors and assigns or any of its authorized representatives, as such inspection or survey or an inspection or survey conducted pursuant to Section 2.10(a) may show to be required. The Mortgagor shall also permit the Mortgagee to inspect the logs and papers of the Vessels, or any of them, and any and all other contracts and other papers relating to the same, whether on board or not, whenever requested, on reasonable notice.
SECTION 2.13 Taxes, Fees, etc. The Mortgagor will pay and discharge, or cause to be paid and discharged, when due and payable from time to time, all taxes, assessments, governmental charges, fines and penalties lawfully imposed on the Vessels, or any of them; provided that the Mortgagor shall not be required to pay any such tax, assessment or charge if the validity or amount thereof is concurrently being contested in good faith by appropriate proceedings and if the Mortgagor shall have set aside on its books reserves deemed by it adequate with respect to such tax, assessment or charge. Notwithstanding the foregoing, the Mortgagor will pay or cause to be paid all such taxes, assessments or charges forthwith upon the commencement of proceedings to foreclose any Lien which is attached as security therefor.
SECTION 2.14 Sale, Assignment, Mortgage, Charter or Other Disposition of Vessel. The Mortgagor will not in any manner change the flag of the Vessels, or any of them, sell, transfer or mortgage the Vessels, or any of them, or enter into any charter party other than (a) charters permitted by the Revolving Credit and Guaranty Agreement, (b) the Existing Mortgage or the Existing Agreement, (c) charters to Guarantors, (d) charters for a period of one year or less under terms that are common and customary for a charter party used by prudent owners and operators who charter vessels similar to the Vessels and engaged in trades similar to the trades in which the Vessels are engaged, or with the prior written consent of the Mortgagee, any charters in excess of one year, and (e) charters for vessels listed on Schedule 2.14 to this Fleet Mortgage; provided that no such charter allowed in this Section 2.14 will relieve the Mortgagor of its obligations under this Fleet Mortgage, or change the flag of the Vessels, or any of them. Any written consent given for any one of the foregoing transactions shall not be construed to be a waiver of this provision in respect of any such other transaction. Any such transaction with
respect to the Vessels, or any of them, shall be subject to the provisions of this Fleet Mortgage and the Lien it creates.
SECTION 2.15 Requisition of Title or Use. In the event that the title to or ownership of the Vessels, or any of them, or the use of the Vessels, or any of them (whether on a bareboat or time charter basis or any other basis), shall be requisitioned, purchased or taken by, or the Vessels, or any of them, shall be seized by or forfeited to any government of any country or any department, agency or representative thereof pursuant to any present or future law, proclamation, decree, order or otherwise, or to any other person or persons, whether or not acting under color of governmental authority, and the compensation, purchase price, reimbursement or award for such requisition, purchase, seizure, forfeiture or other taking of such title, ownership or use shall be an amount equal to or greater than (i) $750,000 (but only if the Mortgagor fails within 270 days after the date of such event of requisition to have or to have made commitments to have one or more Eligible Vessels (as defined in 5.1 hereof), collectively with an aggregate fair market value at least equal to the amount of such compensation (as evidenced by delivery to the Mortgagee of an appraisal in form and substance satisfactory to the Mortgagee), subjected to this Fleet Mortgage pursuant to the provisions of Section 5.3 hereof, or (ii) $25,000,000, then such event shall be deemed a "Condemnation" and the compensation shall be deemed to be "Condemnation Proceeds" to be applied by the Mortgagor to prepay outstanding Obligations in accordance with Section 2.26 of the Revolving Credit and Guaranty Agreement; provided however, if an Event of Default shall have occurred and be continuing, any amount received in the event of a requisition described above shall be applied by the Mortgagor to prepay outstanding Obligations in accordance with Section 2.26 of the Revolving Credit and Guaranty Agreement. To the extent that any Condemnation Proceeds are payable to the Mortgagee, the Mortgagor hereby constitutes and appoints the Mortgagee and its successors and assigns, its true and lawful attorney, for it and in its name, place and stead, to collect, receipt for, acknowledge the payment of, sue for and execute any documentation or writing that may be necessary or required in order to obtain payment of said compensation, purchase price, reimbursement or award, giving and granting to said attorney full power and authority to do and perform every act and thing whatsoever requisite or necessary to be done as fully and to all intents and purposes as it, the Mortgagor, might or could do if personally present at the doing thereof, with full power of substitution, hereby ratifying and confirming all that its said attorney or substitute shall do or cause to be done by virtue hereof, and the Mortgagor shall promptly execute and deliver to the Mortgagee such documents and shall promptly do and perform such acts as in the opinion of the Mortgagee may be necessary or useful to facilitate or expedite the collection by the Mortgagee of such compensation, purchase price, reimbursement or award.
SECTION 2.16 Notice of Loss, Requisition or Damage. In the event of (a) actual loss of any Vessel, (b) any event referred to in Section 2.15 hereof with respect to any Vessel or (c) any casualty, accident or damage to any Vessel involving an amount in excess of $750,000, the Mortgagor shall forthwith give written notice thereof (containing full particulars) to the Mortgagee. Furthermore, the Mortgagor will provide to the Mortgagee, at the end of each six-month period commencing six months following the date hereof, a written report stating each casualty, accident or damage to any Vessel involving an amount in excess of $50,000 that occurred in the prior six month period with full particulars.
SECTION 2.17 Insurance. (a) The Mortgagor shall at all times while this Fleet Mortgage shall remain in effect maintain at its own expense the following insurance:
(i) protection and indemnity insurance with respect to each of the Vessels in such amounts, subject to such deductible or retention amounts, against such risks and under such forms as are then common or customary with respect to vessels similar to the Vessels and engaged in trades similar to the trades in which the Vessels are engaged by other prudent owners and operators of such vessels, provided that such protection and indemnity insurance (including excess policies) shall in all events:
(w) provide limits of liability of not less than $250,000,000 per occurrence (and contain no annual limits on liability);
(x) provide for deductible or retained amounts not exceeding $4,000,000 of annual aggregate deductible with respect to all vessels owned or chartered by the Mortgagor plus $50,000 per occurrence;
(y) provide protection on an "occurrence" basis (rather than on a "claims made" basis); and
(z) provide protection against liabilities arising out of pollution or the spillage or leakage of cargo with a $1,000,000 per occurrence deductible;
(ii) marine, hull and machinery and, if any Vessel or Vessels are operated outside of the United States, war risks insurance on each of the Vessels under the latest (at the time of issue of the policies in question) forms of American or London Institute of Marine Underwriters, provided that such marine, hull and machinery and war risks insurance shall in all events:
(x) be in an amount with respect to each Vessel that is not less than the full commercial value thereof;
(y) with respect to an accident, occurrence or event that does not result in an actual or constructive total loss of a Vessel or Vessels or an agreed or compromised total loss of a Vessel or Vessels, provide for deductible or retained amounts that do not exceed $4,000,000 of annual aggregate deductible with respect to all vessels owned or chartered by the Mortgagor plus $50,000 per occurrence; and
(z) with respect to an accident, occurrence or event that results in an actual or constructive total loss of a Vessel or Vessels or an agreed or compromised total loss of a Vessel or Vessels, provide for deductible or retained
amounts that do not exceed $4,000,000 of annual aggregate deductible with respect to all vessels owned or chartered by the Mortgagor with no per occurrence deductible;
(iii) Insurance protecting against claims under the Longshoremen's and Harbor Workers Compensation Act, Workmen's Compensation and public liability;
(iv) Wreck removal and fire insurance with underwriters and under policy forms and in amounts satisfactory to the Mortgagee; and
(v) Such other insurances that become customarily obtained by prudent operators of vessels similar to the Vessels and engaged in trades similar to the trades in which the Vessels are engaged or as may be reasonably required by the Mortgagee from time to time.
(b) At the Mortgagee's request, to obtain coverage against Mortgagee's Additional Perils (Pollution) Insurance on each of the Vessels, the Mortgagor shall reimburse the Mortgagee for all premiums and other amounts paid by the Mortgagee in connection with such coverage. The Mortgagor shall reimburse the Mortgagee for such costs as Mortgagee's Costs, as defined in and in accordance with Section 2.18 hereof.
(c) All insurance policies required under paragraph (a) of this Section 2.17 shall:
(i) name the Mortgagee, in its individual capacity and as administrative agent, documentation agent and collateral agent, as additional insured and as loss payee in accordance with the provisions of paragraph (i) below;
(ii) provide that in respect of the interest of the Mortgagee in such policies the insurance shall not be invalidated by any action or inaction of the Mortgagor or any other person (other than the Mortgagee) and shall insure the Mortgagee regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Mortgagor or any other person (other than the Mortgagee);
(iii) provide that if such insurance is canceled by the insurers for any reason whatsoever, or such insurance is allowed to lapse for non-payment of premium, or such insurance coverage is reduced or any other material change is made with respect thereto, then such cancellation, lapse, reduction or change shall not be effective as to the Mortgagor or the Mortgagee for 30 days after receipt by the Mortgagor or the Mortgagee, respectively, of written notice by such insurers of such cancellation, lapse, reduction or material change; and
(iv) provide that there shall be no recourse against the Mortgagee for the payment of premiums, commissions, club calls, assessments or advances.
Each insurance policy with respect to protection and indemnity insurance shall:
(i) be primary without right of contribution from any other insurance which is carried by the Mortgagee and
(ii) expressly provide that all of the provisions thereof, except the limits of liability, shall operate in the same manner as if there were a separate policy covering each insured.
(d) The Mortgagor shall not permit the Vessels, or any of them, to undertake any voyage or participate in any venture or transport any cargo which is not permitted by the insurance then in effect or which would limit such insurance or render it unavailable in whole or in part.
(e) All insurance required under this Fleet Mortgage shall be placed and kept with such insurance companies or other insurance underwriters as shall be reasonably acceptable to the Mortgagee and the Mortgagor.
(f) The Mortgagor shall deliver to the Mortgagee copies
of all certificates and, if requested by the Mortgagee, copies of all binders
and policies with respect to insurance from time to time carried on the Vessels
pursuant to this Section 2.17. In addition, on the Closing Date and on or before
February 3rd in each year commencing February 3, 2004, the Mortgagor shall
furnish or cause to be furnished to the Mortgagee a signed report by independent
marine insurance brokers, selected by the Mortgagor and acceptable to the
Mortgagee, describing in reasonable detail the insurance pursuant to this
Section 2.17 and stating that in the opinion of such brokers such insurance
complies in all material respects with the terms of this Section 2.17 and is
common and customary for types of insurances and coverage generally required by
mortgagee lenders from prudent owners and operators of vessels similar to the
Vessels and engaged in trades similar to the trades in which the Vessels are
engaged.
(g) The Mortgagor shall, at its own expense, have the duty and responsibility to make all proofs of loss and take all other steps necessary to collect from underwriters, insurance companies or funds any loss under any insurance with respect to the Vessels, or any of them, obtained by the Mortgagor as required by this Section 2.17.
(h) Nothing in this Section 2.17 shall prohibit the Mortgagee from placing additional insurance on or with respect to the Vessels at its expense, or any of them, or the operation thereof, unless such insurance would conflict with insurance that is carried by the Mortgagor. In the event that the Mortgagor shall fail to maintain any insurance which it is required to maintain pursuant to this Section 2.17, the Mortgagee may, but shall not be obligated to, arrange for such insurance and, in such event, the Mortgagor shall, upon demand, reimburse the Mortgagee for the costs thereof as Mortgagee's Costs, as defined in and in accordance with Section 2.18 hereof, without waiver of any other additional rights the Mortgagee may have.
(i) Any sums payable as a result of a loss under insurance on the Vessels, or any of them, with respect to protection and indemnity risks, including liability arising out of pollution or the spillage or leakage of cargo or collision or tower's liability, may be paid directly to the person to whom any liability covered by such insurance has been incurred or, if the liability insured against has been discharged, to the Mortgagee or the Mortgagor to reimburse it or them for any loss, damage or expense incurred by it or them and covered by such insurance. Each policy of insurance maintained under clause (ii) of paragraph (a) of this Section 2.17 shall provide that any payment that is to be made under such policy (other than with respect to any
protection and indemnity risks covered thereby) shall be made solely to the
Mortgagee if such payment (i) is in respect of losses equal to or greater than
$750,000 (but only if the Mortgagor fails within 270 days after the date of such
loss (x) to have or to have made commitments to have any Vessel subject to a
loss fully repaired and restored or (y) in respect of an actual or constructive
total loss of a Vessel or an agreed or compromised total loss of a Vessel to
subject or to have made commitments to subject one or more Eligible Vessels (as
defined in Section 5.1 hereof), collectively with an aggregate fair market value
at least equal to the amount of such insurance proceeds (as evidenced by
delivery to the Mortgagee of an appraisal in form and substance satisfactory to
the Mortgagee), to this Fleet Mortgage pursuant to the provisions of Section 5.3
hereof), (ii) is in respect to losses equal to or greater than $25,000,000 or
(iii) without regard to the amount or character of the loss, is made after the
insurer has received notice from the Mortgagee that an Event of Default has
occurred and is continuing, and before such notice is rescinded. Any insurance
recoveries to which the Mortgagee shall be so entitled pursuant to the
proceeding sentence shall be applied as follows:
(1) In the event that insurance becomes payable to the Mortgagee on account of an accident, occurrence or event involving a Vessel or Vessels that does not result in an actual or constructive total loss or an agreed or compromised total loss of such Vessel or Vessels,
(A) If no Event of Default shall have occurred and be continuing, the Mortgagee shall, upon the written request of the Mortgagor, (i) apply the proceeds of insurance to pay, or consent that the underwriters pay, directly for repairs, liabilities, salvage claims or other charges and expenses (including labor charges due or paid by the Mortgagor) with respect to such Vessel or Vessels that are covered by the policies, or (ii) to the extent that the Mortgagor shall have repaired the damage to such Vessel or Vessels and paid the cost thereof or discharged or paid such liabilities, salvage claims or other charges and expenses with respect to such Vessel or Vessels (such fact having been certified to in a certificate of an authorized officer of the Mortgagor ("Officer's Certificate") delivered to the Mortgagee, accompanied by written confirmation by the underwriter, a surveyor, an adjuster or a marine insurance broker), apply the proceeds or insurance to reimburse, or consent that the underwriters reimburse, the Mortgagor therefor, and in either case, after all known damages with respect to the particular loss shall have been repaired, except to the extent the Mortgagor with the written consent of the Mortgagee deems the said repair inadvisable, in which case such event shall be deemed a Casualty and all insurance proceeds shall be deemed Casualty Proceeds to be applied by the Mortgagor to prepay outstanding Obligations in accordance with Section 2.26 of the Revolving Credit and Guaranty Agreement, and all known costs, liabilities, salvage claims, charges and expenses with respect to such Vessel or Vessels that are covered by the policies shall have been discharged or paid, such fact having been certified to by
an Officer's Certificate delivered to the Mortgagee, accompanied by written confirmation by the underwriter, a surveyor, an adjuster or a marine insurance broker, pay, or consent that the underwriters pay, any balance of the proceeds of insurance to the Mortgagor; or
(B) if an Event of Default shall have occurred and be continuing such loss shall be deemed a Casualty and all related insurance proceeds shall be deemed Casualty Proceeds to be applied by the Mortgagor to prepay outstanding Obligations in accordance with Section 2.26 of the Revolving Credit and Guaranty Agreement or at the election of the Mortgagee applied for the purposes stated in clause (A)(i) of this subparagraph (1);
(2) In the event that insurance becomes payable to the Mortgagee on account of an accident, occurrence or event involving a Vessel or Vessels that results in an actual or constructive total loss or an agreed or compromised total loss of such Vessel or Vessels such loss shall be deemed a Casualty and all related insurance proceeds shall be deemed Casualty Proceeds to be applied by the Mortgagor to prepay outstanding Obligations in accordance with Section 2.26 of the Revolving Credit and Guaranty Agreement .
(j) During the continuance of a taking, requisition or
charter of the use of the Vessels, or any of them, by the United States of
America, the provisions of this Section 2.17 shall be deemed to have been
complied with in all respects as to such Vessel or Vessels if the United States
Government shall have agreed (i) to reimburse the Mortgagee and the Mortgagor
for loss or damage resulting from the risks indicated in paragraph (a) of this
Section 2.17, or (ii) that the Mortgagee and the Mortgagor shall be entitled to
just compensation therefor. In the event of any taking, requisition or charter
of the Vessels, or any of them, contemplated by this paragraph (j), the
Mortgagor shall promptly furnish to the Mortgagee an Officer's Certificate
stating that such taking, requisition or charter has occurred and that the
United States Government has agreed (i) to reimburse the Mortgagee and the
Mortgagor for loss or damage resulting from the risks indicated in paragraph (a)
of this Section 2.17 or (ii) that the Mortgagee and the Mortgagor are entitled
to just compensation therefor.
(k) In the event that any claim or Lien is asserted against the Vessels, or any of them, for loss, damage or expense which is covered by insurance hereunder and it is necessary for the Mortgagor to obtain a bond or supply other security to prevent the arrest of such Vessel or Vessels, or to obtain the release of such Vessel or Vessels from arrest on account of said claim or Lien, the Mortgagee, upon the written request of the Mortgagor, may, but shall not be required to, assign all or any part of its right, title and interest in and to said insurance covering such loss, damage or expense, to any person executing a surety or guaranty bond or other agreement to save or release such Vessel or Vessels from such arrest as collateral security to indemnify against liability under said bond or other agreement.
SECTION 2.18 Reimbursement of Mortgagee's Costs. (a) The Mortgagor shall promptly pay or reimburse to the Mortgagee all amounts the Mortgagee determines constitute
claims, liabilities, losses, taxes, duties, charges, costs, fees and expenses
("Mortgagee's Costs") incurred or made by the Mortgagee in exercising,
protecting or pursuing rights or remedies under this Fleet Mortgage, the
Revolving Credit and Guaranty Agreement or the other Loan Documents (including
but not limited to (i) amounts paid by the Mortgagee pursuant to Section 2.9,
(ii) costs incurred by the Mortgagee pursuant to Section 2.17(b) or (h), Section
5.4, Section 6.9 or Section 6.12 and (iii) expenses of any sale or taking of the
Vessels, or any of them, attorneys' fees and court costs) or resulting from the
release of the Vessels, or any of them, from the security created by this Fleet
Mortgage or resulting from supplementing this Fleet Mortgage to add additional
Vessels, with interest thereon at the rate provided in Section 2.09 of the
Revolving Credit and Guaranty Agreement.
(b) If the Mortgagor shall default in the observance or performance of any of the covenants, conditions or agreements in this Fleet Mortgage on its part to be performed or observed, the Mortgagee may in its discretion do all acts and make all expenditures necessary to remedy such default, including, but not limited to, the procurement of insurance on the Vessels, or any of them, making repairs, discharge or purchase of Liens and payment of taxes, dues, assessments, governmental charges, fines, penalties and attorneys' fees; provided, however, that the Mortgagee shall be under no obligation to the Mortgagor to do such acts or make any such expenditures nor shall the doing or making thereof relieve the Mortgagor of any default in that respect. All costs, fees and expenses of such acts and expenditures shall constitute Mortgagee's Costs.
(c) All Mortgagee's Costs and interest thereon shall be debts due from the Mortgagor to the Mortgagee payable on demand, and shall constitute Secured Obligations and be secured by the Lien of this Fleet Mortgage.
ARTICLE III
EVENTS OF DEFAULT AND REMEDIES
SECTION 3.1 Event of Default and Remedies. An Event of Default as defined in the Revolving Credit and Guaranty Agreement shall be an Event of Default hereunder.
Upon the occurrence and during the continuance of an Event of Default, this Fleet Mortgage shall be in default, and the Mortgagee shall have the right to exercise one or more of the following remedies:
(1) the Mortgagee may exercise all of the rights and remedies in foreclosure and otherwise given to mortgagees by the provisions of Chapter 313 or by any other applicable laws and exercise all of its rights and remedies as attorney-in-fact or otherwise under this Fleet Mortgage;
(2) the Mortgagee may bring suit at law, in equity or in admiralty in any court to foreclose, including foreclosure by seizure, arrest and sale of the Vessels, or any of them, or to recover judgment for the Secured Obligations, and collect the same out of any and all property of the Mortgagor whether covered by this Fleet Mortgage or otherwise;
(3) the Mortgagee may take the Vessels, or any
of them, wherever the same may be, without legal process and without being
responsible for loss or damage; and the Mortgagor or other person in possession
thereof shall forthwith upon demand of the Mortgagee surrender to the Mortgagee
possession of the Vessels, or any of them, and the Mortgagee may hold, lay up,
lease, charter, operate or otherwise use the Vessels, or any of them, for such
time and upon such terms as they may deem to be for their best advantage,
accounting only for the net profits, if any, arising from the use of such Vessel
or Vessels or from the sale thereof, by court proceedings or pursuant to clause
(4) below, net of all costs, expenses, charges, damages or losses by reason of
such use;
(4) the Mortgagee may sell the Vessels, or any of them, free from any claim of or by the Mortgagor in admiralty, in equity, at law or by statute and upon such terms and conditions as the Mortgagee determines, at public or private sale, by sealed bids or otherwise, by first publishing notice of any such public sale for ten (10) consecutive days in a newspaper published in the City of New York, State of New York, and if the place of sale should not be the City of New York, then also by publication of similar notice in a daily newspaper, if any, published at the place of sale, and by mailing notice of such sale, whether public or private, addressed to the Mortgagor at its respective last known address fourteen (14) days prior to the date fixed for entering into the contract of sale; in the event that the Vessels, or any of them, shall be offered for sale by private sale, no newspaper publication of notice shall be required, nor notice of adjournment of sale; sale may be held at such place and at such time as the Mortgagee by notice may have specified, or may be adjourned by the Mortgagee from time to time by announcement at the time and place appointed for such sale or for such adjourned sale, and without further notice or publication the Mortgagee may make any such sale at the time and place to which the same shall be so adjourned; and any sale may be conducted without bringing the Vessels, or any of them, to the place designated for such sale and in such manner as the Mortgagee may deem to be for its advantage; or
(5) demand and receive all freights, hires, charter hires, earnings, issues, revenues, income or profits of the Vessels, or any of them, due or to become due from any person whomsoever.
Any sale of the Mortgagor's interest in the Vessels, or any of them, made pursuant to this Fleet Mortgage, whether under the power of sale hereby granted or any judicial proceedings, shall operate to divest all right, title and interest of any nature whatsoever of the Mortgagor therein and thereto, and shall forever bar the Mortgagor, its successors and assigns, and all persons claiming by, through or under them. No purchaser shall be bound to inquire whether notice has been given, or whether any default has occurred, or as to the propriety of the sale, or as to the application of the proceeds thereof. In case of any such sale, the Mortgagee, or any other person, firm or corporation to whom the Secured Obligations secured by this Fleet Mortgage are otherwise due or owing, may bid for and purchase the Vessels, or any of them, or other property of the Mortgagor and shall be entitled for the purpose of making settlement or payment for the property so purchased, to use and apply the unpaid balance of their portion of the Secured Obligations due and owing, or which may become due or owing, as a credit against the purchase price of the Vessels, or any of them, up to the amount represented by the ratable share of the net proceeds of sale (after allowing for the costs and expenses of sale and other charges) payable to such Mortgagee or such person.
The Mortgagor hereby irrevocably appoints the Mortgagee and its successors and assigns, with full power of substitution, the true and lawful attorney or attorneys of the Mortgagor, in its name and stead, upon the happening and during the continuance of an Event of Default, to make all necessary transfers of the Vessels, or any of them, and for that purpose the Mortgagee and its successors and assigns may execute all necessary instruments of assignment and transfer, the Mortgagor hereby ratifying and confirming all that its said attorney or attorneys shall do by virtue hereof. Nevertheless, the Mortgagor shall, if so requested by the Mortgagee, ratify and confirm such sale by executing and delivering to the purchaser of such Vessel or Vessels such proper bill of sale, conveyance, instrument of transfer and release as may be designated in such request.
The Mortgagor hereby irrevocably appoints the Mortgagee and its successors and assigns, with full power of substitution, the true and lawful attorney or attorneys of the Mortgagor, in its name and stead, upon the happening and during the continuance of an Event of Default, to demand, collect, receive, compromise and sue for, so far as may be permitted by law, the Mortgagor's interest in all freights, hire, earnings, issues, revenues, income and profits of the Vessels, or any of them, and the Mortgagor's interest in all amounts due from the underwriters under any insurance thereon as payments of losses or as return premiums or otherwise, salvage awards and recoveries in general average or otherwise, and the Mortgagor's interest in all other sums, due or to become due at or after the time of the happening of any Event of Default, in respect of the Vessels, or any of them, or in respect of any insurance thereon from any person whomsoever, and to make, give and execute in the name of the Mortgagor acquittances, receipts, releases or other discharges for the same, whether under seal or otherwise, and to endorse and accept in the name of the Mortgagor all checks, notes, drafts, warrants, agreements and all other instruments in writing with respect to the foregoing.
The Mortgagor covenants and agrees that in addition to any and all other rights, powers and remedies elsewhere in this Fleet Mortgage granted to and conferred upon the Mortgagee, the Mortgagee in any suit to enforce any of its rights, powers or remedies shall be entitled as a matter of right and not as a matter of discretion (i) to the appointment of a receiver or receivers of the Mortgagor's interest in the Vessels, or any of them, and the Mortgagor's interest in the hire, earnings, issues, revenues, freights, incomes and profits due or to become due and arising from the operation thereof, and (ii) to a decree ordering and directing the sale and disposal of the Vessels, or any of them.
SECTION 3.2 Application of Proceeds. Upon the occurrence and during the continuance of an Event of Default, the proceeds of the sale of the Vessels, or any of them, the proceeds of any judgment collected by the Mortgagee for any default hereunder, and the net earnings from any management, charter or other use of the same by the Mortgagee under any of the powers specified in Section 3.1, and any and all other moneys held by or received by the Mortgagee pursuant to or under the terms of this Fleet Mortgage, the application of which has not elsewhere herein been specifically provided for, shall be applied by the Mortgagee as follows:
FIRST: To the payment of all Mortgagee's Costs, including the expenses of any sale or any taking of the Vessels, or any of them, attorneys' fees and court costs,
together with interest as provided herein, and to provide adequate indemnity to the Mortgagee against Liens claiming priority over or equality with this Fleet Mortgage;
SECOND: To the payment of interest on, and then in such order as the Mortgagee may determine, the principal of, the Loans under the Revolving Credit and Guaranty Agreement;
THIRD: To the payment of the remaining Secured Obligations due and owing and all other sums secured by or payable hereunder whether due or not together with interest thereon as provided herein, and of all damages, liquidated or otherwise, including without limitation all other unpaid items, costs or expenses; and
FOURTH: To the payment of any surplus thereafter remaining to the Mortgagor or to whomsoever may be entitled thereto.
In the event that the proceeds are insufficient to pay the amounts specified in paragraphs "FIRST", "SECOND" and "THIRD" above, the Mortgagee shall be entitled to collect the balance from the Mortgagor, or any other person liable therefor.
SECTION 3.3. Certain Rights of Mortgagor. In the absence of an Event of Default, the Mortgagor shall (a) be permitted to retain actual possession and use of the Vessels and (b) have the right, from time to time, in its discretion and without application to the Mortgagee and without a release thereof by the Mortgagee, to dispose of, free from the Lien hereof, its interest in any boilers, engines, machinery, masts, spars, rigging, boats, anchors, cables, chains, tackle, capstans, outfit, tools, pumps and pumping equipment, apparel, furniture, fittings, equipment or any other appurtenances of the Vessels, or any of them, that are no longer useful, necessary, profitable or advantageous in the operation of such Vessel or Vessels, first or simultaneously replacing the same by such new items of substantially equal value, which shall forthwith become subject to the Lien of this Fleet Mortgage as a first preferred mortgage thereon. Notwithstanding the foregoing, the Mortgagor shall not be required to replace covers at the end of their useful lives for any Vessel or Vessels that have been converted to a use that does not require a cover.
ARTICLE IV
GENERAL POWERS OF MORTGAGEE
SECTION 4.1 Arrest or Detention of Vessel. In the event that the Vessels, or any of them, shall be arrested or detained by a marshal or other officer of any court of law, equity or admiralty jurisdiction or by any government or other authority and shall not be released from arrest or detention within ten (10) days from the date of arrest or detention, the Mortgagor does hereby authorize and empower the Mortgagee and its successors and assigns, in the name of the Mortgagor, or its successors or assigns, and does hereby irrevocably appoint the Mortgagee and its successors and assigns, with full power of substitution, the true and lawful attorney or attorneys of the Mortgagor, in its name and stead, to apply for and receive possession of and to take possession of such Vessel or Vessels with all the rights and powers that the Mortgagor, or its successors or assigns, might have, possess or exercise in any such event.
SECTION 4.2 Suits. The Mortgagor also hereby irrevocably appoints the Mortgagee and its successors and assigns, with full power of substitution, the true and lawful attorney of the Mortgagor, in its name and stead, to appear in the name of the Mortgagor, its successors or assigns, in any court where a suit is pending against the Vessels, or any of them, because of or on account of any alleged Lien against such Vessel or Vessels from which such Vessel or Vessels have not been released and to take such proceedings as the Mortgagee reasonably may deem proper towards the defense of such suit and the purchase or discharge of such Lien, and all expenditures made or incurred by the Mortgagee for the purpose of such defense or discharge shall constitute Mortgagee's Costs.
The Mortgagor hereby expressly and irrevocably consents to the jurisdiction of any court in any jurisdiction whatsoever wherein any Vessel may at any time be located outside of the continental United States for the sole purposes of the foreclosure of this Fleet Mortgage, the sale of the Mortgagor's interest in such Vessel or the enforcement of any other remedy or right hereunder, and hereby expressly and irrevocably submits the person of the Mortgagor and its interest in such Vessel to the jurisdiction of any such court in any such action or proceeding.
SECTION 4.3 Powers and Remedies Cumulative; No Waiver. Each and every power and remedy herein specifically given to the Mortgagee or otherwise available pursuant to this Fleet Mortgage shall be cumulative and shall be in addition to every other power and remedy herein specifically given or now or hereafter existing at law, in equity, in admiralty or by statute, and each and every power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as often and in such order as may be determined by the Mortgagee and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other power or remedy. No notice to or demand on the Mortgagor in any instance shall entitle the Mortgagor to any other or further notice or demand in similar or other circumstances. No delay or omission by the Mortgagee in the exercise of any right or power or in pursuance of any remedy occurring upon an Event of Default shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Mortgagor or to be an acquiescence therein, nor shall the acceptance by the Mortgagee of any security or of any payment of or on account of any advances after any past Event of Default or of any payment on account of any past Event of Default be construed to be a waiver of any right to take advantage of any future Event of Default or of any past Event of Default not completely cured thereby.
ARTICLE V
RELEASE OF VESSELS AND MORTGAGE
OF ADDITIONAL VESSELS
SECTION 5.1 Definitions. For purposes of this Article V, the following terms shall have the respective meanings set forth below:
"Eligible Vessel" shall mean any inland river barge or towboat which is duly documented pursuant to the laws of the United States as a vessel of the United States under the United States flag, the whole of which vessel is lawfully owned and lawfully possessed by the Mortgagor, free from any Lien other than the Liens permitted by Section 2.7 hereof.
"Release" shall mean a release, substantially in the form of Annex B (with such changes as shall be required in order to enable such release to be filed and recorded in accordance with the provisions of Chapter 313), of one or more Vessels from the Lien of this Fleet Mortgage executed by the Mortgagee and delivered to the Mortgagor.
"Release Request" shall mean a request delivered by the Mortgagor to the Mortgagee pursuant to and in accordance with the requirements of Section 5.2 hereof.
"Supplement" shall mean a supplement to this Fleet Mortgage, substantially in the form of Annex C hereto (with such changes as shall be required in order to enable such supplement to be filed and recorded in accordance with the provisions of Chapter 313) that subjects one or more Eligible Vessels to the Lien of this Fleet Mortgage, executed by the Mortgagor and delivered to the Mortgagee pursuant to and in accordance with the requirements of Section 5.3 hereof.
SECTION 5.2 Release of Vessels. (a) The Mortgagor may deliver a Release Request to the Mortgagee at any time prior to any sale or disposition of a Vessel or Vessels by the Mortgagor permitted by Section 6.11 of the Revolving Credit and Guaranty Agreement (a "Permitted Sale"). Any Release Request shall be in writing, be signed on behalf of the Mortgagor, certify that such Permitted Sale will be in accordance with the Revolving Credit and Guaranty Agreement, identify the Vessel or Vessels to be released and be accompanied by a form of Release respecting such Vessel or Vessels for execution by the Mortgagee.
(b) After receiving a Release Request that satisfies the requirements of the preceding paragraph (a) and provided no Event of Default has occurred and is continuing, the Mortgagee shall deliver to the Mortgagor a Release covering the Vessel or Vessels designated in such Release Request. Upon recordation, the Mortgagor shall deliver to the Mortgagee evidence thereof.
SECTION 5.3 Mortgage of Additional Vessels. (a) If the Mortgagor
acquires any Eligible Vessel or Eligible Vessels during any calendar month, on
or before the thirtieth (30th) day following the close of such calendar month,
the Mortgagor shall prepare, execute and deliver to the Mortgagee a Supplement
with respect to such Eligible Vessel or Eligible Vessels. Upon execution of the
Supplement by the Mortgagee, the Mortgagor shall cause such Supplement to be
recorded and shall otherwise take all steps necessary in order to subject the
Eligible Vessel or Eligible Vessels named therein to the Lien of this Fleet
Mortgage, subject to all of the terms and provisions hereof. At the time of the
execution and recordation of such Supplement, (i) the Mortgagor shall deliver to
the Mortgagee a copy of the Supplement, together with evidence of recordation,
(ii) the Mortgagor shall deliver to the Mortgagee certificates of insurance or
other evidence reasonably satisfactory to the Mortgagee that the Mortgagor has
insured the Vessel or Vessels covered by such Supplement in accordance with the
requirements set forth in Section 2.17 of this Fleet Mortgage, (iii) the
Mortgagor shall deliver to the Mortgagee an opinion of counsel reasonably
satisfactory to the Mortgagee, substantially in the form of Annex D hereto and
(iv) the Mortgagor shall deliver to the Mortgagee such other documents and take
such other steps as may be reasonably requested by the Mortgagee.
(b) If any Subsidiary of the Mortgagor acquires any Eligible Vessel or Eligible Vessels during a calendar month, on or before the thirtieth (30th) day following the close of such calendar month, the Mortgagor shall cause such Subsidiary to subject such Eligible Vessel or Eligible Vessels to a first preferred mortgage, substantially in the form of this Fleet Mortgage, in favor of the Mortgagee, or if applicable, a mortgage supplement in the same manner as described in this Section 5.3.
SECTION 5.4 Costs. The Mortgagor shall, promptly upon receiving invoices therefor, pay all costs and expenses incurred by the Mortgagor and the Mortgagee in connection with the matters contemplated by this Article V (including, without limitation, the costs of negotiating, preparing, duplicating and delivering documents, all filing and recording fees and similar charges and the fees and disbursements of counsel) and reimburse the Mortgagee for any such costs and expenses paid by them, which amounts shall constitute Mortgagee's Costs.
ARTICLE VI
SUNDRY PROVISIONS
SECTION 6.1 Amount of Fleet Mortgage. For purposes of 46 U.S.C. Section 31321(b)(3), the amount of the direct or contingent obligations that are or may be secured by this Fleet Mortgage (excluding interest, expenses and fees) is $75,000,000 plus interest, expenses, fees, indemnities and costs of performance of the covenants contained in this Fleet Mortgage, the Revolving Credit and Guaranty Agreement and in the other Loan Documents.
SECTION 6.2 Counterparts. This Fleet Mortgage and any amendment hereof may be executed in any number of counterparts and all such counterparts executed and delivered each as an original shall constitute but one and the same instrument.
SECTION 6.3 Currency. The terms "Dollars" and "$" as used herein shall mean any coin or currency of the United States of America which at the time of payment shall be legal tender for public and private debts.
SECTION 6.4 Assignment; Successors. All the covenants, promises, stipulations and agreements of the Mortgagor in this Fleet Mortgage contained shall bind the Mortgagor and its successors and assigns and shall inure to the benefit of the Mortgagee and its successors and assigns. The Mortgagor acknowledges that the Mortgagee may assign its interest, in whole or in part, in this Fleet Mortgage, to any third party and, for such purpose, the Mortgagor waives all right to notice or consent. The Mortgagor may not assign any of its rights or obligations hereunder without the prior written consent of the Mortgagee.
SECTION 6.5 Agents of Mortgagee. Wherever and whenever herein any right, power or authority is granted or given to the Mortgagee, such right, power and authority may be exercised in all cases by the Mortgagee through such agent or agents or official or officials as it or they may appoint or authorize, and the act or acts of such agent or agents or official or officials when taken shall constitute the act of the Mortgagee.
SECTION 6.6 Severability. If any word, phrase, sentence, paragraph, provision or section of this Fleet Mortgage shall be held, declared, or pronounced void, voidable, invalid,
unenforceable or inoperative for any reason by any court of competent jurisdiction, such holding, declaration or pronouncement shall not adversely affect any other word, phrase, sentence, paragraph, provision or section of this Fleet Mortgage which will otherwise remain in full force and effect and be enforced in accordance with its terms, and the effect of such holding, declaration or pronouncement shall be limited to the territory or the jurisdiction in which made.
SECTION 6.7 Amendments; Supplements. This Fleet Mortgage may not be amended or supplemented except in writing by the Mortgagor and the Mortgagee. The provisions of this Fleet Mortgage may not be waived except in writing by the Mortgagee.
SECTION 6.8 Governing Law. To the extent not governed by the laws of the United States, this Fleet Mortgage shall be governed by the laws of the State of New York.
SECTION 6.9 Recordation of Mortgage. The cost and expense of recording this Fleet Mortgage, and the cost and expense of obtaining certified copies of this Fleet Mortgage, shall be paid by the Mortgagor, and the Mortgagor agrees to pay the same or reimburse the Mortgagee, as the case may be, within 10 days after demand. If such sums are not so paid, and if they are borne or paid by the Mortgagee, such sums shall be Mortgagee's Costs.
SECTION 6.10 No Waiver of Preferred Status. Nothing contained herein shall be construed as a waiver by the Mortgagee of the preferred status of this Fleet Mortgage, and any provision which would otherwise constitute such a waiver shall to such extent be of no force or effect.
SECTION 6.11 Waiver. The Mortgagor agrees that it will not at any time or in any manner whatever claim or take any benefit of any stay, extension or moratorium law which may affect the terms of this Fleet Mortgage; nor claim or take any benefit of any law providing for the valuation or appraisal of the Vessels, or any of them, prior to any sale thereof; and the Mortgagor hereby expressly waives all benefit or advantage of any such law, and covenants not to hinder, delay, or impede the execution of any power or remedy herein granted or available at law or in equity to the Mortgagee, but to suffer and permit the execution of every power and remedy as though no such law existed.
SECTION 6.12 Further Assurances. At the request of the Mortgagee, from time to time the Mortgagor will execute, on its own behalf, such other and further instruments and documents as in the opinion of the Mortgagee or special counsel to the Mortgagee may be required, useful or desirable to subject each Vessel more effectually to the Lien of this Fleet Mortgage or to obtain or maintain the full benefits of this Fleet Mortgage. Upon the failure of the Mortgagor so to do, the Mortgagee may execute any and all such other and further assurances and documents for and in the name of the Mortgagor, and the Mortgagor hereby irrevocably appoints the Mortgagee the agent and attorney-in-fact of the Mortgagor so to do, and any expense of the Mortgagee in connection therewith shall constitute Mortgagee's Costs.
SECTION 6.13 Notices. Notices and other communications provided for herein shall be given as provided in the Revolving Credit and Guaranty Agreement.
IN WITNESS WHEREOF, the Mortgagor has executed this Fleet Mortgage effective the day and year first above written.
AMERICAN COMMERCIAL LINES LLC
Title:
STATE OF INDIANA )
: ss.:
COUNTY OF CLARK )
|
On this __ day of February, 2003, before me personally appeared _______________ to me known, who, being by me duly sworn, did depose and say that she/he resides at __________________________; that she/he is the ______________ of AMERICAN COMMERCIAL LINES LLC, the limited liability company described in and which executed the foregoing instrument; that she/he signed his name thereto pursuant to authority granted to her/him by the Board of Managers of said limited liability company.
Notary Public
SCHEDULE I
LIST OF VESSELS
NAME OFFICIAL NUMBER
---- ---------------
|
SCHEDULE 2.14
EXISTING CHARTERS
ANNEX A
FORM OF REVOLVING CREDIT AND GUARANTY AGREEMENT
ANNEX B
FORM OF PARTIAL RELEASE OF FIRST PREFERRED FLEET MORTGAGE
JPMORGAN CHASE BANK, a New York banking corporation, as administrative
agent, documentation agent and collateral agent pursuant to the Revolving Credit
and Guaranty Agreement, located at 270 Park Avenue, New York, New York 10017
(the "Mortgagee"), does hereby certify that the [vessel/vessels] listed on
Attachment A attached hereto and made a part hereof that were mortgaged to the
Mortgagee under that First Preferred Fleet Mortgage, dated February __, 2003 (as
previously supplemented, the "Fleet Mortgage") [any amendments or supplements],
made and executed by American Commercial Lines LLC, a Delaware limited liability
company, with its address at [__________________________], to secure payment to
the Mortgagee of the total principal amount of US$75,000,000, plus interest,
expenses, fees, indemnities and the costs of performance of mortgage and other
covenants, which mortgage was filed at the United States Coast Guard, National
Vessel Documentation Center on February __, 2003, at [time] and recorded in Book
[____], Instrument [____] [recording information of amendments or supplements]
on the whole of the vessels listed on Schedule I therein, [is/are] hereby
released from the lien of the Fleet Mortgage. All other vessels listed on
Schedule I to the Fleet Mortgage but not listed on Attachment A remain subject
to the lien of the Fleet Mortgage.
IN WITNESS WHEREOF, the Mortgagee has caused this Partial Release of
First Preferred Fleet Mortgage to be executed this _____ day of ____________,
[year].
JPMORGAN CHASE BANK, a New York
banking corporation, as
administrative agent, documentation
agent and collateral agent
Title:
STATE OF _________________ )
) ss:
COUNTY OF ________________ )
On this ___ day of _____________, 200_, before me personally appeared _______________ to me known, who, being by me duly sworn, did depose and say that she/he resides at __________________________; that she/he is the ____________ of JPMORGAN CHASE BANK, the banking corporation described in and which executed the foregoing instrument; that she/he signed his name thereto pursuant to authority granted to her/him by the Board of Directors of said corporation.
ANNEX C
SUPPLEMENT NO. ____
to
FIRST PREFERRED FLEET MORTGAGE
THIS SUPPLEMENT NO. ___, dated and effective as of the _____ day of ____________________, (this "Supplement") to that First Preferred Fleet Mortgage dated and effective as of February __, 2003, is entered into between AMERICAN COMMERCIAL LINES LLC, a Delaware limited liability company (the "Mortgagor"), and JPMORGAN CHASE BANK, as administrative agent, documentation agent and collateral agent (the "Mortgagee") under a Revolving Credit and Guaranty Agreement dated as of February __, 2003 (the "Revolving Credit and Guaranty Agreement") among the Mortgagor, American Commercial Lines Holdings LLC, the Banks party thereto (the "Banks"), and JPMorgan Chase Bank, as administrative agent, documentation agent and collateral agent.
W I T N E S S E T H:
RECITALS
A. This Supplement supplements that certain First Preferred Fleet Mortgage dated February __, 2003 made and given by the Mortgagor to the Mortgagee, and filed in the Office of the United States Coast Guard National Vessel Documentation Center at [TIME] on [DATE] and recorded in Book No. ____, Instrument No. ____ (said First Preferred Fleet Mortgage, as the same has heretofore been and may hereafter be amended, supplemented and restated, is herein called the "Fleet Mortgage") on the Vessels identified on Schedule I attached hereto.
B. This is a supplement that covers the whole of the
[vessel/vessels] listed on Schedule II attached hereto as more fully described
in the Granting Clause hereof. [Such vessel/each of such vessels] has been duly
documented in the name of the Mortgagor or for which an application for such
[vessel/vessels] to be duly documented in the name of the Mortgagor has been
filed at the United States Coast Guard National Vessel Documentation Center that
is in substantial compliance with the requirements of chapter 121 of Title 46 of
the United States Code, as amended, and the regulations prescribed under that
chapter under the laws and flag of the United States. The Mortgagor is the true,
lawful and sole owner of the whole of each of the [vessel/vessels] identified on
Schedule II.
C. The full name and address of the Mortgagor is:
American Commercial Lines LLC
1701 E. Market Street
P.O. Box 610
Jeffersonville, Indiana 47130-0610
Attention: General Counsel
D. The full name and address of the Mortgagee is:
JPMorgan Chase Bank, as administrative agent, documentation agent and collateral agent under the Revolving Credit and Guaranty Agreement,
270 Park Avenue New York, New York 10017 Attention: Craig H. Fuehrer (telecopy: 646-534-1755)
E. For purposes of 46 U.S.C. Section 31321(b)(3), the amount of the direct or contingent obligations that are or may be secured by this Supplement (excluding interest, expenses and fees) is $75,000,000 plus interest, expenses, fees, indemnities and costs of performance of the covenants contained in this Supplement, the Fleet Mortgage, the Revolving Credit and Guaranty Agreement and in the other Loan Documents.
F. The Mortgage was granted by the Mortgagor to secure the payment of the Secured Obligations.
G. Pursuant to the provisions of Section 5.3 of the
Fleet Mortgage, the Mortgagor is now required to subject [an] additional
[vessel/vessels] to the Lien of the Fleet Mortgage by executing and delivering
to the Mortgagee this Supplement.
GRANTING CLAUSE
NOW, THEREFORE, in consideration of the premises and of other
valuable consideration, the receipt and sufficiency of which the Mortgagor
hereby acknowledges, and in order to secure the timely payment in full and the
full performance of all Secured Obligations, the Mortgagor has granted,
conveyed, mortgaged, pledged, assigned, transferred, set over and confirmed and
subjected to the Lien of the Fleet Mortgage, and by these presents the Mortgagor
does grant, convey, mortgage, pledge, assign, transfer, set over and confirm and
subject to the Lien of the Fleet Mortgage, unto the Mortgagee and its successors
and assigns, the whole of the [vessel/vessels] identified in Recital B above,
[each of] which is duly documented in the name of the Mortgagor or for which an
application for such [vessel/vessels] to be duly documented in the name of the
Mortgagor has been filed at the United States Coast Guard National Vessel
Documentation Center that is in substantial compliance with the requirements of
chapter 121 of Title 46 of the United States Code, as amended, and the
regulations prescribed under that chapter, under the laws and flag of the United
States of America, including, without being limited to, all of the boilers,
engines, machinery, masts, spars, rigging, boats, pumps, anchors, cables,
chains, tackle, apparel, furniture, fittings, equipment and other appurtenances
appertaining or belonging thereto, whether now owned or hereafter acquired, and
all additions, improvements and replacements hereafter made in or to any vessel,
or any part thereof whether on board or not, including all items and
appurtenances aforesaid and all rents, charters, charter parties, freights,
sub-freights, cargoes, operating profits, and proceeds of the foregoing ([each]
such vessel and all items thereof above enumerated being included in the term "Vessel" as used in this Fleet Mortgage);
TO HAVE AND TO HOLD the same unto and for the proper use and benefit of the Mortgagee, its successors and assigns, forever, upon the terms of the Fleet Mortgage. [The/each] Vessel identified herein shall be subjected to the Lien of the Fleet Mortgage by this Supplement.
ARTICLE I
GENERAL PROVISIONS
SECTION 1.1 Definitions. Capitalized terms used but not defined herein shall have the same meanings set forth with respect thereto in the Fleet Mortgage.
SECTION 1.2 Schedule I. Schedule I to the Fleet Mortgage is hereby supplemented by the inclusion thereon of the Vessels listed in Schedule II hereto with the effect that such Vessels shall hereafter be included as "Vessels" for all purposes of the Fleet Mortgage.
ARTICLE II
REPRESENTATIONS OR WARRANTIES OF THE MORTGAGOR
SECTION 2.1 Restatement and Incorporation of Representations or Warranties. The Mortgagor hereby confirms the accuracy of each of the representations and warranties of the Fleet Mortgage as of the date hereof with respect to each Vessel identified herein.
ARTICLE III
RELATIONSHIP TO MORTGAGE
SECTION 3.1 Part of the Mortgage. This Supplement supplements the Fleet Mortgage and shall, from and after the date hereof, constitute a part of the Fleet Mortgage for all purposes.
SECTION 3.2 Ratification of the Mortgage. The Fleet Mortgage remains in full force and effect and, except as expressly supplemented by this Supplement, the Fleet Mortgage and each of its provisions is hereby in all respects ratified and confirmed.
ARTICLE IV
SUNDRY PROVISIONS
SECTION 4.1 Counterparts. This Supplement may be executed in any number of counterparts, each of which shall for all purposes be deemed to be an original and such counterparts taken together shall be deemed to constitute one and the same instrument.
SECTION 4.2 Governing Law. To the extent not governed by the laws of the United States, this Supplement shall be governed by the laws of the State of New York.
SECTION 4.3 Recordation of Supplement. The cost and expense of recording this Supplement, and the cost and expense of obtaining certified copies of this Supplement, shall be paid by the Mortgagor, and the Mortgagor agrees to pay the same or reimburse the Mortgagee, as the case may be, within 10 days after demand, If such sums are not so paid, and if they are borne or paid by the Mortgagee, such sums shall be Mortgagee's Costs.
SECTION 4.4 Further Assurances. At the request of the Mortgagee, from time to time the Mortgagor will execute, on its own behalf, such other and further instruments and documents as in the opinion of the Mortgagee or special counsel to the Mortgagee may be required, useful or desirable to subject each Vessel more effectually to the Lien of the Fleet Mortgage or to obtain or maintain the full benefits of the Fleet Mortgage. Upon the failure of the Mortgagor so to do, the Mortgagee may execute any and all such other and further assurances and documents for and in the name of the Mortgagor, and the Mortgagor hereby irrevocably appoints the Mortgagee the agent and attorney-in-fact of the Mortgagor so to do, and any expense of the Mortgagee in connection therewith shall constitute Mortgagee's Costs.
IN WITNESS WHEREOF, the Mortgagor and the Mortgagee have caused this Supplement No. ___ to First Preferred Fleet Mortgage to be duly executed and delivered as of the day and year first above written.
AMERICAN COMMERCIAL LINES LLC
JPMORGAN CHASE BANK, as
administrative agent, documentation
agent and collateral agent
STATE OF [ ] )
: ss.:
COUNTY OF [ ] )
On this ___ day of _____________, 200_, before me personally appeared _______________ to me known, who, being by me duly sworn, did depose and say that she/he resides at __________________________; that she/he is the ____________ of AMERICAN COMMERCIAL LINES LLC, the limited liability company described in and which executed the foregoing instrument; that she/he signed his name thereto pursuant to authority granted to her/him by the Board of Managers of said limited liability company.
STATE OF [ ] )
: ss.:
COUNTY OF [ ] )
On this ___ day of _____________, 200_, before me personally appeared _______________ to me known, who, being by me duly sworn, did depose and say that she/he resides at __________________________; that she/he is the ____________ of JPMORGAN CHASE BANK, the New York banking corporation described in and which executed the foregoing instrument; that she/he signed his name thereto pursuant to authority granted to her/him by the Board of Directors of said corporation.
SCHEDULE I TO SUPPLEMENT NO. __
LIST OF VESSELS FROM FLEET MORTGAGE
SCHEDULE II TO SUPPLEMENT NO. __
LIST OF VESSELS ADDED BY SUPPLEMENT
ANNEX D
Form of Legal Opinion
[date]
JPMorgan Chase Bank,
as administrative agent, documentation agent and collateral agent
270 Park Avenue
New York, New York 10017
Gentlemen:
We have acted as special maritime counsel to American Commercial Lines LLC, a Delaware limited liability company (the "Mortgagor"), in connection with that Supplement No. __ dated _________, ____ (the "Mortgage Supplement") to that First Preferred Ship Mortgage dated _____________, ____, (the "Fleet Mortgage") given by the Mortgagor, as mortgagor, to JPMorgan Chase Bank, as administrative agent, documentation agent and collateral agent, as Mortgagee (the "Mortgagee").
In connection with this opinion, we have examined (a) an executed copy, certified or otherwise identified to our satisfaction, of the Mortgage Supplement, (b) such other agreements, documents, certificates and corporate records of the Mortgagor and official records, affidavits and other instruments and (c) such laws and regulations, as we deemed appropriate for the purposes of this opinion. As to factual matters, we have, in certain instances, examined and relied upon certificates of corporate officers of the Mortgagor, copies of which are delivered to you simultaneously herewith and have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. For purposes of this opinion, we have assumed that the Mortgage Supplement has been duly and validly authorized, executed and delivered and constitutes the legal, valid and binding obligation of the Mortgagor, enforceable in accordance with its terms under the laws of the State of New York.
Based upon the foregoing and subject to the further limitations, assumptions and qualifications set forth herein, we are of the opinion that:
1. The Mortgagor is the sole owner of the whole of [the vessel/each of the vessels] identified on Schedule 1 to the Mortgage Supplement (the "[New Vessel/Vessels]"). [The/each] New Vessel is free and clear of any claim, lien, mortgage or other encumbrance of any character of record except for the Fleet Mortgage and the Existing Mortgage, as defined in the Fleet Mortgage, and except as set forth on Exhibit A attached hereto. To the extent that this opinion relates to ownership and freedom and clearance of claims, liens, mortgages or other encumbrances on the [New Vessel/Vessels], we have relied upon the certificates as to such matters, dated the date above, of the Mortgagor and records of the United States Coast Guard National Vessel Documentation Center.
2. [The New Vessel/each of the New Vessels] is eligible for documentation and is duly documented under the laws of the United States under 46 U.S.C. Chapter 121.
3. The Mortgage Supplement has been duly filed and recorded at the National Vessel Documentation Center (the only office in which such filing and recording are necessary), and constitutes a fully perfected "preferred" mortgage on each of the New Vessels in favor of the Mortgagee having the effect and with the priority provided by 46 U.S.C. Section 31301 et seq., and subject to no other lien or encumbrance of record.
The foregoing opinion is subject to the following qualifications:
(a) Enforcement of the Mortgage Supplement may be (i) limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the enforcement of creditors' rights generally, (ii) subject to general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law) and (iii) subject to the fact that some of the provisions of the Mortgage Supplement may be rendered void or unenforceable in whole or in part by the laws of certain jurisdictions in which enforcement may be sought, but that fact will not materially interfere with the practical realization of the benefits of the security provided by the Mortgage Supplement, and the inclusion of such provisions does not affect the validity of the Mortgage Supplement and without which provisions the Mortgage Supplement contains adequate provisions for enforcing payment of the Secured Obligations (as such term is defined in each Fleet Mortgage) and realizing upon the security provided by the Mortgage Supplement;
(b) No opinion is expressed as to the specific remedy, if any, that any court, other governmental authority or arbitrator may grant, impose or render; and
(c) We do not purport to be expert on, and express no opinion with respect to, the law of any jurisdiction other than the federal laws of the United States of America.
This opinion is given as of the date hereof and is intended solely for your benefit and is not to be made available to or relied upon by other persons or entities without the undersigned's prior written consent.
Very truly yours,
EXHIBIT 4.37
EXECUTION COPY
FIRST PREFERRED FLEET MORTGAGE
MADE BY
HOUSTON FLEET LLC
A DEBTOR AND A DEBTOR-IN-POSSESSION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
IN FAVOR OF
JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT, DOCUMENTATION AGENT AND COLLATERAL AGENT UNDER A REVOLVING CREDIT AND GUARANTY AGREEMENT DATED AS OF JANUARY 31, 2003 AMONG AMERICAN COMMERCIAL LINES LLC, A DEBTOR AND A DEBTOR-IN-POSSESSION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE, AS BORROWER, AMERICAN COMMERCIAL LINES HOLDINGS LLC AND THE SUBSIDIARIES OF THE BORROWER NAMED THEREIN, EACH A DEBTOR-IN-POSSESSION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE, THE BANKS PARTY THERETO AND JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT, DOCUMENTATION AGENT AND COLLATERAL AGENT
DATED AND EFFECTIVE AS OF FEBRUARY 3, 2003
TABLE OF CONTENTS
PAGE
ARTICLE I GENERAL PROVISIONS........................................................................ 3
SECTION 1.1 Definitions...................................................................... 3
ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE MORTGAGOR................................ 3
SECTION 2.1 Payment and Performance Obligations.............................................. 3
SECTION 2.2 Organization; Authority; Enforceability.......................................... 3
SECTION 2.3 Citizenship...................................................................... 3
SECTION 2.4 Ownership of Vessels; Warranty and Defense of Title.............................. 3
SECTION 2.5 Perfection....................................................................... 4
SECTION 2.6 Environmental Compliance......................................................... 4
SECTION 2.7 Liens............................................................................ 4
SECTION 2.8 Notice of Mortgage............................................................... 5
SECTION 2.9 Libel or Attachment.............................................................. 5
SECTION 2.10 Maintenance of Vessels........................................................... 5
SECTION 2.11 Documentation; Operation of Vessels.............................................. 6
SECTION 2.12 Inspection....................................................................... 7
SECTION 2.13 Taxes, Fees, etc................................................................. 7
SECTION 2.14 Sale, Assignment, Mortgage, Charter or Other Disposition of Vessel............... 7
SECTION 2.15 Requisition of Title or Use...................................................... 8
SECTION 2.16 Notice of Loss, Requisition or Damage............................................ 8
SECTION 2.17 Insurance........................................................................ 9
SECTION 2.18 Reimbursement of Mortgagee's Costs............................................... 14
ARTICLE III EVENTS OF DEFAULT AND REMEDIES............................................................ 14
SECTION 3.1 Event of Default and Remedies.................................................... 14
SECTION 3.2 Application of Proceeds.......................................................... 16
SECTION 3.3 Certain Rights of Mortgagor...................................................... 17
ARTICLE IV GENERAL POWERS OF MORTGAGEE............................................................... 17
SECTION 4.1 Arrest or Detention of Vessel.................................................... 17
SECTION 4.2 Suits............................................................................ 18
SECTION 4.3 Powers and Remedies Cumulative; No Waiver........................................ 18
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TABLE OF CONTENTS
(continued)
PAGE
ARTICLE V RELEASE OF VESSELS AND MORTGAGE OF ADDITIONAL VESSELS..................................... 19
SECTION 5.1 Definitions...................................................................... 19
SECTION 5.2 Release of Vessels............................................................... 19
SECTION 5.3 Mortgage of Additional Vessels................................................... 19
SECTION 5.4 Costs............................................................................ 20
ARTICLE VI SUNDRY PROVISIONS......................................................................... 20
SECTION 6.1 Amount of Fleet Mortgage......................................................... 20
SECTION 6.2 Counterparts..................................................................... 20
SECTION 6.3 Currency......................................................................... 20
SECTION 6.4 Assignment; Successors........................................................... 20
SECTION 6.5 Agents of Mortgagee.............................................................. 21
SECTION 6.6 Severability..................................................................... 21
SECTION 6.7 Amendments; Supplements.......................................................... 21
SECTION 6.8 Governing Law.................................................................... 21
SECTION 6.9 Recordation of Mortgage.......................................................... 21
SECTION 6.10 No Waiver of Preferred Status.................................................... 21
SECTION 6.11 Waiver........................................................................... 21
SECTION 6.12 Further Assurances............................................................... 21
SECTION 6.13 Notices.......................................................................... 22
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FIRST PREFERRED FLEET MORTGAGE
FIRST PREFERRED FLEET MORTGAGE, made effective this 3rd day of February, 2003, by HOUSTON FLEET LLC, a Delaware limited liability company whose address is 1701 E. Market Street, P.O. Box 610, Jeffersonville, Indiana 47130-0610, (the "Mortgagor"), a debtor and a debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, to JPMORGAN CHASE BANK, a New York banking corporation, whose address is 270 Park Avenue, New York, New York 10017, as administrative agent, documentation agent and collateral agent under the Revolving Credit and Guaranty Agreement defined below (the "Mortgagee").
WHEREAS:
A. On January 31, 2003, American Commercial Lines LLC and the Guarantors (as defined in the Revolving Credit and Guaranty Agreement defined below), including the Mortgagor, filed voluntary petitions with the Bankruptcy Court initiating the Cases (as defined in the Revolving Credit and Guaranty Agreement defined below) and have continued in the possession of their assets and in the management of their business pursuant to Sections 1107 and 1108 of the Bankruptcy Code.
B. The Mortgagor is the sole owner of the whole (100%) of each of the vessels identified in Schedule I hereof and more fully described in the Granting Clause hereof.
C. For purposes of 46 U.S.C. Section 31321(b)(3), the amount of the direct or contingent obligations that are or may be secured by this Fleet Mortgage (excluding interest, expenses and fees) is $75,000,000 plus interest, expenses, fees, indemnities and costs of performance of the covenants contained in this Fleet Mortgage, the Revolving Credit and Guaranty Agreement defined below and in the other Loan Documents (as defined in the Revolving Credit and Guaranty Agreement defined below).
D. The Mortgagor is executing and delivering this Fleet
Mortgage pursuant to a Revolving Credit and Guaranty Agreement dated as of
January 31, 2003 (as at any time amended, the "Revolving Credit and Guaranty
Agreement"), among the Mortgagor as borrower, American Commercial Lines Holdings
LLC ("Holdings"), and certain of the direct or indirect subsidiaries of the
Mortgagor signatory hereto (together with Holdings, each a "Guarantor" and
collectively, the "Guarantors"), JPMorgan Chase Bank, each of the other
financial institutions from time to time party thereto (together with JPMorgan
Chase Bank, the "Banks") and JP Morgan Chase Bank, as Administrative Agent,
Documentation Agent and Collateral Agent, pursuant to which (i) the Tranche A
Banks, severally, have agreed to make Tranche A Loans to the Mortgagor in an
aggregate principal amount of up to $25,000,000, from time to time during the
period commencing on the Closing Date and ending on the Termination Date and
(ii) the Tranche B Banks, severally, have agreed to make available Tranche B
Loans to the Mortgagor in an aggregate principal amount of up to $50,000,000 in
accordance with the Revolving Credit and Guaranty Agreement, a copy of which
Revolving Credit and Guaranty Agreement (without exhibits) is attached hereto as
Annex A and made a part hereof.
E. In order to secure (a) the due and punctual payment by the Mortgagor of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Mortgagor under the Revolving Credit and Guaranty Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including reasonable fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Mortgagor to the Banks and the Mortgagee under the Revolving Credit and Guaranty Agreement, this Fleet Mortgage and the other Loan Documents to which the Mortgagor is or is to be a party, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Mortgagor under or pursuant to the Revolving Credit and Guaranty Agreement, this Fleet Mortgage and the other Loan Documents to which the Mortgagor is or is to be a party, (c) the due and punctual performance of all covenants, agreements, obligations and liabilities of each Guarantor under or pursuant to the Loan Documents and (d) all other Obligations (as defined in the Revolving Credit and Guaranty Agreement)(all the obligations referred to in the preceding clauses (a) through (d) being referred to collectively, as the "Secured Obligations"), the Mortgagor has duly authorized the execution and delivery of this First Preferred Fleet Mortgage under and pursuant to Chapter 313 of Title 46 of the United States Code, as amended ("Chapter 313").
F. The Mortgagor is hereby granting to the Mortgagee this Fleet Mortgage covering the whole of each of the vessels identified on Schedule I hereof. By a supplement or supplements to this Fleet Mortgage, this Fleet Mortgage may hereafter cover one or more additional vessels, as shall be described in such supplement or supplements.
NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt of which is hereby acknowledged, and to secure the due and punctual payment and performance of the Secured Obligations, the Mortgagor, for itself, its successors and assigns does by these presents:
GRANT, CONVEY, MORTGAGE, PLEDGE AND CONFIRM UNTO THE MORTGAGEE, its successors and assigns, the whole of each of the vessels identified on Schedule I hereof, each of which is duly documented in the name of the Mortgagor under the laws and flag of the United States of America, including, without being limited to, all of the boilers, engines, machinery, masts, spars, rigging, boats, pumps, anchors, cables, chains, tackle, apparel, furniture, fittings, equipment and other appurtenances appertaining or belonging thereto, whether now owned or hereafter acquired, and all additions, improvements, and replacements hereafter made in or to any vessel, or any part thereof whether on board or not, including all items and appurtenances aforesaid and all rents, charters, charter parties, freights, sub-freights, cargoes, operating profits, and proceeds of the foregoing (each such vessel and all items thereof above enumerated being included in the term "Vessel" as used in this Fleet Mortgage);
TO HAVE AND TO HOLD the same unto and for the proper use and benefit of the Mortgagee, its successors and assigns, forever, upon the terms herein set forth;
PROVIDED, HOWEVER, and these presents are upon the condition that, if the Mortgagor or its successors and assigns shall duly and punctually pay in full and perform in full the Secured Obligations, then this Fleet Mortgage and the rights hereunder shall cease, determine and be void, otherwise to be and remain in full force and effect;
PROVIDED, FURTHER that any Vessel may be separately discharged from this Fleet Mortgage by the Mortgagee in accordance with Section 5.2 hereof; and
FURTHER COVENANT, DECLARE AND AGREE with the Mortgagee and its successors and assigns, that the Vessels are to be held subject to the further representations, warranties, covenants, terms and conditions hereinafter set forth.
ARTICLE I
GENERAL PROVISIONS
SECTION 1.1 Definitions. Capitalized terms used but not defined herein shall have the same meanings set forth with respect thereto in the Revolving Credit and Guaranty Agreement.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE MORTGAGOR
SECTION 2.1 Payment and Performance Obligations. The Mortgagor will duly and punctually pay or cause to be paid and duly perform, observe and comply with the Secured Obligations.
SECTION 2.2 Organization; Authority; Enforceability. The Mortgagor was duly organized and is now validly existing and in good standing as a limited liability company under the laws of the State of Delaware and shall so remain during the life of this Fleet Mortgage and so long as any of the Secured Obligations shall remain outstanding. The Mortgagor has all requisite authority, power and legal right to own and operate the Vessels, to mortgage the Vessels to the Mortgagee pursuant to this Fleet Mortgage, and to execute and deliver this Fleet Mortgage. All action necessary and required by law for the execution and delivery by the Mortgagor of this Fleet Mortgage has been duly and effectively taken, and this Fleet Mortgage is and will continue to be the valid and binding obligation of the Mortgagor enforceable in accordance with its terms. All consents and approvals required in respect of this Fleet Mortgage have been obtained and are in full force and effect.
SECTION 2.3 Citizenship. The Mortgagor warrants that the Mortgagor meets, and shall continue for the term of this Fleet Mortgage and until all of the Secured Obligations are paid and performed in full to meet, all citizenship requirements necessary for each of the Vessels to be eligible for documentation as a vessel of the United States, under the flag of the United States, pursuant to Title 46, Section 12102 of the United States Code.
SECTION 2.4 Ownership of Vessels; Warranty and Defense of Title. The Mortgagor warrants that it is the true, lawful and sole owner of the whole of each of the Vessels, and that its ownership of each Vessel is free and clear of all Liens except such Liens which arose prior to the date of this Fleet Mortgage that are incident to current operations or created by that certain First Preferred Fleet Mortgage, dated and effective as of June 30, 1998 (the "Existing Mortgage"), granted by the Mortgagor to The Chase Manhattan Bank, as collateral agent and security trustee (the "Existing Mortgagee") pursuant to a Credit Agreement dated as of June 30, 1998, as amended and restated as of April 11, 2002 and amended as of September 27, 2002, among the Mortgagor, the secured lenders from time to time party thereto and the Existing Mortgagee (the "Existing Agreement"); none of the Vessels are subject to a demise charter or to a time or voyage charter other than demise charters or time charters entered in the ordinary course of business and consistent with standard marine practice that are listed on Schedule 2.14 to this Fleet Mortgage; and that the Mortgagor will forever warrant and defend its title and possession of each Vessel for the benefit of the Mortgagee against any and all claims and demands.
SECTION 2.5 Perfection. The Mortgagor shall comply with and satisfy all applicable formalities and provisions of the laws and regulations of the United States of America, including but not limited to the provisions of Chapter 313, as amended, in order to perfect, establish, record and maintain this Fleet Mortgage, and any supplement or amendment thereto, upon each of the Vessels and upon all renewals, as a first preferred fleet mortgage thereunder and on all additions, improvements and replacements made in or to each of the Vessels and shall do such other acts and execute all such other instruments, deeds, conveyances, mortgages and assurances as the Mortgagee may reasonably require in order to subject each of the Vessels to the Lien of this Fleet Mortgage as aforesaid.
SECTION 2.6 Environmental Compliance. The Mortgagor has complied with
the representations and warranties in Section 3.07 of the Revolving Credit and
Guaranty Agreement in respect to each of the Vessels and shall comply with
Section 4.01(l) of the Revolving Credit and Guaranty Agreement regarding
compliance with environmental laws and regulations in respect to each of the
Vessels.
SECTION 2.7 Liens. The Mortgagor represents and agrees that it has not granted and will not grant any charterer, the master of any of the Vessels or any other person, and none thereof has or shall have, any right, power or authority to create, incur or permit to be placed or imposed upon the Vessels, or any of them, any Liens, other than the Lien of this Fleet Mortgage, Liens for crew's wages, wages for stevedores when employed directly by the Mortgagor or the master of the applicable Vessel and general average and salvage (including contract salvage), Liens created in the ordinary course of the Vessels' current operations which are for "necessaries" within the meaning of 46 U.S.C. Section 31301(4) and the Lien of the Existing Mortgage provided that such Liens are subordinate to the Lien of this Fleet Mortgage. The Mortgagor further agrees that it will not permit to be continued any Lien upon the Vessels, or any of them (other than this Fleet Mortgage and the Lien of the Existing Mortgage), for a period in excess of forty-five (45) days after the same becomes due and payable except for any Lien that is being contested by the Mortgagor in good faith by appropriate proceedings diligently conducted which are effective to stay the execution or other enforcement of such Lien and the Mortgagor shall have set aside on its books adequate reserves in accordance with GAAP with respect to such Lien.
SECTION 2.8 Notice of Mortgage. The Mortgagor shall at all times keep a properly certified copy of this Fleet Mortgage and any amendments and supplements hereto and any assignments hereof (i) at its address set forth above and (ii) in the case of a Vessel that is a self-propelled Vessel, with the ship's papers on board such Vessel and such papers shall be exhibited, on demand, to any person having business with such Vessel which might give rise to a maritime Lien on such Vessel, or to any representative of the Mortgagee; and a notice, reading as follows, printed in plain type of such size that the paragraph of reading matter shall cover a space not less than six inches wide by nine inches high, framed under glass, shall be placed and kept prominently displayed in the chart room and in the master's cabin of each of the Vessels that is a self-propelled Vessel:
"NOTICE OF MORTGAGE
This Vessel is owned by Houston Fleet LLC (the "Mortgagor") and is subject to a First Preferred Fleet Mortgage, dated February 3, 2003, as the same may be amended or supplemented, in favor of JPMorgan Chase Bank, as administrative agent, documentation agent and collateral agent, pursuant to the provisions of Chapter 313 of Title 46 of the United States Code, as amended, and under the terms of said Fleet Mortgage the Mortgagor hereby gives notice that it has not granted any charterer, the master of this Vessel or any other person, and none thereof has, the right, power or authority to create, incur or permit to exist upon this Vessel any liens or encumbrances whatsoever, other than the lien of said Fleet Mortgage, liens for crew's wages, wages of stevedores when employed directly by the Mortgagor or the master of this Vessel and general average or salvage (including contract salvage). Any such right, power or authority is also prohibited under the terms of said Fleet Mortgage."
SECTION 2.9 Libel or Attachment. If a libel or complaint shall be filed against the Vessels, or any of them, or if the Vessels, or any of them, shall be levied upon or taken into custody, or detained by any proceeding in any court or tribunal or by any government or other authority, the Mortgagor, within ten (10) days thereafter, will cause such Vessel or Vessels to be released and any Lien thereon, other than the Lien of this Fleet Mortgage or of the Existing Mortgage, to be discharged. In the event the Vessels, or any of them, are levied upon or taken into custody or detained by any authority whatsoever, the Mortgagor agrees forthwith to notify the Mortgagee thereof by telex, confirmed by letter. The Mortgagor shall reimburse the Mortgagee for any amount paid by the Mortgagee, whether in settlement of a claim or in satisfaction of a judgment, and such amounts shall be Mortgagee's Costs, as defined in and in accordance with Section 2.18 hereof.
SECTION 2.10 Maintenance of Vessels. (a) The Mortgagor will at all times, without cost or expense to the Mortgagee, maintain and preserve the Vessels in all material respects, and cause the Vessels in all material respects to be tight, staunch, strong and well and sufficiently tackled, appareled, victualed, fitted, manned, furnished and equipped and to be maintained and preserved, in good running order and repair so that the Vessels in all material respects shall be well equipped and seaworthy, in good working order, repair and operating condition, ordinary wear and tear excepted. At all times, at its own cost and expense, the Mortgagor will exercise due diligence to maintain and preserve the Vessels in all material respects in as good condition, working order and repair as at the time of the execution of this Fleet Mortgage, ordinary wear
and tear and depreciation excepted, and will maintain the Vessels in all material respects in accordance with good marine maintenance practice and procedures and applicable legal or regulatory requirements for the service in which they then are or will be engaged, and in such condition as will enable the Vessels in all material respects to pass such inspection as may be required by marine underwriters as a condition of their writing such insurance and in such amounts as is required under this Fleet Mortgage. Furthermore, the Mortgagor will cause each Vessel to be periodically inspected, drydocked and recoated (hull paint), and its machinery overhauled in accordance with normal marine practices or as may be required by the United States Coast Guard. At the request of the Mortgagee, the Mortgagor shall cause a marine surveyor satisfactory to the Mortgagee to perform a survey, inspection or other actions as may be necessary on a representative sample of the Vessels (the number or location of such Vessels included in such representative sample to be determined by the Mortgagee in its discretion), to prove or establish that the Vessels in all material respects have been maintained and preserved in accordance with the provisions of this Section 2.10(a). In addition, the Mortgagor shall provide at the end of each six-month period commencing six weeks following the date hereof to the Mortgagee a certificate of the chief marine operations officer (currently James J. Farley, Senior Vice President Transportation Services) of the Mortgagor stating that the Vessels have been maintained and preserved in accordance with the requirements of this Section 2.10(a).
(b) The Mortgagor may make structural changes, alterations or additions to the Vessels, or any of them, but only to the extent that any such change, alteration or addition is made at the Mortgagor's expense and risk and does not diminish the value, utility, capacity, operating condition and seaworthiness of the applicable Vessel.
(c) The Mortgagor shall certify as often as required by the Mortgagee that all wage and other claims which give rise to Liens have been paid.
(d) The Mortgagor shall furnish the Mortgagee within fifteen (15) days after receipt by the Mortgagor, copies of all Certificates of Inspection delivered by the United States Coast Guard.
(e) At the request of the Mortgagee, the Mortgagor shall at its expense deliver to the Mortgagee an appraisal of the current charter-free fair market value (determined on the basis of a willing buyer and willing seller) in Dollars of each Vessel by an independent valuer acceptable to the Mortgagee.
SECTION 2.11 Documentation; Operation of Vessels. (a) The Mortgagor will keep each vessel duly documented as a Vessel of the United States, under the flag of the United States, and will not cause or permit any Vessel to be operated in any manner prohibited by any law, regulation or contract applicable to such Vessel, and shall have on board as and when required thereby valid certificates showing compliance therewith. The Mortgagor will not cause or permit the Vessels, or any of them, to engage in any unlawful trade or carry any cargo that will expose the Vessels, or any of them, to penalty, forfeiture or capture, and will not do, or suffer or permit to be done, anything which can or may injuriously affect the registration or enrollment or flag of the Vessels, or any of them, under the laws and regulations of the United States.
(b) The Mortgagor will (and will cause any charterer of the Vessels, or any of them, to) comply with and satisfy all of the provisions of any applicable law, regulation, proclamation or order concerning financial responsibility for liabilities imposed on the Mortgagor or the Vessels, or any of them, with respect to pollution by any state or nation or political subdivision thereof, including but not limited to the United States Federal Water Pollution Control Act and the United States Oil Pollution Act of 1990, as any of the foregoing may at any time be amended, and will (and will cause any charterer of the Vessels, or any of them, to) maintain all certificates or other evidence of financial responsibility as may be required by any such law, regulation, proclamation or order with respect to the trade in which the Vessels, or any of them, is from time to time engaged and the cargo carried thereby.
SECTION 2.12 Inspection. The Mortgagor will permit representatives of the Mortgagee to inspect or survey the Vessels, at the Mortgagor's expense, to ascertain the condition of such Vessel or Vessels and whether such Vessel or Vessels are being properly repaired and maintained. Such inspection or survey shall be made on reasonable notice and at reasonable times and places so as not to interfere with the safe, efficient and normal operation of such Vessel or Vessels. The Mortgagor will cause to be made all such repairs as shall be required by this Fleet Mortgage, without expense to the Mortgagee, its successors and assigns or any of its authorized representatives, as such inspection or survey or an inspection or survey conducted pursuant to Section 2.10(a) may show to be required. The Mortgagor shall also permit the Mortgagee to inspect the logs and papers of the Vessels, or any of them, and any and all other contracts and other papers relating to the same, whether on board or not, whenever requested, on reasonable notice.
SECTION 2.13 Taxes, Fees, etc. The Mortgagor will pay and discharge, or cause to be paid and discharged, when due and payable from time to time, all taxes, assessments, governmental charges, fines and penalties lawfully imposed on the Vessels, or any of them; provided that the Mortgagor shall not be required to pay any such tax, assessment or charge if the validity or amount thereof is concurrently being contested in good faith by appropriate proceedings and if the Mortgagor shall have set aside on its books reserves deemed by it adequate with respect to such tax, assessment or charge. Notwithstanding the foregoing, the Mortgagor will pay or cause to be paid all such taxes, assessments or charges forthwith upon the commencement of proceedings to foreclose any Lien which is attached as security therefor.
SECTION 2.14 Sale, Assignment, Mortgage, Charter or Other Disposition of Vessel. The Mortgagor will not in any manner change the flag of the Vessels, or any of them, sell, transfer or mortgage the Vessels, or any of them, or enter into any charter party other than (a) charters permitted by the Revolving Credit and Guaranty Agreement, (b) the Existing Mortgage or the Existing Agreement, (c) charters to Guarantors, (d) charters for a period of one year or less under terms that are common and customary for a charter party used by prudent owners and operators who charter vessels similar to the Vessels and engaged in trades similar to the trades in which the Vessels are engaged, or with the prior written consent of the Mortgagee, any charters in excess of one year, and (e) charters for vessels listed on Schedule 2.14 to this Fleet Mortgage; provided that no such charter allowed in this Section 2.14 will relieve the Mortgagor of its obligations under this Fleet Mortgage, or change the flag of the Vessels, or any of them. Any written consent given for any one of the foregoing transactions shall not be construed to be a waiver of this provision in respect of any such other transaction. Any such transaction with
respect to the Vessels, or any of them, shall be subject to the provisions of this Fleet Mortgage and the Lien it creates.
SECTION 2.15 Requisition of Title or Use. In the event that the title to or ownership of the Vessels, or any of them, or the use of the Vessels, or any of them (whether on a bareboat or time charter basis or any other basis), shall be requisitioned, purchased or taken by, or the Vessels, or any of them, shall be seized by or forfeited to any government of any country or any department, agency or representative thereof pursuant to any present or future law, proclamation, decree, order or otherwise, or to any other person or persons, whether or not acting under color of governmental authority, and the compensation, purchase price, reimbursement or award for such requisition, purchase, seizure, forfeiture or other taking of such title, ownership or use shall be an amount equal to or greater than (i) $750,000 (but only if the Mortgagor fails within 270 days after the date of such event of requisition to have or to have made commitments to have one or more Eligible Vessels (as defined in 5.1 hereof), collectively with an aggregate fair market value at least equal to the amount of such compensation (as evidenced by delivery to the Mortgagee of an appraisal in form and substance satisfactory to the Mortgagee), subjected to this Fleet Mortgage pursuant to the provisions of Section 5.3 hereof, or (ii) $25,000,000, then such event shall be deemed a "Condemnation" and the compensation shall be deemed to be "Condemnation Proceeds" to be applied by the Mortgagor to prepay outstanding Obligations in accordance with Section 2.26 of the Revolving Credit and Guaranty Agreement; provided however, if an Event of Default shall have occurred and be continuing, any amount received in the event of a requisition described above shall be applied by the Mortgagor to prepay outstanding Obligations in accordance with Section 2.26 of the Revolving Credit and Guaranty Agreement. To the extent that any Condemnation Proceeds are payable to the Mortgagee, the Mortgagor hereby constitutes and appoints the Mortgagee and its successors and assigns, its true and lawful attorney, for it and in its name, place and stead, to collect, receipt for, acknowledge the payment of, sue for and execute any documentation or writing that may be necessary or required in order to obtain payment of said compensation, purchase price, reimbursement or award, giving and granting to said attorney full power and authority to do and perform every act and thing whatsoever requisite or necessary to be done as fully and to all intents and purposes as it, the Mortgagor, might or could do if personally present at the doing thereof, with full power of substitution, hereby ratifying and confirming all that its said attorney or substitute shall do or cause to be done by virtue hereof, and the Mortgagor shall promptly execute and deliver to the Mortgagee such documents and shall promptly do and perform such acts as in the opinion of the Mortgagee may be necessary or useful to facilitate or expedite the collection by the Mortgagee of such compensation, purchase price, reimbursement or award.
SECTION 2.16 Notice of Loss, Requisition or Damage. In the event of (a) actual loss of any Vessel, (b) any event referred to in Section 2.15 hereof with respect to any Vessel or (c) any casualty, accident or damage to any Vessel involving an amount in excess of $750,000, the Mortgagor shall forthwith give written notice thereof (containing full particulars) to the Mortgagee. Furthermore, the Mortgagor will provide to the Mortgagee, at the end of each six-month period commencing six months following the date hereof, a written report stating each casualty, accident or damage to any Vessel involving an amount in excess of $50,000 that occurred in the prior six month period with full particulars.
SECTION 2.17 Insurance. (a) The Mortgagor shall at all times while this Fleet Mortgage shall remain in effect maintain at its own expense the following insurance:
(i) protection and indemnity insurance with respect to each of the Vessels in such amounts, subject to such deductible or retention amounts, against such risks and under such forms as are then common or customary with respect to vessels similar to the Vessels and engaged in trades similar to the trades in which the Vessels are engaged by other prudent owners and operators of such vessels, provided that such protection and indemnity insurance (including excess policies) shall in all events:
(w) provide limits of liability of not less than $250,000,000 per occurrence (and contain no annual limits on liability);
(x) provide for deductible or retained amounts not exceeding $4,000,000 of annual aggregate deductible with respect to all vessels owned or chartered by the Mortgagor plus $50,000 per occurrence;
(y) provide protection on an "occurrence" basis (rather than on a "claims made" basis); and
(z) provide protection against liabilities arising out of pollution or the spillage or leakage of cargo with a $1,000,000 per occurrence deductible;
(ii) marine, hull and machinery and, if any Vessel or Vessels are operated outside of the United States, war risks insurance on each of the Vessels under the latest (at the time of issue of the policies in question) forms of American or London Institute of Marine Underwriters, provided that such marine, hull and machinery and war risks insurance shall in all events:
(x) be in an amount with respect to each Vessel that is not less than the full commercial value thereof;
(y) with respect to an accident, occurrence or event that does not result in an actual or constructive total loss of a Vessel or Vessels or an agreed or compromised total loss of a Vessel or Vessels, provide for deductible or retained amounts that do not exceed $4,000,000 of annual aggregate deductible with respect to all vessels owned or chartered by the Mortgagor plus $50,000 per occurrence; and
(z) with respect to an accident, occurrence or event that results in an actual or constructive total loss of a Vessel or Vessels or an agreed or compromised total loss of a Vessel or Vessels, provide for deductible or retained
amounts that do not exceed $4,000,000 of annual aggregate deductible with respect to all vessels owned or chartered by the Mortgagor with no per occurrence deductible;
(iii) Insurance protecting against claims under the Longshoremen's and Harbor Workers Compensation Act, Workmen's Compensation and public liability;
(iv) Wreck removal and fire insurance with underwriters and under policy forms and in amounts satisfactory to the Mortgagee; and
(v) Such other insurances that become customarily obtained by prudent operators of vessels similar to the Vessels and engaged in trades similar to the trades in which the Vessels are engaged or as may be reasonably required by the Mortgagee from time to time.
(b) At the Mortgagee's request, to obtain coverage against Mortgagee's Additional Perils (Pollution) Insurance on each of the Vessels, the Mortgagor shall reimburse the Mortgagee for all premiums and other amounts paid by the Mortgagee in connection with such coverage. The Mortgagor shall reimburse the Mortgagee for such costs as Mortgagee's Costs, as defined in and in accordance with Section 2.18 hereof.
(c) All insurance policies required under paragraph (a) of this Section 2.17 shall:
(i) name the Mortgagee, in its individual capacity and as administrative agent, documentation agent and collateral agent, as additional insured and as loss payee in accordance with the provisions of paragraph (i) below;
(ii) provide that in respect of the interest of the Mortgagee in such policies the insurance shall not be invalidated by any action or inaction of the Mortgagor or any other person (other than the Mortgagee) and shall insure the Mortgagee regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Mortgagor or any other person (other than the Mortgagee);
(iii) provide that if such insurance is canceled by the insurers for any reason whatsoever, or such insurance is allowed to lapse for non-payment of premium, or such insurance coverage is reduced or any other material change is made with respect thereto, then such cancellation, lapse, reduction or change shall not be effective as to the Mortgagor or the Mortgagee for 30 days after receipt by the Mortgagor or the Mortgagee, respectively, of written notice by such insurers of such cancellation, lapse, reduction or material change; and
(iv) provide that there shall be no recourse against the Mortgagee for the payment of premiums, commissions, club calls, assessments or advances.
Each insurance policy with respect to protection and indemnity insurance shall:
(i) be primary without right of contribution from any other insurance which is carried by the Mortgagee and
(ii) expressly provide that all of the provisions thereof, except the limits of liability, shall operate in the same manner as if there were a separate policy covering each insured.
(d) The Mortgagor shall not permit the Vessels, or any of them, to undertake any voyage or participate in any venture or transport any cargo which is not permitted by the insurance then in effect or which would limit such insurance or render it unavailable in whole or in part.
(e) All insurance required under this Fleet Mortgage shall be placed and kept with such insurance companies or other insurance underwriters as shall be reasonably acceptable to the Mortgagee and the Mortgagor.
(f) The Mortgagor shall deliver to the Mortgagee copies
of all certificates and, if requested by the Mortgagee, copies of all binders
and policies with respect to insurance from time to time carried on the Vessels
pursuant to this Section 2.17. In addition, on the Closing Date and on or before
February 3rd in each year commencing February 3, 2004, the Mortgagor shall
furnish or cause to be furnished to the Mortgagee a signed report by independent
marine insurance brokers, selected by the Mortgagor and acceptable to the
Mortgagee, describing in reasonable detail the insurance pursuant to this
Section 2.17 and stating that in the opinion of such brokers such insurance
complies in all material respects with the terms of this Section 2.17 and is
common and customary for types of insurances and coverage generally required by
mortgagee lenders from prudent owners and operators of vessels similar to the
Vessels and engaged in trades similar to the trades in which the Vessels are
engaged.
(g) The Mortgagor shall, at its own expense, have the duty and responsibility to make all proofs of loss and take all other steps necessary to collect from underwriters, insurance companies or funds any loss under any insurance with respect to the Vessels, or any of them, obtained by the Mortgagor as required by this Section 2.17.
(h) Nothing in this Section 2.17 shall prohibit the Mortgagee from placing additional insurance on or with respect to the Vessels at its expense, or any of them, or the operation thereof, unless such insurance would conflict with insurance that is carried by the Mortgagor. In the event that the Mortgagor shall fail to maintain any insurance which it is required to maintain pursuant to this Section 2.17, the Mortgagee may, but shall not be obligated to, arrange for such insurance and, in such event, the Mortgagor shall, upon demand, reimburse the Mortgagee for the costs thereof as Mortgagee's Costs, as defined in and in accordance with Section 2.18 hereof, without waiver of any other additional rights the Mortgagee may have.
(i) Any sums payable as a result of a loss under insurance on the Vessels, or any of them, with respect to protection and indemnity risks, including liability arising out of pollution or the spillage or leakage of cargo or collision or tower's liability, may be paid directly to the person to whom any liability covered by such insurance has been incurred or, if the liability insured against has been discharged, to the Mortgagee or the Mortgagor to reimburse it or them for any loss, damage or expense incurred by it or them and covered by such insurance. Each policy of insurance maintained under clause (ii) of paragraph (a) of this Section 2.17 shall provide that any payment that is to be made under such policy (other than with respect to any
protection and indemnity risks covered thereby) shall be made solely to the
Mortgagee if such payment (i) is in respect of losses equal to or greater than
$750,000 (but only if the Mortgagor fails within 270 days after the date of such
loss (x) to have or to have made commitments to have any Vessel subject to a
loss fully repaired and restored or (y) in respect of an actual or constructive
total loss of a Vessel or an agreed or compromised total loss of a Vessel to
subject or to have made commitments to subject one or more Eligible Vessels (as
defined in Section 5.1 hereof), collectively with an aggregate fair market value
at least equal to the amount of such insurance proceeds (as evidenced by
delivery to the Mortgagee of an appraisal in form and substance satisfactory to
the Mortgagee), to this Fleet Mortgage pursuant to the provisions of Section 5.3
hereof), (ii) is in respect to losses equal to or greater than $25,000,000 or
(iii) without regard to the amount or character of the loss, is made after the
insurer has received notice from the Mortgagee that an Event of Default has
occurred and is continuing, and before such notice is rescinded. Any insurance
recoveries to which the Mortgagee shall be so entitled pursuant to the
proceeding sentence shall be applied as follows:
(1) In the event that insurance becomes payable to the Mortgagee on account of an accident, occurrence or event involving a Vessel or Vessels that does not result in an actual or constructive total loss or an agreed or compromised total loss of such Vessel or Vessels,
(A) If no Event of Default shall have occurred and be continuing, the Mortgagee shall, upon the written request of the Mortgagor, (i) apply the proceeds of insurance to pay, or consent that the underwriters pay, directly for repairs, liabilities, salvage claims or other charges and expenses (including labor charges due or paid by the Mortgagor) with respect to such Vessel or Vessels that are covered by the policies, or (ii) to the extent that the Mortgagor shall have repaired the damage to such Vessel or Vessels and paid the cost thereof or discharged or paid such liabilities, salvage claims or other charges and expenses with respect to such Vessel or Vessels (such fact having been certified to in a certificate of an authorized officer of the Mortgagor ("Officer's Certificate") delivered to the Mortgagee, accompanied by written confirmation by the underwriter, a surveyor, an adjuster or a marine insurance broker), apply the proceeds or insurance to reimburse, or consent that the underwriters reimburse, the Mortgagor therefor, and in either case, after all known damages with respect to the particular loss shall have been repaired, except to the extent the Mortgagor with the written consent of the Mortgagee deems the said repair inadvisable, in which case such event shall be deemed a Casualty and all insurance proceeds shall be deemed Casualty Proceeds to be applied by the Mortgagor to prepay outstanding Obligations in accordance with Section 2.26 of the Revolving Credit and Guaranty Agreement, and all known costs, liabilities, salvage claims, charges and expenses with respect to such Vessel or Vessels that are covered by the policies shall have been discharged or paid, such fact having been certified to by
an Officer's Certificate delivered to the Mortgagee, accompanied by written confirmation by the underwriter, a surveyor, an adjuster or a marine insurance broker, pay, or consent that the underwriters pay, any balance of the proceeds of insurance to the Mortgagor; or
(B) if an Event of Default shall have occurred and be continuing such loss shall be deemed a Casualty and all related insurance proceeds shall be deemed Casualty Proceeds to be applied by the Mortgagor to prepay outstanding Obligations in accordance with Section 2.26 of the Revolving Credit and Guaranty Agreement or at the election of the Mortgagee applied for the purposes stated in clause (A)(i) of this subparagraph (1);
(2) In the event that insurance becomes payable to the Mortgagee on account of an accident, occurrence or event involving a Vessel or Vessels that results in an actual or constructive total loss or an agreed or compromised total loss of such Vessel or Vessels such loss shall be deemed a Casualty and all related insurance proceeds shall be deemed Casualty Proceeds to be applied by the Mortgagor to prepay outstanding Obligations in accordance with Section 2.26 of the Revolving Credit and Guaranty Agreement .
(j) During the continuance of a taking, requisition or
charter of the use of the Vessels, or any of them, by the United States of
America, the provisions of this Section 2.17 shall be deemed to have been
complied with in all respects as to such Vessel or Vessels if the United States
Government shall have agreed (i) to reimburse the Mortgagee and the Mortgagor
for loss or damage resulting from the risks indicated in paragraph (a) of this
Section 2.17, or (ii) that the Mortgagee and the Mortgagor shall be entitled to
just compensation therefor. In the event of any taking, requisition or charter
of the Vessels, or any of them, contemplated by this paragraph (j), the
Mortgagor shall promptly furnish to the Mortgagee an Officer's Certificate
stating that such taking, requisition or charter has occurred and that the
United States Government has agreed (i) to reimburse the Mortgagee and the
Mortgagor for loss or damage resulting from the risks indicated in paragraph (a)
of this Section 2.17 or (ii) that the Mortgagee and the Mortgagor are entitled
to just compensation therefor.
(k) In the event that any claim or Lien is asserted against the Vessels, or any of them, for loss, damage or expense which is covered by insurance hereunder and it is necessary for the Mortgagor to obtain a bond or supply other security to prevent the arrest of such Vessel or Vessels, or to obtain the release of such Vessel or Vessels from arrest on account of said claim or Lien, the Mortgagee, upon the written request of the Mortgagor, may, but shall not be required to, assign all or any part of its right, title and interest in and to said insurance covering such loss, damage or expense, to any person executing a surety or guaranty bond or other agreement to save or release such Vessel or Vessels from such arrest as collateral security to indemnify against liability under said bond or other agreement.
SECTION 2.18 Reimbursement of Mortgagee's Costs. (a) The Mortgagor shall promptly pay or reimburse to the Mortgagee all amounts the Mortgagee determines constitute
claims, liabilities, losses, taxes, duties, charges, costs, fees and expenses
("Mortgagee's Costs") incurred or made by the Mortgagee in exercising,
protecting or pursuing rights or remedies under this Fleet Mortgage, the
Revolving Credit and Guaranty Agreement or the other Loan Documents (including
but not limited to (i) amounts paid by the Mortgagee pursuant to Section 2.9,
(ii) costs incurred by the Mortgagee pursuant to Section 2.17(b) or (h), Section
5.4, Section 6.9 or Section 6.12 and (iii) expenses of any sale or taking of the
Vessels, or any of them, attorneys' fees and court costs) or resulting from the
release of the Vessels, or any of them, from the security created by this Fleet
Mortgage or resulting from supplementing this Fleet Mortgage to add additional
Vessels, with interest thereon at the rate provided in Section 2.09 of the
Revolving Credit and Guaranty Agreement.
(b) If the Mortgagor shall default in the observance or performance of any of the covenants, conditions or agreements in this Fleet Mortgage on its part to be performed or observed, the Mortgagee may in its discretion do all acts and make all expenditures necessary to remedy such default, including, but not limited to, the procurement of insurance on the Vessels, or any of them, making repairs, discharge or purchase of Liens and payment of taxes, dues, assessments, governmental charges, fines, penalties and attorneys' fees; provided, however, that the Mortgagee shall be under no obligation to the Mortgagor to do such acts or make any such expenditures nor shall the doing or making thereof relieve the Mortgagor of any default in that respect. All costs, fees and expenses of such acts and expenditures shall constitute Mortgagee's Costs.
(c) All Mortgagee's Costs and interest thereon shall be debts due from the Mortgagor to the Mortgagee payable on demand, and shall constitute Secured Obligations and be secured by the Lien of this Fleet Mortgage.
ARTICLE III
EVENTS OF DEFAULT AND REMEDIES
SECTION 3.1 Event of Default and Remedies. An Event of Default as defined in the Revolving Credit and Guaranty Agreement shall be an Event of Default hereunder.
Upon the occurrence and during the continuance of an Event of Default, this Fleet Mortgage shall be in default, and the Mortgagee shall have the right to exercise one or more of the following remedies:
(1) the Mortgagee may exercise all of the rights and remedies in foreclosure and otherwise given to mortgagees by the provisions of Chapter 313 or by any other applicable laws and exercise all of its rights and remedies as attorney-in-fact or otherwise under this Fleet Mortgage;
(2) the Mortgagee may bring suit at law, in equity or in admiralty in any court to foreclose, including foreclosure by seizure, arrest and sale of the Vessels, or any of them, or to recover judgment for the Secured Obligations, and collect the same out of any and all property of the Mortgagor whether covered by this Fleet Mortgage or otherwise;
(3) the Mortgagee may take the Vessels, or any
of them, wherever the same may be, without legal process and without being
responsible for loss or damage; and the Mortgagor or other person in possession
thereof shall forthwith upon demand of the Mortgagee surrender to the Mortgagee
possession of the Vessels, or any of them, and the Mortgagee may hold, lay up,
lease, charter, operate or otherwise use the Vessels, or any of them, for such
time and upon such terms as they may deem to be for their best advantage,
accounting only for the net profits, if any, arising from the use of such Vessel
or Vessels or from the sale thereof, by court proceedings or pursuant to clause
(4) below, net of all costs, expenses, charges, damages or losses by reason of
such use;
(4) the Mortgagee may sell the Vessels, or any of them, free from any claim of or by the Mortgagor in admiralty, in equity, at law or by statute and upon such terms and conditions as the Mortgagee determines, at public or private sale, by sealed bids or otherwise, by first publishing notice of any such public sale for ten (10) consecutive days in a newspaper published in the City of New York, State of New York, and if the place of sale should not be the City of New York, then also by publication of similar notice in a daily newspaper, if any, published at the place of sale, and by mailing notice of such sale, whether public or private, addressed to the Mortgagor at its respective last known address fourteen (14) days prior to the date fixed for entering into the contract of sale; in the event that the Vessels, or any of them, shall be offered for sale by private sale, no newspaper publication of notice shall be required, nor notice of adjournment of sale; sale may be held at such place and at such time as the Mortgagee by notice may have specified, or may be adjourned by the Mortgagee from time to time by announcement at the time and place appointed for such sale or for such adjourned sale, and without further notice or publication the Mortgagee may make any such sale at the time and place to which the same shall be so adjourned; and any sale may be conducted without bringing the Vessels, or any of them, to the place designated for such sale and in such manner as the Mortgagee may deem to be for its advantage; or
(5) demand and receive all freights, hires, charter hires, earnings, issues, revenues, income or profits of the Vessels, or any of them, due or to become due from any person whomsoever.
Any sale of the Mortgagor's interest in the Vessels, or any of them, made pursuant to this Fleet Mortgage, whether under the power of sale hereby granted or any judicial proceedings, shall operate to divest all right, title and interest of any nature whatsoever of the Mortgagor therein and thereto, and shall forever bar the Mortgagor, its successors and assigns, and all persons claiming by, through or under them. No purchaser shall be bound to inquire whether notice has been given, or whether any default has occurred, or as to the propriety of the sale, or as to the application of the proceeds thereof. In case of any such sale, the Mortgagee, or any other person, firm or corporation to whom the Secured Obligations secured by this Fleet Mortgage are otherwise due or owing, may bid for and purchase the Vessels, or any of them, or other property of the Mortgagor and shall be entitled for the purpose of making settlement or payment for the property so purchased, to use and apply the unpaid balance of their portion of the Secured Obligations due and owing, or which may become due or owing, as a credit against the purchase price of the Vessels, or any of them, up to the amount represented by the ratable share of the net proceeds of sale (after allowing for the costs and expenses of sale and other charges) payable to such Mortgagee or such person.
The Mortgagor hereby irrevocably appoints the Mortgagee and its successors and assigns, with full power of substitution, the true and lawful attorney or attorneys of the Mortgagor, in its name and stead, upon the happening and during the continuance of an Event of Default, to make all necessary transfers of the Vessels, or any of them, and for that purpose the Mortgagee and its successors and assigns may execute all necessary instruments of assignment and transfer, the Mortgagor hereby ratifying and confirming all that its said attorney or attorneys shall do by virtue hereof. Nevertheless, the Mortgagor shall, if so requested by the Mortgagee, ratify and confirm such sale by executing and delivering to the purchaser of such Vessel or Vessels such proper bill of sale, conveyance, instrument of transfer and release as may be designated in such request.
The Mortgagor hereby irrevocably appoints the Mortgagee and its successors and assigns, with full power of substitution, the true and lawful attorney or attorneys of the Mortgagor, in its name and stead, upon the happening and during the continuance of an Event of Default, to demand, collect, receive, compromise and sue for, so far as may be permitted by law, the Mortgagor's interest in all freights, hire, earnings, issues, revenues, income and profits of the Vessels, or any of them, and the Mortgagor's interest in all amounts due from the underwriters under any insurance thereon as payments of losses or as return premiums or otherwise, salvage awards and recoveries in general average or otherwise, and the Mortgagor's interest in all other sums, due or to become due at or after the time of the happening of any Event of Default, in respect of the Vessels, or any of them, or in respect of any insurance thereon from any person whomsoever, and to make, give and execute in the name of the Mortgagor acquittances, receipts, releases or other discharges for the same, whether under seal or otherwise, and to endorse and accept in the name of the Mortgagor all checks, notes, drafts, warrants, agreements and all other instruments in writing with respect to the foregoing.
The Mortgagor covenants and agrees that in addition to any and all other rights, powers and remedies elsewhere in this Fleet Mortgage granted to and conferred upon the Mortgagee, the Mortgagee in any suit to enforce any of its rights, powers or remedies shall be entitled as a matter of right and not as a matter of discretion (i) to the appointment of a receiver or receivers of the Mortgagor's interest in the Vessels, or any of them, and the Mortgagor's interest in the hire, earnings, issues, revenues, freights, incomes and profits due or to become due and arising from the operation thereof, and (ii) to a decree ordering and directing the sale and disposal of the Vessels, or any of them.
SECTION 3.2 Application of Proceeds. Upon the occurrence and during the continuance of an Event of Default, the proceeds of the sale of the Vessels, or any of them, the proceeds of any judgment collected by the Mortgagee for any default hereunder, and the net earnings from any management, charter or other use of the same by the Mortgagee under any of the powers specified in Section 3.1, and any and all other moneys held by or received by the Mortgagee pursuant to or under the terms of this Fleet Mortgage, the application of which has not elsewhere herein been specifically provided for, shall be applied by the Mortgagee as follows:
FIRST: To the payment of all Mortgagee's Costs, including the expenses of any sale or any taking of the Vessels, or any of them, attorneys' fees and court costs,
together with interest as provided herein, and to provide adequate indemnity to the Mortgagee against Liens claiming priority over or equality with this Fleet Mortgage;
SECOND: To the payment of interest on, and then in such order as the Mortgagee may determine, the principal of, the Loans under the Revolving Credit and Guaranty Agreement;
THIRD: To the payment of the remaining Secured Obligations due and owing and all other sums secured by or payable hereunder whether due or not together with interest thereon as provided herein, and of all damages, liquidated or otherwise, including without limitation all other unpaid items, costs or expenses; and
FOURTH: To the payment of any surplus thereafter remaining to the Mortgagor or to whomsoever may be entitled thereto.
In the event that the proceeds are insufficient to pay the amounts specified in paragraphs "FIRST", "SECOND" and "THIRD" above, the Mortgagee shall be entitled to collect the balance from the Mortgagor, or any other person liable therefor.
SECTION 3.3 Certain Rights of Mortgagor. In the absence of an Event of Default, the Mortgagor shall (a) be permitted to retain actual possession and use of the Vessels and (b) have the right, from time to time, in its discretion and without application to the Mortgagee and without a release thereof by the Mortgagee, to dispose of, free from the Lien hereof, its interest in any boilers, engines, machinery, masts, spars, rigging, boats, anchors, cables, chains, tackle, capstans, outfit, tools, pumps and pumping equipment, apparel, furniture, fittings, equipment or any other appurtenances of the Vessels, or any of them, that are no longer useful, necessary, profitable or advantageous in the operation of such Vessel or Vessels, first or simultaneously replacing the same by such new items of substantially equal value, which shall forthwith become subject to the Lien of this Fleet Mortgage as a first preferred mortgage thereon. Notwithstanding the foregoing, the Mortgagor shall not be required to replace covers at the end of their useful lives for any Vessel or Vessels that have been converted to a use that does not require a cover.
ARTICLE IV
GENERAL POWERS OF MORTGAGEE
SECTION 4.1 Arrest or Detention of Vessel. In the event that the Vessels, or any of them, shall be arrested or detained by a marshal or other officer of any court of law, equity or admiralty jurisdiction or by any government or other authority and shall not be released from arrest or detention within ten (10) days from the date of arrest or detention, the Mortgagor does hereby authorize and empower the Mortgagee and its successors and assigns, in the name of the Mortgagor, or its successors or assigns, and does hereby irrevocably appoint the Mortgagee and its successors and assigns, with full power of substitution, the true and lawful attorney or attorneys of the Mortgagor, in its name and stead, to apply for and receive possession of and to take possession of such Vessel or Vessels with all the rights and powers that the Mortgagor, or its successors or assigns, might have, possess or exercise in any such event.
SECTION 4.2 Suits. The Mortgagor also hereby irrevocably appoints the Mortgagee and its successors and assigns, with full power of substitution, the true and lawful attorney of the Mortgagor, in its name and stead, to appear in the name of the Mortgagor, its successors or assigns, in any court where a suit is pending against the Vessels, or any of them, because of or on account of any alleged Lien against such Vessel or Vessels from which such Vessel or Vessels have not been released and to take such proceedings as the Mortgagee reasonably may deem proper towards the defense of such suit and the purchase or discharge of such Lien, and all expenditures made or incurred by the Mortgagee for the purpose of such defense or discharge shall constitute Mortgagee's Costs.
The Mortgagor hereby expressly and irrevocably consents to the jurisdiction of any court in any jurisdiction whatsoever wherein any Vessel may at any time be located outside of the continental United States for the sole purposes of the foreclosure of this Fleet Mortgage, the sale of the Mortgagor's interest in such Vessel or the enforcement of any other remedy or right hereunder, and hereby expressly and irrevocably submits the person of the Mortgagor and its interest in such Vessel to the jurisdiction of any such court in any such action or proceeding.
SECTION 4.3 Powers and Remedies Cumulative; No Waiver. Each and every power and remedy herein specifically given to the Mortgagee or otherwise available pursuant to this Fleet Mortgage shall be cumulative and shall be in addition to every other power and remedy herein specifically given or now or hereafter existing at law, in equity, in admiralty or by statute, and each and every power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as often and in such order as may be determined by the Mortgagee and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other power or remedy. No notice to or demand on the Mortgagor in any instance shall entitle the Mortgagor to any other or further notice or demand in similar or other circumstances. No delay or omission by the Mortgagee in the exercise of any right or power or in pursuance of any remedy occurring upon an Event of Default shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Mortgagor or to be an acquiescence therein, nor shall the acceptance by the Mortgagee of any security or of any payment of or on account of any advances after any past Event of Default or of any payment on account of any past Event of Default be construed to be a waiver of any right to take advantage of any future Event of Default or of any past Event of Default not completely cured thereby.
ARTICLE V
RELEASE OF VESSELS AND MORTGAGE
OF ADDITIONAL VESSELS
SECTION 5.1 Definitions. For purposes of this Article V, the following terms shall have the respective meanings set forth below:
"Eligible Vessel" shall mean any inland river barge or towboat which is duly documented pursuant to the laws of the United States as a vessel of the United States under the United States flag, the whole of which vessel is lawfully owned and lawfully possessed by the Mortgagor, free from any Lien other than the Liens permitted by Section 2.7 hereof.
"Release" shall mean a release, substantially in the form of Annex B (with such changes as shall be required in order to enable such release to be filed and recorded in accordance with the provisions of Chapter 313), of one or more Vessels from the Lien of this Fleet Mortgage executed by the Mortgagee and delivered to the Mortgagor.
"Release Request" shall mean a request delivered by the Mortgagor to the Mortgagee pursuant to and in accordance with the requirements of Section 5.2 hereof.
"Supplement" shall mean a supplement to this Fleet Mortgage, substantially in the form of Annex C hereto (with such changes as shall be required in order to enable such supplement to be filed and recorded in accordance with the provisions of Chapter 313) that subjects one or more Eligible Vessels to the Lien of this Fleet Mortgage, executed by the Mortgagor and delivered to the Mortgagee pursuant to and in accordance with the requirements of Section 5.3 hereof.
SECTION 5.2 Release of Vessels. (a) The Mortgagor may deliver a Release Request to the Mortgagee at any time prior to any sale or disposition of a Vessel or Vessels by the Mortgagor permitted by Section 6.11 of the Revolving Credit and Guaranty Agreement (a "Permitted Sale"). Any Release Request shall be in writing, be signed on behalf of the Mortgagor, certify that such Permitted Sale will be in accordance with the Revolving Credit and Guaranty Agreement, identify the Vessel or Vessels to be released and be accompanied by a form of Release respecting such Vessel or Vessels for execution by the Mortgagee.
(b) After receiving a Release Request that satisfies the requirements of the preceding paragraph (a) and provided no Event of Default has occurred and is continuing, the Mortgagee shall deliver to the Mortgagor a Release covering the Vessel or Vessels designated in such Release Request. Upon recordation, the Mortgagor shall deliver to the Mortgagee evidence thereof.
SECTION 5.3 Mortgage of Additional Vessels. (a) If the Mortgagor
acquires any Eligible Vessel or Eligible Vessels during any calendar month, on
or before the thirtieth (30th) day following the close of such calendar month,
the Mortgagor shall prepare, execute and deliver to the Mortgagee a Supplement
with respect to such Eligible Vessel or Eligible Vessels. Upon execution of the
Supplement by the Mortgagee, the Mortgagor shall cause such Supplement to be
recorded and shall otherwise take all steps necessary in order to subject the
Eligible Vessel or Eligible Vessels named therein to the Lien of this Fleet
Mortgage, subject to all of the terms and provisions hereof. At the time of the
execution and recordation of such Supplement, (i) the Mortgagor shall deliver to
the Mortgagee a copy of the Supplement, together with evidence of recordation,
(ii) the Mortgagor shall deliver to the Mortgagee certificates of insurance or
other evidence reasonably satisfactory to the Mortgagee that the Mortgagor has
insured the Vessel or Vessels covered by such Supplement in accordance with the
requirements set forth in Section 2.17 of this Fleet Mortgage, (iii) the
Mortgagor shall deliver to the Mortgagee an opinion of counsel reasonably
satisfactory to the Mortgagee, substantially in the form of Annex D hereto and
(iv) the Mortgagor shall deliver to the Mortgagee such other documents and take
such other steps as may be reasonably requested by the Mortgagee.
(b) If any Subsidiary of the Mortgagor acquires any Eligible Vessel or Eligible Vessels during a calendar month, on or before the thirtieth (30th) day following the close of such calendar month, the Mortgagor shall cause such Subsidiary to subject such Eligible Vessel or Eligible Vessels to a first preferred mortgage, substantially in the form of this Fleet Mortgage, in favor of the Mortgagee, or if applicable, a mortgage supplement in the same manner as described in this Section 5.3.
SECTION 5.4 Costs. The Mortgagor shall, promptly upon receiving invoices therefor, pay all costs and expenses incurred by the Mortgagor and the Mortgagee in connection with the matters contemplated by this Article V (including, without limitation, the costs of negotiating, preparing, duplicating and delivering documents, all filing and recording fees and similar charges and the fees and disbursements of counsel) and reimburse the Mortgagee for any such costs and expenses paid by them, which amounts shall constitute Mortgagee's Costs.
ARTICLE VI
SUNDRY PROVISIONS
SECTION 6.1 Amount of Fleet Mortgage. For purposes of 46 U.S.C. Section 31321(b)(3), the amount of the direct or contingent obligations that are or may be secured by this Fleet Mortgage (excluding interest, expenses and fees) is $75,000,000 plus interest, expenses, fees, indemnities and costs of performance of the covenants contained in this Fleet Mortgage, the Revolving Credit and Guaranty Agreement and in the other Loan Documents.
SECTION 6.2 Counterparts. This Fleet Mortgage and any amendment hereof may be executed in any number of counterparts and all such counterparts executed and delivered each as an original shall constitute but one and the same instrument.
SECTION 6.3 Currency. The terms "Dollars" and "$" as used herein shall mean any coin or currency of the United States of America which at the time of payment shall be legal tender for public and private debts.
SECTION 6.4 Assignment; Successors. All the covenants, promises, stipulations and agreements of the Mortgagor in this Fleet Mortgage contained shall bind the Mortgagor and its successors and assigns and shall inure to the benefit of the Mortgagee and its successors and assigns. The Mortgagor acknowledges that the Mortgagee may assign its interest, in whole or in part, in this Fleet Mortgage, to any third party and, for such purpose, the Mortgagor waives all right to notice or consent. The Mortgagor may not assign any of its rights or obligations hereunder without the prior written consent of the Mortgagee.
SECTION 6.5 Agents of Mortgagee. Wherever and whenever herein any right, power or authority is granted or given to the Mortgagee, such right, power and authority may be exercised in all cases by the Mortgagee through such agent or agents or official or officials as it or they may appoint or authorize, and the act or acts of such agent or agents or official or officials when taken shall constitute the act of the Mortgagee.
SECTION 6.6 Severability. If any word, phrase, sentence, paragraph, provision or section of this Fleet Mortgage shall be held, declared, or pronounced void, voidable, invalid,
unenforceable or inoperative for any reason by any court of competent jurisdiction, such holding, declaration or pronouncement shall not adversely affect any other word, phrase, sentence, paragraph, provision or section of this Fleet Mortgage which will otherwise remain in full force and effect and be enforced in accordance with its terms, and the effect of such holding, declaration or pronouncement shall be limited to the territory or the jurisdiction in which made.
SECTION 6.7 Amendments; Supplements. This Fleet Mortgage may not be amended or supplemented except in writing by the Mortgagor and the Mortgagee. The provisions of this Fleet Mortgage may not be waived except in writing by the Mortgagee.
SECTION 6.8 Governing Law. To the extent not governed by the laws of the United States, this Fleet Mortgage shall be governed by the laws of the State of New York.
SECTION 6.9 Recordation of Mortgage. The cost and expense of recording this Fleet Mortgage, and the cost and expense of obtaining certified copies of this Fleet Mortgage, shall be paid by the Mortgagor, and the Mortgagor agrees to pay the same or reimburse the Mortgagee, as the case may be, within 10 days after demand. If such sums are not so paid, and if they are borne or paid by the Mortgagee, such sums shall be Mortgagee's Costs.
SECTION 6.10 No Waiver of Preferred Status. Nothing contained herein shall be construed as a waiver by the Mortgagee of the preferred status of this Fleet Mortgage, and any provision which would otherwise constitute such a waiver shall to such extent be of no force or effect.
SECTION 6.11 Waiver. The Mortgagor agrees that it will not at any time or in any manner whatever claim or take any benefit of any stay, extension or moratorium law which may affect the terms of this Fleet Mortgage; nor claim or take any benefit of any law providing for the valuation or appraisal of the Vessels, or any of them, prior to any sale thereof; and the Mortgagor hereby expressly waives all benefit or advantage of any such law, and covenants not to hinder, delay, or impede the execution of any power or remedy herein granted or available at law or in equity to the Mortgagee, but to suffer and permit the execution of every power and remedy as though no such law existed.
SECTION 6.12 Further Assurances. At the request of the Mortgagee, from time to time the Mortgagor will execute, on its own behalf, such other and further instruments and documents as in the opinion of the Mortgagee or special counsel to the Mortgagee may be required, useful or desirable to subject each Vessel more effectually to the Lien of this Fleet Mortgage or to obtain or maintain the full benefits of this Fleet Mortgage. Upon the failure of the Mortgagor so to do, the Mortgagee may execute any and all such other and further assurances and documents for and in the name of the Mortgagor, and the Mortgagor hereby irrevocably appoints the Mortgagee the agent and attorney-in-fact of the Mortgagor so to do, and any expense of the Mortgagee in connection therewith shall constitute Mortgagee's Costs.
SECTION 6.13 Notices. Notices and other communications provided for herein shall be given as provided in the Revolving Credit and Guaranty Agreement.
IN WITNESS WHEREOF, the Mortgagor has executed this Fleet Mortgage effective the day and year first above written.
HOUSTON FLEET LLC
Title:
STATE OF INDIANA )
: ss.:
COUNTY OF CLARK )
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On this __ day of February, 2003, before me personally appeared _______________ to me known, who, being by me duly sworn, did depose and say that she/he resides at __________________________; that she/he is the ______________ of HOUSTON FLEET LLC, the limited liability company described in and which executed the foregoing instrument; that she/he signed his name thereto pursuant to authority granted to her/him by the Board of Managers of said limited liability company.
SCHEDULE I
LIST OF VESSELS
SCHEDULE 2.14
EXISTING CHARTERS
ANNEX A
FORM OF REVOLVING CREDIT AND GUARANTY AGREEMENT
ANNEX B
FORM OF PARTIAL RELEASE OF FIRST PREFERRED FLEET MORTGAGE
JPMORGAN CHASE BANK, a New York banking corporation, as administrative
agent, documentation agent and collateral agent pursuant to the Revolving Credit
and Guaranty Agreement, located at 270 Park Avenue, New York, New York 10017
(the "Mortgagee"), does hereby certify that the [vessel/vessels] listed on
Attachment A attached hereto and made a part hereof that were mortgaged to the
Mortgagee under that First Preferred Fleet Mortgage, dated February __, 2003 (as
previously supplemented, the "Fleet Mortgage") [any amendments or supplements],
made and executed by Houston Fleet LLC, a Delaware limited liability company,
with its address at [__________________________], to secure payment to the
Mortgagee of the total principal amount of US$75,000,000, plus interest,
expenses, fees, indemnities and the costs of performance of mortgage and other
covenants, which mortgage was filed at the United States Coast Guard, National
Vessel Documentation Center on February __, 2003, at [time] and recorded in Book
[____], Instrument [____] [recording information of amendments or supplements]
on the whole of the vessels listed on Schedule I therein, [is/are] hereby
released from the lien of the Fleet Mortgage. All other vessels listed on
Schedule I to the Fleet Mortgage but not listed on Attachment A remain subject
to the lien of the Fleet Mortgage.
IN WITNESS WHEREOF, the Mortgagee has caused this Partial Release of
First Preferred Fleet Mortgage to be executed this _____ day of ____________,
[year].
JPMORGAN CHASE BANK, a New York
banking corporation, as
administrative agent, documentation
agent and collateral agent
Title:
STATE OF _________________ )
) ss:
COUNTY OF ________________ )
On this ___ day of _____________, 200_, before me personally appeared _______________ to me known, who, being by me duly sworn, did depose and say that she/he resides at __________________________; that she/he is the ____________ of JPMORGAN CHASE BANK, the banking corporation described in and which executed the foregoing instrument; that she/he signed his name thereto pursuant to authority granted to her/him by the Board of Directors of said corporation.
ANNEX C
SUPPLEMENT NO. ____
to
FIRST PREFERRED FLEET MORTGAGE
THIS SUPPLEMENT NO. ___, dated and effective as of the _____ day of ____________________, (this "Supplement") to that First Preferred Fleet Mortgage dated and effective as of February __, 2003, is entered into between HOUSTON FLEET LLC, a Delaware limited liability company (the "Mortgagor"), and JPMORGAN CHASE BANK, as administrative agent, documentation agent and collateral agent (the "Mortgagee") under a Revolving Credit and Guaranty Agreement dated as of February __, 2003 (the "Revolving Credit and Guaranty Agreement") among the Mortgagor, American Commercial Lines Holdings LLC, the Banks party thereto (the "Banks"), and JPMorgan Chase Bank, as administrative agent, documentation agent and collateral agent.
W I T N E S S E T H:
RECITALS
A. This Supplement supplements that certain First Preferred Fleet Mortgage dated February __, 2003 made and given by the Mortgagor to the Mortgagee, and filed in the Office of the United States Coast Guard National Vessel Documentation Center at [TIME] on [DATE] and recorded in Book No. ____, Instrument No. ____ (said First Preferred Fleet Mortgage, as the same has heretofore been and may hereafter be amended, supplemented and restated, is herein called the "Fleet Mortgage") on the Vessels identified on Schedule I attached hereto.
B. This is a supplement that covers the whole of the
[vessel/vessels] listed on Schedule II attached hereto as more fully described
in the Granting Clause hereof. [Such vessel/each of such vessels] has been duly
documented in the name of the Mortgagor or for which an application for such
[vessel/vessels] to be duly documented in the name of the Mortgagor has been
filed at the United States Coast Guard National Vessel Documentation Center that
is in substantial compliance with the requirements of chapter 121 of Title 46 of
the United States Code, as amended, and the regulations prescribed under that
chapter under the laws and flag of the United States. The Mortgagor is the true,
lawful and sole owner of the whole of each of the [vessel/vessels] identified on
Schedule II.
C. The full name and address of the Mortgagor is:
Houston Fleet LLC
1701 E. Market Street
P.O. Box 610
Jeffersonville, Indiana 47130-0610
Attention: General Counsel
D. The full name and address of the Mortgagee is:
JPMorgan Chase Bank, as administrative agent, documentation agent and collateral agent under the Revolving Credit and Guaranty Agreement,
270 Park Avenue New York, New York 10017 Attention: Craig H. Fuehrer (telecopy: 646-534-1755)
E. For purposes of 46 U.S.C. Section 31321(b)(3), the amount of the direct or contingent obligations that are or may be secured by this Supplement (excluding interest, expenses and fees) is $75,000,000 plus interest, expenses, fees, indemnities and costs of performance of the covenants contained in this Supplement, the Fleet Mortgage, the Revolving Credit and Guaranty Agreement and in the other Loan Documents.
F. The Mortgage was granted by the Mortgagor to secure the payment of the Secured Obligations.
G. Pursuant to the provisions of Section 5.3 of the
Fleet Mortgage, the Mortgagor is now required to subject [an] additional
[vessel/vessels] to the Lien of the Fleet Mortgage by executing and delivering
to the Mortgagee this Supplement.
GRANTING CLAUSE
NOW, THEREFORE, in consideration of the premises and of other
valuable consideration, the receipt and sufficiency of which the Mortgagor
hereby acknowledges, and in order to secure the timely payment in full and the
full performance of all Secured Obligations, the Mortgagor has granted,
conveyed, mortgaged, pledged, assigned, transferred, set over and confirmed and
subjected to the Lien of the Fleet Mortgage, and by these presents the Mortgagor
does grant, convey, mortgage, pledge, assign, transfer, set over and confirm and
subject to the Lien of the Fleet Mortgage, unto the Mortgagee and its successors
and assigns, the whole of the [vessel/vessels] identified in Recital B above,
[each of] which is duly documented in the name of the Mortgagor or for which an
application for such [vessel/vessels] to be duly documented in the name of the
Mortgagor has been filed at the United States Coast Guard National Vessel
Documentation Center that is in substantial compliance with the requirements of
chapter 121 of Title 46 of the United States Code, as amended, and the
regulations prescribed under that chapter, under the laws and flag of the United
States of America, including, without being limited to, all of the boilers,
engines, machinery, masts, spars, rigging, boats, pumps, anchors, cables,
chains, tackle, apparel, furniture, fittings, equipment and other appurtenances
appertaining or belonging thereto, whether now owned or hereafter acquired, and
all additions, improvements and replacements hereafter made in or to any vessel,
or any part thereof whether on board or not, including all items and
appurtenances aforesaid and all rents, charters, charter parties, freights,
sub-freights, cargoes, operating profits, and proceeds of the foregoing ([each]
such vessel and all items thereof above enumerated being included in the term "Vessel" as used in this Fleet Mortgage);
TO HAVE AND TO HOLD the same unto and for the proper use and benefit of the Mortgagee, its successors and assigns, forever, upon the terms of the Fleet Mortgage. [The/each] Vessel identified herein shall be subjected to the Lien of the Fleet Mortgage by this Supplement.
ARTICLE I
GENERAL PROVISIONS
SECTION 1.1 Definitions. Capitalized terms used but not defined herein shall have the same meanings set forth with respect thereto in the Fleet Mortgage.
SECTION 1.2 Schedule I. Schedule I to the Fleet Mortgage is hereby supplemented by the inclusion thereon of the Vessels listed in Schedule II hereto with the effect that such Vessels shall hereafter be included as "Vessels" for all purposes of the Fleet Mortgage.
ARTICLE II
REPRESENTATIONS OR WARRANTIES OF THE MORTGAGOR
SECTION 2.1 Restatement and Incorporation of Representations or Warranties. The Mortgagor hereby confirms the accuracy of each of the representations and warranties of the Fleet Mortgage as of the date hereof with respect to each Vessel identified herein.
ARTICLE III
RELATIONSHIP TO MORTGAGE
SECTION 3.1 Part of the Mortgage. This Supplement supplements the Fleet Mortgage and shall, from and after the date hereof, constitute a part of the Fleet Mortgage for all purposes.
SECTION 3.2 Ratification of the Mortgage. The Fleet Mortgage remains in full force and effect and, except as expressly supplemented by this Supplement, the Fleet Mortgage and each of its provisions is hereby in all respects ratified and confirmed.
ARTICLE IV
SUNDRY PROVISIONS
SECTION 4.1 Counterparts. This Supplement may be executed in any number of counterparts, each of which shall for all purposes be deemed to be an original and such counterparts taken together shall be deemed to constitute one and the same instrument.
SECTION 4.2 Governing Law. To the extent not governed by the laws of the United States, this Supplement shall be governed by the laws of the State of New York.
SECTION 4.3 Recordation of Supplement. The cost and expense of recording this Supplement, and the cost and expense of obtaining certified copies of this Supplement, shall be paid by the Mortgagor, and the Mortgagor agrees to pay the same or reimburse the Mortgagee, as the case may be, within 10 days after demand, If such sums are not so paid, and if they are borne or paid by the Mortgagee, such sums shall be Mortgagee's Costs.
SECTION 4.4 Further Assurances. At the request of the Mortgagee, from time to time the Mortgagor will execute, on its own behalf, such other and further instruments and documents as in the opinion of the Mortgagee or special counsel to the Mortgagee may be required, useful or desirable to subject each Vessel more effectually to the Lien of the Fleet Mortgage or to obtain or maintain the full benefits of the Fleet Mortgage. Upon the failure of the Mortgagor so to do, the Mortgagee may execute any and all such other and further assurances and documents for and in the name of the Mortgagor, and the Mortgagor hereby irrevocably appoints the Mortgagee the agent and attorney-in-fact of the Mortgagor so to do, and any expense of the Mortgagee in connection therewith shall constitute Mortgagee's Costs.
IN WITNESS WHEREOF, the Mortgagor and the Mortgagee have caused this Supplement No. ___ to First Preferred Fleet Mortgage to be duly executed and delivered as of the day and year first above written.
HOUSTON FLEET LLC
JPMORGAN CHASE BANK, as
administrative agent, documentation
agent and collateral agent
STATE OF [ ] )
: ss.:
COUNTY OF [ ] )
On this ___ day of _____________, 200_, before me personally appeared _______________ to me known, who, being by me duly sworn, did depose and say that she/he resides at __________________________; that she/he is the ____________ of HOUSTON FLEET LLC, the limited liability company described in and which executed the foregoing instrument; that she/he signed his name thereto pursuant to authority granted to her/him by the Board of Managers of said limited liability company.
STATE OF [ ] )
: ss.:
COUNTY OF [ ] )
On this ___ day of _____________, 200_, before me personally appeared _______________ to me known, who, being by me duly sworn, did depose and say that she/he resides at __________________________; that she/he is the ____________ of JPMORGAN CHASE BANK, the New York banking corporation described in and which executed the foregoing instrument; that she/he signed his name thereto pursuant to authority granted to her/him by the Board of Directors of said corporation.
SCHEDULE I TO SUPPLEMENT NO. __
LIST OF VESSELS FROM FLEET MORTGAGE
SCHEDULE II TO SUPPLEMENT NO. __
LIST OF VESSELS ADDED BY SUPPLEMENT
ANNEX D
Form of Legal Opinion
[date]
JPMorgan Chase Bank,
as administrative agent, documentation agent and collateral agent
270 Park Avenue
New York, New York 10017
Gentlemen:
We have acted as special maritime counsel to Houston Fleet LLC, a Delaware limited liability company (the "Mortgagor"), in connection with that Supplement No. __ dated _________, ____ (the "Mortgage Supplement") to that First Preferred Ship Mortgage dated _____________, ____, (the "Fleet Mortgage") given by the Mortgagor, as mortgagor, to JPMorgan Chase Bank, as administrative agent, documentation agent and collateral agent, as Mortgagee (the "Mortgagee").
In connection with this opinion, we have examined (a) an executed copy, certified or otherwise identified to our satisfaction, of the Mortgage Supplement, (b) such other agreements, documents, certificates and corporate records of the Mortgagor and official records, affidavits and other instruments and (c) such laws and regulations, as we deemed appropriate for the purposes of this opinion. As to factual matters, we have, in certain instances, examined and relied upon certificates of corporate officers of the Mortgagor, copies of which are delivered to you simultaneously herewith and have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. For purposes of this opinion, we have assumed that the Mortgage Supplement has been duly and validly authorized, executed and delivered and constitutes the legal, valid and binding obligation of the Mortgagor, enforceable in accordance with its terms under the laws of the State of New York.
Based upon the foregoing and subject to the further limitations, assumptions and qualifications set forth herein, we are of the opinion that:
1. The Mortgagor is the sole owner of the whole of [the vessel/each of the vessels] identified on Schedule 1 to the Mortgage Supplement (the "[New Vessel/Vessels]"). [The/each] New Vessel is free and clear of any claim, lien, mortgage or other encumbrance of any character of record except for the Fleet Mortgage and the Existing Mortgage, as defined in the Fleet Mortgage, and except as set forth on Exhibit A attached hereto. To the extent that this opinion relates to ownership and freedom and clearance of claims, liens, mortgages or other encumbrances on the [New Vessel/Vessels], we have relied upon the certificates as to such matters, dated the date above, of the Mortgagor and records of the United States Coast Guard National Vessel Documentation Center.
2. [The New Vessel/each of the New Vessels] is eligible for documentation and is duly documented under the laws of the United States under 46 U.S.C. Chapter 121.
3. The Mortgage Supplement has been duly filed and recorded at the National Vessel Documentation Center (the only office in which such filing and recording are necessary), and constitutes a fully perfected "preferred" mortgage on each of the New Vessels in favor of the Mortgagee having the effect and with the priority provided by 46 U.S.C. Section 31301 et seq., and subject to no other lien or encumbrance of record.
The foregoing opinion is subject to the following qualifications:
(a) Enforcement of the Mortgage Supplement may be (i) limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the enforcement of creditors' rights generally, (ii) subject to general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law) and (iii) subject to the fact that some of the provisions of the Mortgage Supplement may be rendered void or unenforceable in whole or in part by the laws of certain jurisdictions in which enforcement may be sought, but that fact will not materially interfere with the practical realization of the benefits of the security provided by the Mortgage Supplement, and the inclusion of such provisions does not affect the validity of the Mortgage Supplement and without which provisions the Mortgage Supplement contains adequate provisions for enforcing payment of the Secured Obligations (as such term is defined in each Fleet Mortgage) and realizing upon the security provided by the Mortgage Supplement;
(b) No opinion is expressed as to the specific remedy, if any, that any court, other governmental authority or arbitrator may grant, impose or render; and
(c) We do not purport to be expert on, and express no opinion with respect to, the law of any jurisdiction other than the federal laws of the United States of America.
This opinion is given as of the date hereof and is intended solely for your benefit and is not to be made available to or relied upon by other persons or entities without the undersigned's prior written consent.
Very truly yours,
EXHIBIT 4.38
EXECUTION COPY
FIRST PREFERRED FLEET MORTGAGE
MADE BY
LOUISIANA DOCK COMPANY LLC
A DEBTOR AND A DEBTOR-IN-POSSESSION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
IN FAVOR OF
JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT, DOCUMENTATION AGENT AND COLLATERAL AGENT UNDER A REVOLVING CREDIT AND GUARANTY AGREEMENT DATED AS OF JANUARY 31, 2003 AMONG AMERICAN COMMERCIAL LINES LLC, A DEBTOR AND A DEBTOR-IN-POSSESSION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE, AS BORROWER, AMERICAN COMMERCIAL LINES HOLDINGS LLC AND THE SUBSIDIARIES OF THE BORROWER NAMED THEREIN, EACH A DEBTOR-IN-POSSESSION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE, THE BANKS PARTY THERETO AND JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT, DOCUMENTATION AGENT AND COLLATERAL AGENT
DATED AND EFFECTIVE AS OF FEBRUARY 3, 2003
TABLE OF CONTENTS
PAGE
ARTICLE I GENERAL PROVISIONS....................................................................... 3
SECTION 1.1 Definitions..................................................................... 3
ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE MORTGAGOR............................... 3
SECTION 2.1 Payment and Performance Obligations............................................. 3
SECTION 2.2 Organization; Authority; Enforceability......................................... 3
SECTION 2.3 Citizenship..................................................................... 3
SECTION 2.4 Ownership of Vessels; Warranty and Defense of Title............................. 3
SECTION 2.5 Perfection...................................................................... 4
SECTION 2.6 Environmental Compliance........................................................ 4
SECTION 2.7 Liens........................................................................... 4
SECTION 2.8 Notice of Mortgage.............................................................. 5
SECTION 2.9 Libel or Attachment............................................................. 5
SECTION 2.10 Maintenance of Vessels.......................................................... 5
SECTION 2.11 Documentation; Operation of Vessels............................................. 6
SECTION 2.12 Inspection...................................................................... 7
SECTION 2.13 Taxes, Fees, etc................................................................ 7
SECTION 2.14 Sale, Assignment, Mortgage, Charter or Other Disposition of Vessel.............. 7
SECTION 2.15 Requisition of Title or Use..................................................... 8
SECTION 2.16 Notice of Loss, Requisition or Damage........................................... 8
SECTION 2.17 Insurance....................................................................... 9
SECTION 2.18 Reimbursement of Mortgagee's Costs.............................................. 14
ARTICLE III EVENTS OF DEFAULT AND REMEDIES........................................................... 14
SECTION 3.1 Event of Default and Remedies................................................... 14
SECTION 3.2 Application of Proceeds......................................................... 16
SECTION 3.3 Certain Rights of Mortgagor..................................................... 17
ARTICLE IV GENERAL POWERS OF MORTGAGEE.............................................................. 17
SECTION 4.1 Arrest or Detention of Vessel................................................... 17
SECTION 4.2 Suits........................................................................... 18
SECTION 4.3 Powers and Remedies Cumulative; No Waiver....................................... 18
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TABLE OF CONTENTS
(continued)
PAGE
ARTICLE V RELEASE OF VESSELS AND MORTGAGE OF ADDITIONAL VESSELS.................................... 19
SECTION 5.1 Definitions..................................................................... 19
SECTION 5.2 Release of Vessels.............................................................. 19
SECTION 5.3 Mortgage of Additional Vessels.................................................. 19
SECTION 5.4 Costs........................................................................... 20
ARTICLE VI SUNDRY PROVISIONS........................................................................ 20
SECTION 6.1 Amount of Fleet Mortgage........................................................ 20
SECTION 6.2 Counterparts.................................................................... 20
SECTION 6.3 Currency........................................................................ 20
SECTION 6.4 Assignment; Successors.......................................................... 20
SECTION 6.5 Agents of Mortgagee............................................................. 21
SECTION 6.6 Severability.................................................................... 21
SECTION 6.7 Amendments; Supplements......................................................... 21
SECTION 6.8 Governing Law................................................................... 21
SECTION 6.9 Recordation of Mortgage......................................................... 21
SECTION 6.10 No Waiver of Preferred Status................................................... 21
SECTION 6.11 Waiver.......................................................................... 21
SECTION 6.12 Further Assurances.............................................................. 21
SECTION 6.13 Notices......................................................................... 22
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FIRST PREFERRED FLEET MORTGAGE
FIRST PREFERRED FLEET MORTGAGE, made effective this 3rd day of February, 2003, by LOUISIANA DOCK COMPANY LLC, a Delaware limited liability company whose address is 1701 E. Market Street, P.O. Box 610, Jeffersonville, Indiana 47130-0610, (the "Mortgagor"), a debtor and a debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, to JPMORGAN CHASE BANK, a New York banking corporation, whose address is 270 Park Avenue, New York, New York 10017, as administrative agent, documentation agent and collateral agent under the Revolving Credit and Guaranty Agreement defined below (the "Mortgagee").
WHEREAS:
A. On January 31, 2003, American Commercial Lines LLC and the Guarantors (as defined in the Revolving Credit and Guaranty Agreement defined below), including the Mortgagor, filed voluntary petitions with the Bankruptcy Court initiating the Cases (as defined in the Revolving Credit and Guaranty Agreement defined below) and have continued in the possession of their assets and in the management of their business pursuant to Sections 1107 and 1108 of the Bankruptcy Code.
B. The Mortgagor is the sole owner of the whole (100%) of each of the vessels identified in Schedule I hereof and more fully described in the Granting Clause hereof.
C. For purposes of 46 U.S.C. Section 31321(b)(3), the amount of the direct or contingent obligations that are or may be secured by this Fleet Mortgage (excluding interest, expenses and fees) is $75,000,000 plus interest, expenses, fees, indemnities and costs of performance of the covenants contained in this Fleet Mortgage, the Revolving Credit and Guaranty Agreement defined below and in the other Loan Documents (as defined in the Revolving Credit and Guaranty Agreement defined below).
D. The Mortgagor is executing and delivering this Fleet
Mortgage pursuant to a Revolving Credit and Guaranty Agreement dated as of
January 31, 2003 (as at any time amended, the "Revolving Credit and Guaranty
Agreement"), among the Mortgagor as borrower, American Commercial Lines Holdings
LLC ("Holdings"), and certain of the direct or indirect subsidiaries of the
Mortgagor signatory hereto (together with Holdings, each a "Guarantor" and
collectively, the "Guarantors"), JPMorgan Chase Bank, each of the other
financial institutions from time to time party thereto (together with JPMorgan
Chase Bank, the "Banks") and JP Morgan Chase Bank, as Administrative Agent,
Documentation Agent and Collateral Agent, pursuant to which (i) the Tranche A
Banks, severally, have agreed to make Tranche A Loans to the Mortgagor in an
aggregate principal amount of up to $25,000,000, from time to time during the
period commencing on the Closing Date and ending on the Termination Date and
(ii) the Tranche B Banks, severally, have agreed to make available Tranche B
Loans to the Mortgagor in an aggregate principal amount of up to $50,000,000 in
accordance with the Revolving Credit and Guaranty Agreement, a copy of which
Revolving Credit and Guaranty Agreement (without exhibits) is attached hereto as
Annex A and made a part hereof.
E. In order to secure (a) the due and punctual payment by the Mortgagor of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Mortgagor under the Revolving Credit and Guaranty Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including reasonable fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Mortgagor to the Banks and the Mortgagee under the Revolving Credit and Guaranty Agreement, this Fleet Mortgage and the other Loan Documents to which the Mortgagor is or is to be a party, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Mortgagor under or pursuant to the Revolving Credit and Guaranty Agreement, this Fleet Mortgage and the other Loan Documents to which the Mortgagor is or is to be a party, (c) the due and punctual performance of all covenants, agreements, obligations and liabilities of each Guarantor under or pursuant to the Loan Documents and (d) all other Obligations (as defined in the Revolving Credit and Guaranty Agreement)(all the obligations referred to in the preceding clauses (a) through (d) being referred to collectively, as the "Secured Obligations"), the Mortgagor has duly authorized the execution and delivery of this First Preferred Fleet Mortgage under and pursuant to Chapter 313 of Title 46 of the United States Code, as amended ("Chapter 313").
F. The Mortgagor is hereby granting to the Mortgagee this Fleet Mortgage covering the whole of each of the vessels identified on Schedule I hereof. By a supplement or supplements to this Fleet Mortgage, this Fleet Mortgage may hereafter cover one or more additional vessels, as shall be described in such supplement or supplements.
NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt of which is hereby acknowledged, and to secure the due and punctual payment and performance of the Secured Obligations, the Mortgagor, for itself, its successors and assigns does by these presents:
GRANT, CONVEY, MORTGAGE, PLEDGE AND CONFIRM UNTO THE MORTGAGEE, its successors and assigns, the whole of each of the vessels identified on Schedule I hereof, each of which is duly documented in the name of the Mortgagor under the laws and flag of the United States of America, including, without being limited to, all of the boilers, engines, machinery, masts, spars, rigging, boats, pumps, anchors, cables, chains, tackle, apparel, furniture, fittings, equipment and other appurtenances appertaining or belonging thereto, whether now owned or hereafter acquired, and all additions, improvements, and replacements hereafter made in or to any vessel, or any part thereof whether on board or not, including all items and appurtenances aforesaid and all rents, charters, charter parties, freights, sub-freights, cargoes, operating profits, and proceeds of the foregoing (each such vessel and all items thereof above enumerated being included in the term "Vessel" as used in this Fleet Mortgage);
TO HAVE AND TO HOLD the same unto and for the proper use and benefit of the Mortgagee, its successors and assigns, forever, upon the terms herein set forth;
PROVIDED, HOWEVER, and these presents are upon the condition that, if the Mortgagor or its successors and assigns shall duly and punctually pay in full and perform in full the Secured Obligations, then this Fleet Mortgage and the rights hereunder shall cease, determine and be void, otherwise to be and remain in full force and effect;
PROVIDED, FURTHER that any Vessel may be separately discharged from this Fleet Mortgage by the Mortgagee in accordance with Section 5.2 hereof; and
FURTHER COVENANT, DECLARE AND AGREE with the Mortgagee and its successors and assigns, that the Vessels are to be held subject to the further representations, warranties, covenants, terms and conditions hereinafter set forth.
ARTICLE I
GENERAL PROVISIONS
SECTION 1.1 Definitions. Capitalized terms used but not defined herein shall have the same meanings set forth with respect thereto in the Revolving Credit and Guaranty Agreement.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE MORTGAGOR
SECTION 2.1 Payment and Performance Obligations. The Mortgagor will duly and punctually pay or cause to be paid and duly perform, observe and comply with the Secured Obligations.
SECTION 2.2 Organization; Authority; Enforceability. The Mortgagor was duly organized and is now validly existing and in good standing as a limited liability company under the laws of the State of Delaware and shall so remain during the life of this Fleet Mortgage and so long as any of the Secured Obligations shall remain outstanding. The Mortgagor has all requisite authority, power and legal right to own and operate the Vessels, to mortgage the Vessels to the Mortgagee pursuant to this Fleet Mortgage, and to execute and deliver this Fleet Mortgage. All action necessary and required by law for the execution and delivery by the Mortgagor of this Fleet Mortgage has been duly and effectively taken, and this Fleet Mortgage is and will continue to be the valid and binding obligation of the Mortgagor enforceable in accordance with its terms. All consents and approvals required in respect of this Fleet Mortgage have been obtained and are in full force and effect.
SECTION 2.3 Citizenship. The Mortgagor warrants that the Mortgagor meets, and shall continue for the term of this Fleet Mortgage and until all of the Secured Obligations are paid and performed in full to meet, all citizenship requirements necessary for each of the Vessels to be eligible for documentation as a vessel of the United States, under the flag of the United States, pursuant to Title 46, Section 12102 of the United States Code.
SECTION 2.4 Ownership of Vessels; Warranty and Defense of Title. The Mortgagor warrants that it is the true, lawful and sole owner of the whole of each of the Vessels, and that its ownership of each Vessel is free and clear of all Liens except such Liens which arose prior to the date of this Fleet Mortgage that are incident to current operations or created by that certain First Preferred Fleet Mortgage, dated and effective as of June 30, 1998 (the "Existing Mortgage"), granted by the Mortgagor to The Chase Manhattan Bank, as collateral agent and security trustee (the "Existing Mortgagee") pursuant to a Credit Agreement dated as of June 30, 1998, as amended and restated as of April 11, 2002 and amended as of September 27, 2002, among the Mortgagor, the secured lenders from time to time party thereto and the Existing Mortgagee (the "Existing Agreement"); none of the Vessels are subject to a demise charter or to a time or voyage charter other than demise charters or time charters entered in the ordinary course of business and consistent with standard marine practice that are listed on Schedule 2.14 to this Fleet Mortgage; and that the Mortgagor will forever warrant and defend its title and possession of each Vessel for the benefit of the Mortgagee against any and all claims and demands.
SECTION 2.5 Perfection. The Mortgagor shall comply with and satisfy all applicable formalities and provisions of the laws and regulations of the United States of America, including but not limited to the provisions of Chapter 313, as amended, in order to perfect, establish, record and maintain this Fleet Mortgage, and any supplement or amendment thereto, upon each of the Vessels and upon all renewals, as a first preferred fleet mortgage thereunder and on all additions, improvements and replacements made in or to each of the Vessels and shall do such other acts and execute all such other instruments, deeds, conveyances, mortgages and assurances as the Mortgagee may reasonably require in order to subject each of the Vessels to the Lien of this Fleet Mortgage as aforesaid.
SECTION 2.6 Environmental Compliance. The Mortgagor has complied with
the representations and warranties in Section 3.07 of the Revolving Credit and
Guaranty Agreement in respect to each of the Vessels and shall comply with
Section 4.01(l) of the Revolving Credit and Guaranty Agreement regarding
compliance with environmental laws and regulations in respect to each of the
Vessels.
SECTION 2.7 Liens. The Mortgagor represents and agrees that it has not granted and will not grant any charterer, the master of any of the Vessels or any other person, and none thereof has or shall have, any right, power or authority to create, incur or permit to be placed or imposed upon the Vessels, or any of them, any Liens, other than the Lien of this Fleet Mortgage, Liens for crew's wages, wages for stevedores when employed directly by the Mortgagor or the master of the applicable Vessel and general average and salvage (including contract salvage), Liens created in the ordinary course of the Vessels' current operations which are for "necessaries" within the meaning of 46 U.S.C. Section 31301(4) and the Lien of the Existing Mortgage provided that such Liens are subordinate to the Lien of this Fleet Mortgage. The Mortgagor further agrees that it will not permit to be continued any Lien upon the Vessels, or any of them (other than this Fleet Mortgage and the Lien of the Existing Mortgage), for a period in excess of forty-five (45) days after the same becomes due and payable except for any Lien that is being contested by the Mortgagor in good faith by appropriate proceedings diligently conducted which are effective to stay the execution or other enforcement of such Lien and the Mortgagor shall have set aside on its books adequate reserves in accordance with GAAP with respect to such Lien.
SECTION 2.8 Notice of Mortgage. The Mortgagor shall at all times keep a properly certified copy of this Fleet Mortgage and any amendments and supplements hereto and any assignments hereof (i) at its address set forth above and (ii) in the case of a Vessel that is a self-propelled Vessel, with the ship's papers on board such Vessel and such papers shall be exhibited, on demand, to any person having business with such Vessel which might give rise to a maritime Lien on such Vessel, or to any representative of the Mortgagee; and a notice, reading as follows, printed in plain type of such size that the paragraph of reading matter shall cover a space not less than six inches wide by nine inches high, framed under glass, shall be placed and kept prominently displayed in the chart room and in the master's cabin of each of the Vessels that is a self-propelled Vessel:
"NOTICE OF MORTGAGE
This Vessel is owned by Louisiana Dock Company LLC (the "Mortgagor") and is subject to a First Preferred Fleet Mortgage, dated February 3, 2003, as the same may be amended or supplemented, in favor of JPMorgan Chase Bank, as administrative agent, documentation agent and collateral agent, pursuant to the provisions of Chapter 313 of Title 46 of the United States Code, as amended, and under the terms of said Fleet Mortgage the Mortgagor hereby gives notice that it has not granted any charterer, the master of this Vessel or any other person, and none thereof has, the right, power or authority to create, incur or permit to exist upon this Vessel any liens or encumbrances whatsoever, other than the lien of said Fleet Mortgage, liens for crew's wages, wages of stevedores when employed directly by the Mortgagor or the master of this Vessel and general average or salvage (including contract salvage). Any such right, power or authority is also prohibited under the terms of said Fleet Mortgage."
SECTION 2.9 Libel or Attachment. If a libel or complaint shall be filed against the Vessels, or any of them, or if the Vessels, or any of them, shall be levied upon or taken into custody, or detained by any proceeding in any court or tribunal or by any government or other authority, the Mortgagor, within ten (10) days thereafter, will cause such Vessel or Vessels to be released and any Lien thereon, other than the Lien of this Fleet Mortgage or of the Existing Mortgage, to be discharged. In the event the Vessels, or any of them, are levied upon or taken into custody or detained by any authority whatsoever, the Mortgagor agrees forthwith to notify the Mortgagee thereof by telex, confirmed by letter. The Mortgagor shall reimburse the Mortgagee for any amount paid by the Mortgagee, whether in settlement of a claim or in satisfaction of a judgment, and such amounts shall be Mortgagee's Costs, as defined in and in accordance with Section 2.18 hereof.
SECTION 2.10 Maintenance of Vessels. (a) The Mortgagor will at all times, without cost or expense to the Mortgagee, maintain and preserve the Vessels in all material respects, and cause the Vessels in all material respects to be tight, staunch, strong and well and sufficiently tackled, appareled, victualed, fitted, manned, furnished and equipped and to be maintained and preserved, in good running order and repair so that the Vessels in all material respects shall be well equipped and seaworthy, in good working order, repair and operating condition, ordinary wear
and tear excepted. At all times, at its own cost and expense, the Mortgagor will
exercise due diligence to maintain and preserve the Vessels in all material
respects in as good condition, working order and repair as at the time of the
execution of this Fleet Mortgage, ordinary wear and tear and depreciation
excepted, and will maintain the Vessels in all material respects in accordance
with good marine maintenance practice and procedures and applicable legal or
regulatory requirements for the service in which they then are or will be
engaged, and in such condition as will enable the Vessels in all material
respects to pass such inspection as may be required by marine underwriters as a
condition of their writing such insurance and in such amounts as is required
under this Fleet Mortgage. Furthermore, the Mortgagor will cause each Vessel to
be periodically inspected, drydocked and recoated (hull paint), and its
machinery overhauled in accordance with normal marine practices or as may be
required by the United States Coast Guard. At the request of the Mortgagee, the
Mortgagor shall cause a marine surveyor satisfactory to the Mortgagee to perform
a survey, inspection or other actions as may be necessary on a representative
sample of the Vessels (the number or location of such Vessels included in such
representative sample to be determined by the Mortgagee in its discretion), to
prove or establish that the Vessels in all material respects have been
maintained and preserved in accordance with the provisions of this Section
2.10(a). In addition, the Mortgagor shall provide at the end of each six-month
period commencing six weeks following the date hereof to the Mortgagee a
certificate of the chief marine operations officer (currently James J. Farley,
Senior Vice President Transportation Services) of the Mortgagor stating that the
Vessels have been maintained and preserved in accordance with the requirements
of this Section 2.10(a).
(b) The Mortgagor may make structural changes, alterations or additions to the Vessels, or any of them, but only to the extent that any such change, alteration or addition is made at the Mortgagor's expense and risk and does not diminish the value, utility, capacity, operating condition and seaworthiness of the applicable Vessel.
(c) The Mortgagor shall certify as often as required by the Mortgagee that all wage and other claims which give rise to Liens have been paid.
(d) The Mortgagor shall furnish the Mortgagee within fifteen (15) days after receipt by the Mortgagor, copies of all Certificates of Inspection delivered by the United States Coast Guard.
(e) At the request of the Mortgagee, the Mortgagor shall at its expense deliver to the Mortgagee an appraisal of the current charter-free fair market value (determined on the basis of a willing buyer and willing seller) in Dollars of each Vessel by an independent valuer acceptable to the Mortgagee.
SECTION 2.11 Documentation; Operation of Vessels. (a) The Mortgagor will keep each vessel duly documented as a Vessel of the United States, under the flag of the United States, and will not cause or permit any Vessel to be operated in any manner prohibited by any law, regulation or contract applicable to such Vessel, and shall have on board as and when required thereby valid certificates showing compliance therewith. The Mortgagor will not cause or permit the Vessels, or any of them, to engage in any unlawful trade or carry any cargo that will expose the Vessels, or any of them, to penalty, forfeiture or capture, and will not do, or suffer or permit to be done, anything which can or may injuriously affect the registration or enrollment or flag of the Vessels, or any of them, under the laws and regulations of the United States.
(b) The Mortgagor will (and will cause any charterer of the Vessels, or any of them, to) comply with and satisfy all of the provisions of any applicable law, regulation, proclamation or order concerning financial responsibility for liabilities imposed on the Mortgagor or the Vessels, or any of them, with respect to pollution by any state or nation or political subdivision thereof, including but not limited to the United States Federal Water Pollution Control Act and the United States Oil Pollution Act of 1990, as any of the foregoing may at any time be amended, and will (and will cause any charterer of the Vessels, or any of them, to) maintain all certificates or other evidence of financial responsibility as may be required by any such law, regulation, proclamation or order with respect to the trade in which the Vessels, or any of them, is from time to time engaged and the cargo carried thereby.
SECTION 2.12 Inspection. The Mortgagor will permit representatives of the Mortgagee to inspect or survey the Vessels, at the Mortgagor's expense, to ascertain the condition of such Vessel or Vessels and whether such Vessel or Vessels are being properly repaired and maintained. Such inspection or survey shall be made on reasonable notice and at reasonable times and places so as not to interfere with the safe, efficient and normal operation of such Vessel or Vessels. The Mortgagor will cause to be made all such repairs as shall be required by this Fleet Mortgage, without expense to the Mortgagee, its successors and assigns or any of its authorized representatives, as such inspection or survey or an inspection or survey conducted pursuant to Section 2.10(a) may show to be required. The Mortgagor shall also permit the Mortgagee to inspect the logs and papers of the Vessels, or any of them, and any and all other contracts and other papers relating to the same, whether on board or not, whenever requested, on reasonable notice.
SECTION 2.13 Taxes, Fees, etc. The Mortgagor will pay and discharge, or cause to be paid and discharged, when due and payable from time to time, all taxes, assessments, governmental charges, fines and penalties lawfully imposed on the Vessels, or any of them; provided that the Mortgagor shall not be required to pay any such tax, assessment or charge if the validity or amount thereof is concurrently being contested in good faith by appropriate proceedings and if the Mortgagor shall have set aside on its books reserves deemed by it adequate with respect to such tax, assessment or charge. Notwithstanding the foregoing, the Mortgagor will pay or cause to be paid all such taxes, assessments or charges forthwith upon the commencement of proceedings to foreclose any Lien which is attached as security therefor.
SECTION 2.14 Sale, Assignment, Mortgage, Charter or Other Disposition of Vessel. The Mortgagor will not in any manner change the flag of the Vessels, or any of them, sell, transfer or mortgage the Vessels, or any of them, or enter into any charter party other than (a) charters permitted by the Revolving Credit and Guaranty Agreement, (b) the Existing Mortgage or the Existing Agreement, (c) charters to Guarantors, (d) charters for a period of one year or less under terms that are common and customary for a charter party used by prudent owners and operators who charter vessels similar to the Vessels and engaged in trades similar to the trades in which the Vessels are engaged, or with the prior written consent of the Mortgagee, any charters in excess of one year, and (e) charters for vessels listed on Schedule 2.14 to this Fleet Mortgage; provided that no such charter allowed in this Section 2.14 will relieve the Mortgagor of its obligations under this Fleet Mortgage, or change the flag of the Vessels, or any of them. Any written consent given for any one of the foregoing transactions shall not be construed to be a waiver of this provision in respect of any such other transaction. Any such transaction with
respect to the Vessels, or any of them, shall be subject to the provisions of this Fleet Mortgage and the Lien it creates.
SECTION 2.15 Requisition of Title or Use. In the event that the title to or ownership of the Vessels, or any of them, or the use of the Vessels, or any of them (whether on a bareboat or time charter basis or any other basis), shall be requisitioned, purchased or taken by, or the Vessels, or any of them, shall be seized by or forfeited to any government of any country or any department, agency or representative thereof pursuant to any present or future law, proclamation, decree, order or otherwise, or to any other person or persons, whether or not acting under color of governmental authority, and the compensation, purchase price, reimbursement or award for such requisition, purchase, seizure, forfeiture or other taking of such title, ownership or use shall be an amount equal to or greater than (i) $750,000 (but only if the Mortgagor fails within 270 days after the date of such event of requisition to have or to have made commitments to have one or more Eligible Vessels (as defined in 5.1 hereof), collectively with an aggregate fair market value at least equal to the amount of such compensation (as evidenced by delivery to the Mortgagee of an appraisal in form and substance satisfactory to the Mortgagee), subjected to this Fleet Mortgage pursuant to the provisions of Section 5.3 hereof, or (ii) $25,000,000, then such event shall be deemed a "Condemnation" and the compensation shall be deemed to be "Condemnation Proceeds" to be applied by the Mortgagor to prepay outstanding Obligations in accordance with Section 2.26 of the Revolving Credit and Guaranty Agreement; provided however, if an Event of Default shall have occurred and be continuing, any amount received in the event of a requisition described above shall be applied by the Mortgagor to prepay outstanding Obligations in accordance with Section 2.26 of the Revolving Credit and Guaranty Agreement. To the extent that any Condemnation Proceeds are payable to the Mortgagee, the Mortgagor hereby constitutes and appoints the Mortgagee and its successors and assigns, its true and lawful attorney, for it and in its name, place and stead, to collect, receipt for, acknowledge the payment of, sue for and execute any documentation or writing that may be necessary or required in order to obtain payment of said compensation, purchase price, reimbursement or award, giving and granting to said attorney full power and authority to do and perform every act and thing whatsoever requisite or necessary to be done as fully and to all intents and purposes as it, the Mortgagor, might or could do if personally present at the doing thereof, with full power of substitution, hereby ratifying and confirming all that its said attorney or substitute shall do or cause to be done by virtue hereof, and the Mortgagor shall promptly execute and deliver to the Mortgagee such documents and shall promptly do and perform such acts as in the opinion of the Mortgagee may be necessary or useful to facilitate or expedite the collection by the Mortgagee of such compensation, purchase price, reimbursement or award.
SECTION 2.16 Notice of Loss, Requisition or Damage. In the event of (a) actual loss of any Vessel, (b) any event referred to in Section 2.15 hereof with respect to any Vessel or (c) any casualty, accident or damage to any Vessel involving an amount in excess of $750,000, the Mortgagor shall forthwith give written notice thereof (containing full particulars) to the Mortgagee. Furthermore, the Mortgagor will provide to the Mortgagee, at the end of each six-month period commencing six months following the date hereof, a written report stating each casualty, accident or damage to any Vessel involving an amount in excess of $50,000 that occurred in the prior six month period with full particulars.
SECTION 2.17 Insurance. (a) The Mortgagor shall at all times while this Fleet Mortgage shall remain in effect maintain at its own expense the following insurance:
(i) protection and indemnity insurance with respect to each of the Vessels in such amounts, subject to such deductible or retention amounts, against such risks and under such forms as are then common or customary with respect to vessels similar to the Vessels and engaged in trades similar to the trades in which the Vessels are engaged by other prudent owners and operators of such vessels, provided that such protection and indemnity insurance (including excess policies) shall in all events:
(w) provide limits of liability of not less than $250,000,000 per occurrence (and contain no annual limits on liability);
(x) provide for deductible or retained amounts not exceeding $4,000,000 of annual aggregate deductible with respect to all vessels owned or chartered by the Mortgagor plus $50,000 per occurrence;
(y) provide protection on an "occurrence" basis (rather than on a "claims made" basis); and
(z) provide protection against liabilities arising out of pollution or the spillage or leakage of cargo with a $1,000,000 per occurrence deductible;
(ii) marine, hull and machinery and, if any Vessel or Vessels are operated outside of the United States, war risks insurance on each of the Vessels under the latest (at the time of issue of the policies in question) forms of American or London Institute of Marine Underwriters, provided that such marine, hull and machinery and war risks insurance shall in all events:
(x) be in an amount with respect to each Vessel that is not less than the full commercial value thereof;
(y) with respect to an accident, occurrence or event that does not result in an actual or constructive total loss of a Vessel or Vessels or an agreed or compromised total loss of a Vessel or Vessels, provide for deductible or retained amounts that do not exceed $4,000,000 of annual aggregate deductible with respect to all vessels owned or chartered by the Mortgagor plus $50,000 per occurrence; and
(z) with respect to an accident, occurrence or event that results in an actual or constructive total loss of a Vessel or Vessels or an agreed or compromised total loss of a Vessel or Vessels, provide for deductible or retained
amounts that do not exceed $4,000,000 of annual aggregate deductible with respect to all vessels owned or chartered by the Mortgagor with no per occurrence deductible;
(iii) Insurance protecting against claims under the Longshoremen's and Harbor Workers Compensation Act, Workmen's Compensation and public liability;
(iv) Wreck removal and fire insurance with underwriters and under policy forms and in amounts satisfactory to the Mortgagee; and
(v) Such other insurances that become customarily obtained by prudent operators of vessels similar to the Vessels and engaged in trades similar to the trades in which the Vessels are engaged or as may be reasonably required by the Mortgagee from time to time.
(b) At the Mortgagee's request, to obtain coverage against Mortgagee's Additional Perils (Pollution) Insurance on each of the Vessels, the Mortgagor shall reimburse the Mortgagee for all premiums and other amounts paid by the Mortgagee in connection with such coverage. The Mortgagor shall reimburse the Mortgagee for such costs as Mortgagee's Costs, as defined in and in accordance with Section 2.18 hereof.
(c) All insurance policies required under paragraph (a) of this Section 2.17 shall:
(i) name the Mortgagee, in its individual capacity and as administrative agent, documentation agent and collateral agent, as additional insured and as loss payee in accordance with the provisions of paragraph (i) below;
(ii) provide that in respect of the interest of the Mortgagee in such policies the insurance shall not be invalidated by any action or inaction of the Mortgagor or any other person (other than the Mortgagee) and shall insure the Mortgagee regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Mortgagor or any other person (other than the Mortgagee);
(iii) provide that if such insurance is canceled by the insurers for any reason whatsoever, or such insurance is allowed to lapse for non-payment of premium, or such insurance coverage is reduced or any other material change is made with respect thereto, then such cancellation, lapse, reduction or change shall not be effective as to the Mortgagor or the Mortgagee for 30 days after receipt by the Mortgagor or the Mortgagee, respectively, of written notice by such insurers of such cancellation, lapse, reduction or material change; and
(iv) provide that there shall be no recourse against the Mortgagee for the payment of premiums, commissions, club calls, assessments or advances.
Each insurance policy with respect to protection and indemnity insurance shall:
(i) be primary without right of contribution from any other insurance which is carried by the Mortgagee and
(ii) expressly provide that all of the provisions thereof, except the limits of liability, shall operate in the same manner as if there were a separate policy covering each insured.
(d) The Mortgagor shall not permit the Vessels, or any of them, to undertake any voyage or participate in any venture or transport any cargo which is not permitted by the insurance then in effect or which would limit such insurance or render it unavailable in whole or in part.
(e) All insurance required under this Fleet Mortgage shall be placed and kept with such insurance companies or other insurance underwriters as shall be reasonably acceptable to the Mortgagee and the Mortgagor.
(f) The Mortgagor shall deliver to the Mortgagee copies
of all certificates and, if requested by the Mortgagee, copies of all binders
and policies with respect to insurance from time to time carried on the Vessels
pursuant to this Section 2.17. In addition, on the Closing Date and on or before
February 3rd in each year commencing February 3, 2004, the Mortgagor shall
furnish or cause to be furnished to the Mortgagee a signed report by independent
marine insurance brokers, selected by the Mortgagor and acceptable to the
Mortgagee, describing in reasonable detail the insurance pursuant to this
Section 2.17 and stating that in the opinion of such brokers such insurance
complies in all material respects with the terms of this Section 2.17 and is
common and customary for types of insurances and coverage generally required by
mortgagee lenders from prudent owners and operators of vessels similar to the
Vessels and engaged in trades similar to the trades in which the Vessels are
engaged.
(g) The Mortgagor shall, at its own expense, have the duty and responsibility to make all proofs of loss and take all other steps necessary to collect from underwriters, insurance companies or funds any loss under any insurance with respect to the Vessels, or any of them, obtained by the Mortgagor as required by this Section 2.17.
(h) Nothing in this Section 2.17 shall prohibit the Mortgagee from placing additional insurance on or with respect to the Vessels at its expense, or any of them, or the operation thereof, unless such insurance would conflict with insurance that is carried by the Mortgagor. In the event that the Mortgagor shall fail to maintain any insurance which it is required to maintain pursuant to this Section 2.17, the Mortgagee may, but shall not be obligated to, arrange for such insurance and, in such event, the Mortgagor shall, upon demand, reimburse the Mortgagee for the costs thereof as Mortgagee's Costs, as defined in and in accordance with Section 2.18 hereof, without waiver of any other additional rights the Mortgagee may have.
(i) Any sums payable as a result of a loss under insurance on the Vessels, or any of them, with respect to protection and indemnity risks, including liability arising out of pollution or the spillage or leakage of cargo or collision or tower's liability, may be paid directly to the person to whom any liability covered by such insurance has been incurred or, if the liability insured against has been discharged, to the Mortgagee or the Mortgagor to reimburse it or them for any loss, damage or expense incurred by it or them and covered by such insurance. Each policy of insurance maintained under clause (ii) of paragraph (a) of this Section 2.17 shall provide that any payment that is to be made under such policy (other than with respect to any
protection and indemnity risks covered thereby) shall be made solely to the
Mortgagee if such payment (i) is in respect of losses equal to or greater than
$750,000 (but only if the Mortgagor fails within 270 days after the date of such
loss (x) to have or to have made commitments to have any Vessel subject to a
loss fully repaired and restored or (y) in respect of an actual or constructive
total loss of a Vessel or an agreed or compromised total loss of a Vessel to
subject or to have made commitments to subject one or more Eligible Vessels (as
defined in Section 5.1 hereof), collectively with an aggregate fair market value
at least equal to the amount of such insurance proceeds (as evidenced by
delivery to the Mortgagee of an appraisal in form and substance satisfactory to
the Mortgagee), to this Fleet Mortgage pursuant to the provisions of Section 5.3
hereof), (ii) is in respect to losses equal to or greater than $25,000,000 or
(iii) without regard to the amount or character of the loss, is made after the
insurer has received notice from the Mortgagee that an Event of Default has
occurred and is continuing, and before such notice is rescinded. Any insurance
recoveries to which the Mortgagee shall be so entitled pursuant to the
proceeding sentence shall be applied as follows:
(1) In the event that insurance becomes payable to the Mortgagee on account of an accident, occurrence or event involving a Vessel or Vessels that does not result in an actual or constructive total loss or an agreed or compromised total loss of such Vessel or Vessels,
(A) If no Event of Default shall have occurred and be continuing, the Mortgagee shall, upon the written request of the Mortgagor, (i) apply the proceeds of insurance to pay, or consent that the underwriters pay, directly for repairs, liabilities, salvage claims or other charges and expenses (including labor charges due or paid by the Mortgagor) with respect to such Vessel or Vessels that are covered by the policies, or (ii) to the extent that the Mortgagor shall have repaired the damage to such Vessel or Vessels and paid the cost thereof or discharged or paid such liabilities, salvage claims or other charges and expenses with respect to such Vessel or Vessels (such fact having been certified to in a certificate of an authorized officer of the Mortgagor ("Officer's Certificate") delivered to the Mortgagee, accompanied by written confirmation by the underwriter, a surveyor, an adjuster or a marine insurance broker), apply the proceeds or insurance to reimburse, or consent that the underwriters reimburse, the Mortgagor therefor, and in either case, after all known damages with respect to the particular loss shall have been repaired, except to the extent the Mortgagor with the written consent of the Mortgagee deems the said repair inadvisable, in which case such event shall be deemed a Casualty and all insurance proceeds shall be deemed Casualty Proceeds to be applied by the Mortgagor to prepay outstanding Obligations in accordance with Section 2.26 of the Revolving Credit and Guaranty Agreement, and all known costs, liabilities, salvage claims, charges and expenses with respect to such Vessel or Vessels that are covered by the policies shall have been discharged or paid, such fact having been certified to by
an Officer's Certificate delivered to the Mortgagee, accompanied by written confirmation by the underwriter, a surveyor, an adjuster or a marine insurance broker, pay, or consent that the underwriters pay, any balance of the proceeds of insurance to the Mortgagor; or
(B) if an Event of Default shall have occurred and be continuing such loss shall be deemed a Casualty and all related insurance proceeds shall be deemed Casualty Proceeds to be applied by the Mortgagor to prepay outstanding Obligations in accordance with Section 2.26 of the Revolving Credit and Guaranty Agreement or at the election of the Mortgagee applied for the purposes stated in clause (A)(i) of this subparagraph (1);
(2) In the event that insurance becomes payable to the Mortgagee on account of an accident, occurrence or event involving a Vessel or Vessels that results in an actual or constructive total loss or an agreed or compromised total loss of such Vessel or Vessels such loss shall be deemed a Casualty and all related insurance proceeds shall be deemed Casualty Proceeds to be applied by the Mortgagor to prepay outstanding Obligations in accordance with Section 2.26 of the Revolving Credit and Guaranty Agreement .
(j) During the continuance of a taking, requisition or
charter of the use of the Vessels, or any of them, by the United States of
America, the provisions of this Section 2.17 shall be deemed to have been
complied with in all respects as to such Vessel or Vessels if the United States
Government shall have agreed (i) to reimburse the Mortgagee and the Mortgagor
for loss or damage resulting from the risks indicated in paragraph (a) of this
Section 2.17, or (ii) that the Mortgagee and the Mortgagor shall be entitled to
just compensation therefor. In the event of any taking, requisition or charter
of the Vessels, or any of them, contemplated by this paragraph (j), the
Mortgagor shall promptly furnish to the Mortgagee an Officer's Certificate
stating that such taking, requisition or charter has occurred and that the
United States Government has agreed (i) to reimburse the Mortgagee and the
Mortgagor for loss or damage resulting from the risks indicated in paragraph (a)
of this Section 2.17 or (ii) that the Mortgagee and the Mortgagor are entitled
to just compensation therefor.
(k) In the event that any claim or Lien is asserted against the Vessels, or any of them, for loss, damage or expense which is covered by insurance hereunder and it is necessary for the Mortgagor to obtain a bond or supply other security to prevent the arrest of such Vessel or Vessels, or to obtain the release of such Vessel or Vessels from arrest on account of said claim or Lien, the Mortgagee, upon the written request of the Mortgagor, may, but shall not be required to, assign all or any part of its right, title and interest in and to said insurance covering such loss, damage or expense, to any person executing a surety or guaranty bond or other agreement to save or release such Vessel or Vessels from such arrest as collateral security to indemnify against liability under said bond or other agreement.
SECTION 2.18 Reimbursement of Mortgagee's Costs. (a) The Mortgagor shall promptly pay or reimburse to the Mortgagee all amounts the Mortgagee determines constitute
claims, liabilities, losses, taxes, duties, charges, costs, fees and expenses
("Mortgagee's Costs") incurred or made by the Mortgagee in exercising,
protecting or pursuing rights or remedies under this Fleet Mortgage, the
Revolving Credit and Guaranty Agreement or the other Loan Documents (including
but not limited to (i) amounts paid by the Mortgagee pursuant to Section 2.9,
(ii) costs incurred by the Mortgagee pursuant to Section 2.17(b) or (h), Section
5.4, Section 6.9 or Section 6.12 and (iii) expenses of any sale or taking of the
Vessels, or any of them, attorneys' fees and court costs) or resulting from the
release of the Vessels, or any of them, from the security created by this Fleet
Mortgage or resulting from supplementing this Fleet Mortgage to add additional
Vessels, with interest thereon at the rate provided in Section 2.09 of the
Revolving Credit and Guaranty Agreement.
(b) If the Mortgagor shall default in the observance or performance of any of the covenants, conditions or agreements in this Fleet Mortgage on its part to be performed or observed, the Mortgagee may in its discretion do all acts and make all expenditures necessary to remedy such default, including, but not limited to, the procurement of insurance on the Vessels, or any of them, making repairs, discharge or purchase of Liens and payment of taxes, dues, assessments, governmental charges, fines, penalties and attorneys' fees; provided, however, that the Mortgagee shall be under no obligation to the Mortgagor to do such acts or make any such expenditures nor shall the doing or making thereof relieve the Mortgagor of any default in that respect. All costs, fees and expenses of such acts and expenditures shall constitute Mortgagee's Costs.
(c) All Mortgagee's Costs and interest thereon shall be debts due from the Mortgagor to the Mortgagee payable on demand, and shall constitute Secured Obligations and be secured by the Lien of this Fleet Mortgage.
ARTICLE III
EVENTS OF DEFAULT AND REMEDIES
SECTION 3.1 Event of Default and Remedies. An Event of Default as defined in the Revolving Credit and Guaranty Agreement shall be an Event of Default hereunder.
Upon the occurrence and during the continuance of an Event of Default, this Fleet Mortgage shall be in default, and the Mortgagee shall have the right to exercise one or more of the following remedies:
(1) the Mortgagee may exercise all of the rights and remedies in foreclosure and otherwise given to mortgagees by the provisions of Chapter 313 or by any other applicable laws and exercise all of its rights and remedies as attorney-in-fact or otherwise under this Fleet Mortgage;
(2) the Mortgagee may bring suit at law, in equity or in admiralty in any court to foreclose, including foreclosure by seizure, arrest and sale of the Vessels, or any of them, or to recover judgment for the Secured Obligations, and collect the same out of any and all property of the Mortgagor whether covered by this Fleet Mortgage or otherwise;
(3) the Mortgagee may take the Vessels, or any
of them, wherever the same may be, without legal process and without being
responsible for loss or damage; and the Mortgagor or other person in possession
thereof shall forthwith upon demand of the Mortgagee surrender to the Mortgagee
possession of the Vessels, or any of them, and the Mortgagee may hold, lay up,
lease, charter, operate or otherwise use the Vessels, or any of them, for such
time and upon such terms as they may deem to be for their best advantage,
accounting only for the net profits, if any, arising from the use of such Vessel
or Vessels or from the sale thereof, by court proceedings or pursuant to clause
(4) below, net of all costs, expenses, charges, damages or losses by reason of
such use;
(4) the Mortgagee may sell the Vessels, or any of them, free from any claim of or by the Mortgagor in admiralty, in equity, at law or by statute and upon such terms and conditions as the Mortgagee determines, at public or private sale, by sealed bids or otherwise, by first publishing notice of any such public sale for ten (10) consecutive days in a newspaper published in the City of New York, State of New York, and if the place of sale should not be the City of New York, then also by publication of similar notice in a daily newspaper, if any, published at the place of sale, and by mailing notice of such sale, whether public or private, addressed to the Mortgagor at its respective last known address fourteen (14) days prior to the date fixed for entering into the contract of sale; in the event that the Vessels, or any of them, shall be offered for sale by private sale, no newspaper publication of notice shall be required, nor notice of adjournment of sale; sale may be held at such place and at such time as the Mortgagee by notice may have specified, or may be adjourned by the Mortgagee from time to time by announcement at the time and place appointed for such sale or for such adjourned sale, and without further notice or publication the Mortgagee may make any such sale at the time and place to which the same shall be so adjourned; and any sale may be conducted without bringing the Vessels, or any of them, to the place designated for such sale and in such manner as the Mortgagee may deem to be for its advantage; or
(5) demand and receive all freights, hires, charter hires, earnings, issues, revenues, income or profits of the Vessels, or any of them, due or to become due from any person whomsoever.
Any sale of the Mortgagor's interest in the Vessels, or any of them, made pursuant to this Fleet Mortgage, whether under the power of sale hereby granted or any judicial proceedings, shall operate to divest all right, title and interest of any nature whatsoever of the Mortgagor therein and thereto, and shall forever bar the Mortgagor, its successors and assigns, and all persons claiming by, through or under them. No purchaser shall be bound to inquire whether notice has been given, or whether any default has occurred, or as to the propriety of the sale, or as to the application of the proceeds thereof. In case of any such sale, the Mortgagee, or any other person, firm or corporation to whom the Secured Obligations secured by this Fleet Mortgage are otherwise due or owing, may bid for and purchase the Vessels, or any of them, or other property of the Mortgagor and shall be entitled for the purpose of making settlement or payment for the property so purchased, to use and apply the unpaid balance of their portion of the Secured Obligations due and owing, or which may become due or owing, as a credit against the purchase price of the Vessels, or any of them, up to the amount represented by the ratable share of the net proceeds of sale (after allowing for the costs and expenses of sale and other charges) payable to such Mortgagee or such person.
The Mortgagor hereby irrevocably appoints the Mortgagee and its successors and assigns, with full power of substitution, the true and lawful attorney or attorneys of the Mortgagor, in its name and stead, upon the happening and during the continuance of an Event of Default, to make all necessary transfers of the Vessels, or any of them, and for that purpose the Mortgagee and its successors and assigns may execute all necessary instruments of assignment and transfer, the Mortgagor hereby ratifying and confirming all that its said attorney or attorneys shall do by virtue hereof. Nevertheless, the Mortgagor shall, if so requested by the Mortgagee, ratify and confirm such sale by executing and delivering to the purchaser of such Vessel or Vessels such proper bill of sale, conveyance, instrument of transfer and release as may be designated in such request.
The Mortgagor hereby irrevocably appoints the Mortgagee and its successors and assigns, with full power of substitution, the true and lawful attorney or attorneys of the Mortgagor, in its name and stead, upon the happening and during the continuance of an Event of Default, to demand, collect, receive, compromise and sue for, so far as may be permitted by law, the Mortgagor's interest in all freights, hire, earnings, issues, revenues, income and profits of the Vessels, or any of them, and the Mortgagor's interest in all amounts due from the underwriters under any insurance thereon as payments of losses or as return premiums or otherwise, salvage awards and recoveries in general average or otherwise, and the Mortgagor's interest in all other sums, due or to become due at or after the time of the happening of any Event of Default, in respect of the Vessels, or any of them, or in respect of any insurance thereon from any person whomsoever, and to make, give and execute in the name of the Mortgagor acquittances, receipts, releases or other discharges for the same, whether under seal or otherwise, and to endorse and accept in the name of the Mortgagor all checks, notes, drafts, warrants, agreements and all other instruments in writing with respect to the foregoing.
The Mortgagor covenants and agrees that in addition to any and all other rights, powers and remedies elsewhere in this Fleet Mortgage granted to and conferred upon the Mortgagee, the Mortgagee in any suit to enforce any of its rights, powers or remedies shall be entitled as a matter of right and not as a matter of discretion (i) to the appointment of a receiver or receivers of the Mortgagor's interest in the Vessels, or any of them, and the Mortgagor's interest in the hire, earnings, issues, revenues, freights, incomes and profits due or to become due and arising from the operation thereof, and (ii) to a decree ordering and directing the sale and disposal of the Vessels, or any of them.
SECTION 3.2 Application of Proceeds. Upon the occurrence and during the continuance of an Event of Default, the proceeds of the sale of the Vessels, or any of them, the proceeds of any judgment collected by the Mortgagee for any default hereunder, and the net earnings from any management, charter or other use of the same by the Mortgagee under any of the powers specified in Section 3.1, and any and all other moneys held by or received by the Mortgagee pursuant to or under the terms of this Fleet Mortgage, the application of which has not elsewhere herein been specifically provided for, shall be applied by the Mortgagee as follows:
FIRST: To the payment of all Mortgagee's Costs, including the expenses of any sale or any taking of the Vessels, or any of them, attorneys' fees and court costs,
together with interest as provided herein, and to provide adequate indemnity to the Mortgagee against Liens claiming priority over or equality with this Fleet Mortgage;
SECOND: To the payment of interest on, and then in such order as the Mortgagee may determine, the principal of, the Loans under the Revolving Credit and Guaranty Agreement;
THIRD: To the payment of the remaining Secured Obligations due and owing and all other sums secured by or payable hereunder whether due or not together with interest thereon as provided herein, and of all damages, liquidated or otherwise, including without limitation all other unpaid items, costs or expenses; and
FOURTH: To the payment of any surplus thereafter remaining to the Mortgagor or to whomsoever may be entitled thereto.
In the event that the proceeds are insufficient to pay the amounts specified in paragraphs "FIRST", "SECOND" and "THIRD" above, the Mortgagee shall be entitled to collect the balance from the Mortgagor, or any other person liable therefor.
SECTION 3.3 Certain Rights of Mortgagor. In the absence of an Event of Default, the Mortgagor shall (a) be permitted to retain actual possession and use of the Vessels and (b) have the right, from time to time, in its discretion and without application to the Mortgagee and without a release thereof by the Mortgagee, to dispose of, free from the Lien hereof, its interest in any boilers, engines, machinery, masts, spars, rigging, boats, anchors, cables, chains, tackle, capstans, outfit, tools, pumps and pumping equipment, apparel, furniture, fittings, equipment or any other appurtenances of the Vessels, or any of them, that are no longer useful, necessary, profitable or advantageous in the operation of such Vessel or Vessels, first or simultaneously replacing the same by such new items of substantially equal value, which shall forthwith become subject to the Lien of this Fleet Mortgage as a first preferred mortgage thereon. Notwithstanding the foregoing, the Mortgagor shall not be required to replace covers at the end of their useful lives for any Vessel or Vessels that have been converted to a use that does not require a cover.
ARTICLE IV
GENERAL POWERS OF MORTGAGEE
SECTION 4.1 Arrest or Detention of Vessel. In the event that the Vessels, or any of them, shall be arrested or detained by a marshal or other officer of any court of law, equity or admiralty jurisdiction or by any government or other authority and shall not be released from arrest or detention within ten (10) days from the date of arrest or detention, the Mortgagor does hereby authorize and empower the Mortgagee and its successors and assigns, in the name of the Mortgagor, or its successors or assigns, and does hereby irrevocably appoint the Mortgagee and its successors and assigns, with full power of substitution, the true and lawful attorney or attorneys of the Mortgagor, in its name and stead, to apply for and receive possession of and to take possession of such Vessel or Vessels with all the rights and powers that the Mortgagor, or its successors or assigns, might have, possess or exercise in any such event.
SECTION 4.2 Suits. The Mortgagor also hereby irrevocably appoints the Mortgagee and its successors and assigns, with full power of substitution, the true and lawful attorney of the Mortgagor, in its name and stead, to appear in the name of the Mortgagor, its successors or assigns, in any court where a suit is pending against the Vessels, or any of them, because of or on account of any alleged Lien against such Vessel or Vessels from which such Vessel or Vessels have not been released and to take such proceedings as the Mortgagee reasonably may deem proper towards the defense of such suit and the purchase or discharge of such Lien, and all expenditures made or incurred by the Mortgagee for the purpose of such defense or discharge shall constitute Mortgagee's Costs.
The Mortgagor hereby expressly and irrevocably consents to the jurisdiction of any court in any jurisdiction whatsoever wherein any Vessel may at any time be located outside of the continental United States for the sole purposes of the foreclosure of this Fleet Mortgage, the sale of the Mortgagor's interest in such Vessel or the enforcement of any other remedy or right hereunder, and hereby expressly and irrevocably submits the person of the Mortgagor and its interest in such Vessel to the jurisdiction of any such court in any such action or proceeding.
SECTION 4.3 Powers and Remedies Cumulative; No Waiver. Each and every power and remedy herein specifically given to the Mortgagee or otherwise available pursuant to this Fleet Mortgage shall be cumulative and shall be in addition to every other power and remedy herein specifically given or now or hereafter existing at law, in equity, in admiralty or by statute, and each and every power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as often and in such order as may be determined by the Mortgagee and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other power or remedy. No notice to or demand on the Mortgagor in any instance shall entitle the Mortgagor to any other or further notice or demand in similar or other circumstances. No delay or omission by the Mortgagee in the exercise of any right or power or in pursuance of any remedy occurring upon an Event of Default shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Mortgagor or to be an acquiescence therein, nor shall the acceptance by the Mortgagee of any security or of any payment of or on account of any advances after any past Event of Default or of any payment on account of any past Event of Default be construed to be a waiver of any right to take advantage of any future Event of Default or of any past Event of Default not completely cured thereby.
ARTICLE V
RELEASE OF VESSELS AND MORTGAGE
OF ADDITIONAL VESSELS
SECTION 5.1 Definitions. For purposes of this Article V, the following terms shall have the respective meanings set forth below:
"Eligible Vessel" shall mean any inland river barge or towboat which is duly documented pursuant to the laws of the United States as a vessel of the United States under the United States flag, the whole of which vessel is lawfully owned and lawfully possessed by the Mortgagor, free from any Lien other than the Liens permitted by Section 2.7 hereof.
"Release" shall mean a release, substantially in the form of Annex B (with such changes as shall be required in order to enable such release to be filed and recorded in accordance with the provisions of Chapter 313), of one or more Vessels from the Lien of this Fleet Mortgage executed by the Mortgagee and delivered to the Mortgagor.
"Release Request" shall mean a request delivered by the Mortgagor to the Mortgagee pursuant to and in accordance with the requirements of Section 5.2 hereof.
"Supplement" shall mean a supplement to this Fleet Mortgage, substantially in the form of Annex C hereto (with such changes as shall be required in order to enable such supplement to be filed and recorded in accordance with the provisions of Chapter 313) that subjects one or more Eligible Vessels to the Lien of this Fleet Mortgage, executed by the Mortgagor and delivered to the Mortgagee pursuant to and in accordance with the requirements of Section 5.3 hereof.
SECTION 5.2 Release of Vessels. (a) The Mortgagor may deliver a Release Request to the Mortgagee at any time prior to any sale or disposition of a Vessel or Vessels by the Mortgagor permitted by Section 6.11 of the Revolving Credit and Guaranty Agreement (a "Permitted Sale"). Any Release Request shall be in writing, be signed on behalf of the Mortgagor, certify that such Permitted Sale will be in accordance with the Revolving Credit and Guaranty Agreement, identify the Vessel or Vessels to be released and be accompanied by a form of Release respecting such Vessel or Vessels for execution by the Mortgagee.
(b) After receiving a Release Request that satisfies the requirements of the preceding paragraph (a) and provided no Event of Default has occurred and is continuing, the Mortgagee shall deliver to the Mortgagor a Release covering the Vessel or Vessels designated in such Release Request. Upon recordation, the Mortgagor shall deliver to the Mortgagee evidence thereof.
SECTION 5.3 Mortgage of Additional Vessels. (a) If the Mortgagor
acquires any Eligible Vessel or Eligible Vessels during any calendar month, on
or before the thirtieth (30th) day following the close of such calendar month,
the Mortgagor shall prepare, execute and deliver to the Mortgagee a Supplement
with respect to such Eligible Vessel or Eligible Vessels. Upon execution of the
Supplement by the Mortgagee, the Mortgagor shall cause such Supplement to be
recorded and shall otherwise take all steps necessary in order to subject the
Eligible Vessel or Eligible Vessels named therein to the Lien of this Fleet
Mortgage, subject to all of the terms and provisions hereof. At the time of the
execution and recordation of such Supplement, (i) the Mortgagor shall deliver to
the Mortgagee a copy of the Supplement, together with evidence of recordation,
(ii) the Mortgagor shall deliver to the Mortgagee certificates of insurance or
other evidence reasonably satisfactory to the Mortgagee that the Mortgagor has
insured the Vessel or Vessels covered by such Supplement in accordance with the
requirements set forth in Section 2.17 of this Fleet Mortgage, (iii) the
Mortgagor shall deliver to the Mortgagee an opinion of counsel reasonably
satisfactory to the Mortgagee, substantially in the form of Annex D hereto and
(iv) the Mortgagor shall deliver to the Mortgagee such other documents and take
such other steps as may be reasonably requested by the Mortgagee.
(b) If any Subsidiary of the Mortgagor acquires any Eligible Vessel or Eligible Vessels during a calendar month, on or before the thirtieth (30th) day following the close of such calendar month, the Mortgagor shall cause such Subsidiary to subject such Eligible Vessel or Eligible Vessels to a first preferred mortgage, substantially in the form of this Fleet Mortgage, in favor of the Mortgagee, or if applicable, a mortgage supplement in the same manner as described in this Section 5.3.
SECTION 5.4 Costs. The Mortgagor shall, promptly upon receiving invoices therefor, pay all costs and expenses incurred by the Mortgagor and the Mortgagee in connection with the matters contemplated by this Article V (including, without limitation, the costs of negotiating, preparing, duplicating and delivering documents, all filing and recording fees and similar charges and the fees and disbursements of counsel) and reimburse the Mortgagee for any such costs and expenses paid by them, which amounts shall constitute Mortgagee's Costs.
ARTICLE VI
SUNDRY PROVISIONS
SECTION 6.1 Amount of Fleet Mortgage. For purposes of 46 U.S.C. Section 31321(b)(3), the amount of the direct or contingent obligations that are or may be secured by this Fleet Mortgage (excluding interest, expenses and fees) is $75,000,000 plus interest, expenses, fees, indemnities and costs of performance of the covenants contained in this Fleet Mortgage, the Revolving Credit and Guaranty Agreement and in the other Loan Documents.
SECTION 6.2 Counterparts. This Fleet Mortgage and any amendment hereof may be executed in any number of counterparts and all such counterparts executed and delivered each as an original shall constitute but one and the same instrument.
SECTION 6.3 Currency. The terms "Dollars" and "$" as used herein shall mean any coin or currency of the United States of America which at the time of payment shall be legal tender for public and private debts.
SECTION 6.4 Assignment; Successors. All the covenants, promises, stipulations and agreements of the Mortgagor in this Fleet Mortgage contained shall bind the Mortgagor and its successors and assigns and shall inure to the benefit of the Mortgagee and its successors and assigns. The Mortgagor acknowledges that the Mortgagee may assign its interest, in whole or in part, in this Fleet Mortgage, to any third party and, for such purpose, the Mortgagor waives all right to notice or consent. The Mortgagor may not assign any of its rights or obligations hereunder without the prior written consent of the Mortgagee.
SECTION 6.5 Agents of Mortgagee. Wherever and whenever herein any right, power or authority is granted or given to the Mortgagee, such right, power and authority may be exercised in all cases by the Mortgagee through such agent or agents or official or officials as it or they may appoint or authorize, and the act or acts of such agent or agents or official or officials when taken shall constitute the act of the Mortgagee.
SECTION 6.6 Severability. If any word, phrase, sentence, paragraph,
provision or section of this Fleet Mortgage shall be held, declared, or
pronounced void, voidable, invalid,
unenforceable or inoperative for any reason by any court of competent jurisdiction, such holding, declaration or pronouncement shall not adversely affect any other word, phrase, sentence, paragraph, provision or section of this Fleet Mortgage which will otherwise remain in full force and effect and be enforced in accordance with its terms, and the effect of such holding, declaration or pronouncement shall be limited to the territory or the jurisdiction in which made.
SECTION 6.7 Amendments; Supplements. This Fleet Mortgage may not be amended or supplemented except in writing by the Mortgagor and the Mortgagee. The provisions of this Fleet Mortgage may not be waived except in writing by the Mortgagee.
SECTION 6.8 Governing Law. To the extent not governed by the laws of the United States, this Fleet Mortgage shall be governed by the laws of the State of New York.
SECTION 6.9 Recordation of Mortgage. The cost and expense of recording this Fleet Mortgage, and the cost and expense of obtaining certified copies of this Fleet Mortgage, shall be paid by the Mortgagor, and the Mortgagor agrees to pay the same or reimburse the Mortgagee, as the case may be, within 10 days after demand. If such sums are not so paid, and if they are borne or paid by the Mortgagee, such sums shall be Mortgagee's Costs.
SECTION 6.10 No Waiver of Preferred Status. Nothing contained herein shall be construed as a waiver by the Mortgagee of the preferred status of this Fleet Mortgage, and any provision which would otherwise constitute such a waiver shall to such extent be of no force or effect.
SECTION 6.11 Waiver. The Mortgagor agrees that it will not at any time or in any manner whatever claim or take any benefit of any stay, extension or moratorium law which may affect the terms of this Fleet Mortgage; nor claim or take any benefit of any law providing for the valuation or appraisal of the Vessels, or any of them, prior to any sale thereof; and the Mortgagor hereby expressly waives all benefit or advantage of any such law, and covenants not to hinder, delay, or impede the execution of any power or remedy herein granted or available at law or in equity to the Mortgagee, but to suffer and permit the execution of every power and remedy as though no such law existed.
SECTION 6.12 Further Assurances. At the request of the Mortgagee, from time to time the Mortgagor will execute, on its own behalf, such other and further instruments and documents as in the opinion of the Mortgagee or special counsel to the Mortgagee may be required, useful or desirable to subject each Vessel more effectually to the Lien of this Fleet Mortgage or to obtain or maintain the full benefits of this Fleet Mortgage. Upon the failure of the Mortgagor so to do, the Mortgagee may execute any and all such other and further assurances and documents for and in the name of the Mortgagor, and the Mortgagor hereby irrevocably appoints the Mortgagee the agent and attorney-in-fact of the Mortgagor so to do, and any expense of the Mortgagee in connection therewith shall constitute Mortgagee's Costs.
SECTION 6.13 Notices. Notices and other communications provided for herein shall be given as provided in the Revolving Credit and Guaranty Agreement.
IN WITNESS WHEREOF, the Mortgagor has executed this Fleet Mortgage effective the day and year first above written.
LOUISIANA DOCK COMPANY LLC
Title:
STATE OF INDIANA )
: ss.:
COUNTY OF CLARK )
|
On this __ day of February, 2003, before me personally appeared _______________ to me known, who, being by me duly sworn, did depose and say that she/he resides at __________________________; that she/he is the ______________ of LOUISIANA DOCK COMPANY LLC, the limited liability company described in and which executed the foregoing instrument; that she/he signed his name thereto pursuant to authority granted to her/him by the Board of Managers of said limited liability company.
Notary Public
SCHEDULE I
LIST OF VESSELS
NAME OFFICIAL NUMBER
---- ---------------
|
SCHEDULE 2.14
EXISTING CHARTERS
ANNEX A
FORM OF REVOLVING CREDIT AND GUARANTY AGREEMENT
ANNEX B
FORM OF PARTIAL RELEASE OF FIRST PREFERRED FLEET MORTGAGE
JPMORGAN CHASE BANK, a New York banking corporation, as administrative
agent, documentation agent and collateral agent pursuant to the Revolving Credit
and Guaranty Agreement, located at 270 Park Avenue, New York, New York 10017
(the "Mortgagee"), does hereby certify that the [vessel/vessels] listed on
Attachment A attached hereto and made a part hereof that were mortgaged to the
Mortgagee under that First Preferred Fleet Mortgage, dated February __, 2003 (as
previously supplemented, the "Fleet Mortgage") [any amendments or supplements],
made and executed by Louisiana Dock Company LLC, a Delaware limited liability
company, with its address at [__________________________], to secure payment to
the Mortgagee of the total principal amount of US$75,000,000, plus interest,
expenses, fees, indemnities and the costs of performance of mortgage and other
covenants, which mortgage was filed at the United States Coast Guard, National
Vessel Documentation Center on February __, 2003, at [time] and recorded in Book
[____], Instrument [____] [recording information of amendments or supplements]
on the whole of the vessels listed on Schedule I therein, [is/are] hereby
released from the lien of the Fleet Mortgage. All other vessels listed on
Schedule I to the Fleet Mortgage but not listed on Attachment A remain subject
to the lien of the Fleet Mortgage.
IN WITNESS WHEREOF, the Mortgagee has caused this Partial Release of
First Preferred Fleet Mortgage to be executed this _____ day of ____________,
[year].
JPMORGAN CHASE BANK, a New York
banking corporation, as
administrative agent, documentation
agent and collateral agent
Title:
STATE OF _________________ )
) ss:
COUNTY OF ________________ )
On this ___ day of _____________, 200_, before me personally appeared _______________ to me known, who, being by me duly sworn, did depose and say that she/he resides at __________________________; that she/he is the ____________ of JPMORGAN CHASE BANK, the banking corporation described in and which executed the foregoing instrument; that she/he signed his name thereto pursuant to authority granted to her/him by the Board of Directors of said corporation.
ANNEX C
SUPPLEMENT NO. ____
to
FIRST PREFERRED FLEET MORTGAGE
THIS SUPPLEMENT NO. ___, dated and effective as of the _____ day of ____________________, (this "Supplement") to that First Preferred Fleet Mortgage dated and effective as of February __, 2003, is entered into between LOUISIANA DOCK COMPANY LLC, a Delaware limited liability company (the "Mortgagor"), and JPMORGAN CHASE BANK, as administrative agent, documentation agent and collateral agent (the "Mortgagee") under a Revolving Credit and Guaranty Agreement dated as of February __, 2003 (the "Revolving Credit and Guaranty Agreement") among the Mortgagor, American Commercial Lines Holdings LLC, the Banks party thereto (the "Banks"), and JPMorgan Chase Bank, as administrative agent, documentation agent and collateral agent.
W I T N E S S E T H:
RECITALS
A. This Supplement supplements that certain First Preferred Fleet Mortgage dated February __, 2003 made and given by the Mortgagor to the Mortgagee, and filed in the Office of the United States Coast Guard National Vessel Documentation Center at [TIME] on [DATE] and recorded in Book No. ____, Instrument No. ____ (said First Preferred Fleet Mortgage, as the same has heretofore been and may hereafter be amended, supplemented and restated, is herein called the "Fleet Mortgage") on the Vessels identified on Schedule I attached hereto.
B. This is a supplement that covers the whole of the
[vessel/vessels] listed on Schedule II attached hereto as more fully described
in the Granting Clause hereof. [Such vessel/each of such vessels] has been duly
documented in the name of the Mortgagor or for which an application for such
[vessel/vessels] to be duly documented in the name of the Mortgagor has been
filed at the United States Coast Guard National Vessel Documentation Center that
is in substantial compliance with the requirements of chapter 121 of Title 46 of
the United States Code, as amended, and the regulations prescribed under that
chapter under the laws and flag of the United States. The Mortgagor is the true,
lawful and sole owner of the whole of each of the [vessel/vessels] identified on
Schedule II.
C. The full name and address of the Mortgagor is:
Louisiana Dock Company LLC
1701 E. Market Street
P.O. Box 610
Jeffersonville, Indiana 47130-0610
Attention: General Counsel
D. The full name and address of the Mortgagee is:
JPMorgan Chase Bank, as administrative agent, documentation agent and collateral agent under the Revolving Credit and Guaranty Agreement,
270 Park Avenue New York, New York 10017 Attention: Craig H. Fuehrer (telecopy: 646-534-1755)
E. For purposes of 46 U.S.C. Section 31321(b)(3), the amount of the direct or contingent obligations that are or may be secured by this Supplement (excluding interest, expenses and fees) is $75,000,000 plus interest, expenses, fees, indemnities and costs of performance of the covenants contained in this Supplement, the Fleet Mortgage, the Revolving Credit and Guaranty Agreement and in the other Loan Documents.
F. The Mortgage was granted by the Mortgagor to secure the payment of the Secured Obligations.
G. Pursuant to the provisions of Section 5.3 of the
Fleet Mortgage, the Mortgagor is now required to subject [an] additional
[vessel/vessels] to the Lien of the Fleet Mortgage by executing and delivering
to the Mortgagee this Supplement.
GRANTING CLAUSE
NOW, THEREFORE, in consideration of the premises and of other
valuable consideration, the receipt and sufficiency of which the Mortgagor
hereby acknowledges, and in order to secure the timely payment in full and the
full performance of all Secured Obligations, the Mortgagor has granted,
conveyed, mortgaged, pledged, assigned, transferred, set over and confirmed and
subjected to the Lien of the Fleet Mortgage, and by these presents the Mortgagor
does grant, convey, mortgage, pledge, assign, transfer, set over and confirm and
subject to the Lien of the Fleet Mortgage, unto the Mortgagee and its successors
and assigns, the whole of the [vessel/vessels] identified in Recital B above,
[each of] which is duly documented in the name of the Mortgagor or for which an
application for such [vessel/vessels] to be duly documented in the name of the
Mortgagor has been filed at the United States Coast Guard National Vessel
Documentation Center that is in substantial compliance with the requirements of
chapter 121 of Title 46 of the United States Code, as amended, and the
regulations prescribed under that chapter, under the laws and flag of the United
States of America, including, without being limited to, all of the boilers,
engines, machinery, masts, spars, rigging, boats, pumps, anchors, cables,
chains, tackle, apparel, furniture, fittings, equipment and other appurtenances
appertaining or belonging thereto, whether now owned or hereafter acquired, and
all additions, improvements and replacements hereafter made in or to any vessel,
or any part thereof whether on board or not, including all items and
appurtenances aforesaid and all rents, charters, charter parties, freights,
sub-freights, cargoes, operating profits, and proceeds of the foregoing ([each]
such vessel and all items thereof above enumerated being included in the term "Vessel" as used in this Fleet Mortgage);
TO HAVE AND TO HOLD the same unto and for the proper use and benefit of the Mortgagee, its successors and assigns, forever, upon the terms of the Fleet Mortgage. [The/each] Vessel identified herein shall be subjected to the Lien of the Fleet Mortgage by this Supplement.
ARTICLE I
GENERAL PROVISIONS
SECTION 1.1 Definitions. Capitalized terms used but not defined herein shall have the same meanings set forth with respect thereto in the Fleet Mortgage.
SECTION 1.2 Schedule I. Schedule I to the Fleet Mortgage is hereby supplemented by the inclusion thereon of the Vessels listed in Schedule II hereto with the effect that such Vessels shall hereafter be included as "Vessels" for all purposes of the Fleet Mortgage.
ARTICLE II
REPRESENTATIONS OR WARRANTIES OF THE MORTGAGOR
SECTION 2.1 Restatement and Incorporation of Representations or Warranties. The Mortgagor hereby confirms the accuracy of each of the representations and warranties of the Fleet Mortgage as of the date hereof with respect to each Vessel identified herein.
ARTICLE III
RELATIONSHIP TO MORTGAGE
SECTION 3.1 Part of the Mortgage. This Supplement supplements the Fleet Mortgage and shall, from and after the date hereof, constitute a part of the Fleet Mortgage for all purposes.
SECTION 3.2 Ratification of the Mortgage. The Fleet Mortgage remains in full force and effect and, except as expressly supplemented by this Supplement, the Fleet Mortgage and each of its provisions is hereby in all respects ratified and confirmed.
ARTICLE IV
SUNDRY PROVISIONS
SECTION 4.1 Counterparts. This Supplement may be executed in any number of counterparts, each of which shall for all purposes be deemed to be an original and such counterparts taken together shall be deemed to constitute one and the same instrument.
SECTION 4.2 Governing Law. To the extent not governed by the laws of the United States, this Supplement shall be governed by the laws of the State of New York.
SECTION 4.3 Recordation of Supplement. The cost and expense of recording this Supplement, and the cost and expense of obtaining certified copies of this Supplement, shall be paid by the Mortgagor, and the Mortgagor agrees to pay the same or reimburse the Mortgagee, as the case may be, within 10 days after demand, If such sums are not so paid, and if they are borne or paid by the Mortgagee, such sums shall be Mortgagee's Costs.
SECTION 4.4 Further Assurances. At the request of the Mortgagee, from time to time the Mortgagor will execute, on its own behalf, such other and further instruments and documents as in the opinion of the Mortgagee or special counsel to the Mortgagee may be required, useful or desirable to subject each Vessel more effectually to the Lien of the Fleet Mortgage or to obtain or maintain the full benefits of the Fleet Mortgage. Upon the failure of the Mortgagor so to do, the Mortgagee may execute any and all such other and further assurances and documents for and in the name of the Mortgagor, and the Mortgagor hereby irrevocably appoints the Mortgagee the agent and attorney-in-fact of the Mortgagor so to do, and any expense of the Mortgagee in connection therewith shall constitute Mortgagee's Costs.
IN WITNESS WHEREOF, the Mortgagor and the Mortgagee have caused this Supplement No. ___ to First Preferred Fleet Mortgage to be duly executed and delivered as of the day and year first above written.
LOUISIANA DOCK COMPANY LLC
JPMORGAN CHASE BANK, as
administrative agent, documentation
agent and collateral agent
STATE OF [ ] )
: ss.:
COUNTY OF [ ] )
On this ___ day of _____________, 200_, before me personally appeared _______________ to me known, who, being by me duly sworn, did depose and say that she/he resides at __________________________; that she/he is the ____________ of LOUISIANA DOCK COMPANY LLC, the limited liability company described in and which executed the foregoing instrument; that she/he signed his name thereto pursuant to authority granted to her/him by the Board of Managers of said limited liability company.
STATE OF [ ] )
: ss.:
COUNTY OF [ ] )
On this ___ day of _____________, 200_, before me personally appeared _______________ to me known, who, being by me duly sworn, did depose and say that she/he resides at __________________________; that she/he is the ____________ of JPMORGAN CHASE BANK, the New York banking corporation described in and which executed the foregoing instrument; that she/he signed his name thereto pursuant to authority granted to her/him by the Board of Directors of said corporation.
SCHEDULE I TO SUPPLEMENT NO. __
LIST OF VESSELS FROM FLEET MORTGAGE
SCHEDULE II TO SUPPLEMENT NO. __
LIST OF VESSELS ADDED BY SUPPLEMENT
ANNEX D
Form of Legal Opinion
[date]
JPMorgan Chase Bank,
as administrative agent, documentation agent and collateral agent
270 Park Avenue
New York, New York 10017
Gentlemen:
We have acted as special maritime counsel to Louisiana Dock Company LLC, a Delaware limited liability company (the "Mortgagor"), in connection with that Supplement No. __ dated _________, ____ (the "Mortgage Supplement") to that First Preferred Ship Mortgage dated _____________, ____, (the "Fleet Mortgage") given by the Mortgagor, as mortgagor, to JPMorgan Chase Bank, as administrative agent, documentation agent and collateral agent, as Mortgagee (the "Mortgagee").
In connection with this opinion, we have examined (a) an executed copy, certified or otherwise identified to our satisfaction, of the Mortgage Supplement, (b) such other agreements, documents, certificates and corporate records of the Mortgagor and official records, affidavits and other instruments and (c) such laws and regulations, as we deemed appropriate for the purposes of this opinion. As to factual matters, we have, in certain instances, examined and relied upon certificates of corporate officers of the Mortgagor, copies of which are delivered to you simultaneously herewith and have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. For purposes of this opinion, we have assumed that the Mortgage Supplement has been duly and validly authorized, executed and delivered and constitutes the legal, valid and binding obligation of the Mortgagor, enforceable in accordance with its terms under the laws of the State of New York.
Based upon the foregoing and subject to the further limitations, assumptions and qualifications set forth herein, we are of the opinion that:
1. The Mortgagor is the sole owner of the whole of [the vessel/each of the vessels] identified on Schedule 1 to the Mortgage Supplement (the "[New Vessel/Vessels]"). [The/each] New Vessel is free and clear of any claim, lien, mortgage or other encumbrance of any character of record except for the Fleet Mortgage and the Existing Mortgage, as defined in the Fleet Mortgage, and except as set forth on Exhibit A attached hereto. To the extent that this opinion relates to ownership and freedom and clearance of claims, liens, mortgages or other encumbrances on the [New Vessel/Vessels], we have relied upon the certificates as to such matters, dated the date above, of the Mortgagor and records of the United States Coast Guard National Vessel Documentation Center.
2. [The New Vessel/each of the New Vessels] is eligible for documentation and is duly documented under the laws of the United States under 46 U.S.C. Chapter 121.
3. The Mortgage Supplement has been duly filed and recorded at the National Vessel Documentation Center (the only office in which such filing and recording are necessary), and constitutes a fully perfected "preferred" mortgage on each of the New Vessels in favor of the Mortgagee having the effect and with the priority provided by 46 U.S.C. Section 31301 et seq., and subject to no other lien or encumbrance of record.
The foregoing opinion is subject to the following qualifications:
(a) Enforcement of the Mortgage Supplement may be (i) limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the enforcement of creditors' rights generally, (ii) subject to general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law) and (iii) subject to the fact that some of the provisions of the Mortgage Supplement may be rendered void or unenforceable in whole or in part by the laws of certain jurisdictions in which enforcement may be sought, but that fact will not materially interfere with the practical realization of the benefits of the security provided by the Mortgage Supplement, and the inclusion of such provisions does not affect the validity of the Mortgage Supplement and without which provisions the Mortgage Supplement contains adequate provisions for enforcing payment of the Secured Obligations (as such term is defined in each Fleet Mortgage) and realizing upon the security provided by the Mortgage Supplement;
(b) No opinion is expressed as to the specific remedy, if any, that any court, other governmental authority or arbitrator may grant, impose or render; and
(c) We do not purport to be expert on, and express no opinion with respect to, the law of any jurisdiction other than the federal laws of the United States of America.
This opinion is given as of the date hereof and is intended solely for your benefit and is not to be made available to or relied upon by other persons or entities without the undersigned's prior written consent.
Very truly yours,
Exhibit 10.14
SEPARATION AGREEMENT
This Separation Agreement (hereinafter the "Agreement") is made and entered into this 12th day of August, 2003 by and between MICHAEL C. HAGAN (hereinafter "Hagan"), and AMERICAN COMMERCIAL LINES LLC, a Delaware limited liability company with a business address of 1701 East Market Place, Jeffersonville, Indiana 47130, as debtor and debtor in possession, and all of its parent, related, affiliated and subsidiary companies, and all their predecessors, successors, employees, officers, directors, board of managers, members, interest holders, representatives, assigns, agents, insurers and employee benefit programs, and the trustees, administrators, fiduciaries and insurers of such employee benefit programs (collectively, the "the Company").
RECITALS
1. As of the date hereof, Hagan is employed by the Company as President and Chief Executive Officer and also serves as a member of the Board of Managers of the Company.
2. Hagan has announced his intention to retire from the Company. Hagan and the Company have agreed that Hagan's retirement date will be October 31, 2003, unless the parties mutually agree to an earlier date.
3. Hagan and the Company wish to resolve all outstanding matters between them in a mutually acceptable way.
4. The Company has offered to provide benefits to Hagan in exchange for Hagan's execution of this Agreement, the Releases contained herein and the Consulting Agreement defined below.
5. Hagan desires to waive certain claims or potential claims Hagan may have or could claim to have against the Company in order to receive these benefits.
6. Hagan and the Company wish to enter into a consulting arrangement pursuant to a consulting agreement (the "Consulting Agreement") to be executed contemporaneous herewith for certain services of Hagan following his retirement.
NOW THEREFORE, in exchange for the good and valuable consideration provided herein, the receipt and sufficiency of which is hereby acknowledged, Hagan and the Company hereby agree as follows:
(1) CONCLUSION OF EMPLOYMENT
Hagan's active engagement as an employee of the Company will end on October 31, 2003, or such earlier date as the parties may mutually agree (hereinafter the "Retirement Date"). Hagan promises that on or before the Retirement Date, he will return all files, records, credit cards, keys, identification, computers, computer records, cell phones, pagers, or other Company property which is in Hagan's possession or
control, except for such items as Hagan may be instructed to retain until the conclusion of the Consulting Period as defined below. In the event that Hagan retains or receives the Company property during the Consulting Period, Hagan covenants to return all such property on or before the conclusion of the Consulting Period.
(2) NON-DISPARAGEMENT, NON-SOLICITATION, NON-COMPETITION, CONSULTING AND PUBLIC DISCLOSURE
(a) Non-Disparagement and Non-Solicitation by Hagan. Beginning on the date hereof, Hagan agrees and acknowledges that he will not:
(i) disparage the Company in any manner;
(ii) disclose any confidential information, proprietary information, trade secrets, or other information which is not disseminated publicly (hereinafter collectively "Confidential Information") which Hagan learned while employed by the Company;
(iii) through the end of the Non-Compete Period (as defined below) solicit or help anyone solicit any employees of the Company to cease employment with the Company; or
(iv) through the end of the Non-Compete Period (as defined below) solicit or help anyone to solicit any customers or vendors of the Company to cease dealing with the Company.
(b) Non-Disparagement by the Company. Beginning on the date hereof, the Company agrees and acknowledges that it shall not disparage Hagan in manner, and shall not directly or indirectly, publicly or privately, make, publish or solicit or encourage others to make, publish or solicit any disparaging statements, comments, announcements or remarks concerning Hagan.
(c) Non-Competition by Hagan. From the Retirement Date through June 30, 2004 (the "Non-compete Period"), Hagan shall not accept employment with or otherwise work or act for or on behalf of any person or entity engaged in the transportation of cargo by barge on the Inland Waterway System of the United States in competition with American Commercial Barge Line LLC
(3) COMPENSATION AND BENEFITS
(a) Base Salary. From the date hereof, through and including the Retirement Date, the Company shall continue to pay Hagan his Base Salary, pursuant to the terms of the employment agreement between Hagan and the Company dated as of May 29, 2002 (the "Hagan Employment Agreement"), including all earned or accrued vacation pay.
(b) Compensation. In consideration of the Claims to be released by Hagan, the agreements of Hagan set forth herein (including, but not limited to the Non-Competition
Agreement, and the Consulting Services to be provided by Hagan, as set forth below, the Company shall pay to Hagan: (i) an initial payment (the "Initial Payment") of $275,000.00 in cash, within three (3) business days after the Release (as defined below) becomes irrevocable; and (ii) a consulting fee (the "Consulting Fee"), of $25,000 per month, payable to Hagan (or to his estate if he should die during the Consulting Period) in advance on or before the first business day of each month. Pursuant to Section 16, hereof, the Company shall use its best efforts to ensure that the Initial Payment and the Consulting Fees are granted administrative priority status pursuant to Section 503(b) of the Bankruptcy Code.
(c) Welfare Plans and Benefits Programs. Beginning on the commencement date of the Consulting Period, Hagan shall continue to participate in the Company's group medical and dental insurance plans for two (2) years, at a cost to Hagan that is no greater than the cost of such benefit programs to active employees. During this period, if Hagan becomes eligible to receive medical or dental benefits from any benefit plan (a "Primary Coverage Plan") maintained by any other person, then the benefits offered by the Company's plans shall become secondary to the benefits offered under the Primary Coverage Plan. Following the expiration of these benefits, Hagan shall have the right to any continued coverage required by federal law under the Consolidated Omnibus Budget Reconciliation Act ("COBRA") and will receive an appropriate COBRA notice setting forth Hagan's rights and obligations. Nothing in this paragraph shall alter the Company's reserved right to change or discontinue any benefit plan at any time.
(d) Qualified Benefit Plans. As of the date hereof, Hagan is a participant in the American Commercial Lines LLC Pension Plan (the "ACL Pension Plan") and the American Commercial Lines LLC 401(k) Plan (the "ACL 401(k) Plan" and, together with the ACL Pension Plan, the "Qualified Benefit Plans"). Hagan's participation in the Qualified Benefit Plans shall in all respects continue to be governed by the specific terms of the Qualified Benefit Plans.
(e) Non-Qualified Benefit Plans. As of the date hereof, Hagan is a participant in the following non-qualified benefit plans offered by the Company (collectively the "Non-Qualified Benefit Plans"): (i) American Commercial Lines LLC Amended and Restated Salary Continuation Plan; (ii) Supplemental Savings Plan for Eligible Executives of American Commercial Lines LLC; and (iii) Special Retirement Plan of American Commercial Lines LLC. Notwithstanding the specific terms of the Non-Qualified Benefit Plans, Hagan's participation in the Non-Qualified Benefit Plans shall terminate on the Retirement Date, and any claims Hagan may have for payment of funds pursuant to the Non-Qualified Benefit Plans shall be treated in accordance with Section 5 hereof.
(4) CONSULTING SERVICES
(a) Consulting Period. As used herein, the term "Consulting Period" shall mean the period of time beginning one day after the Retirement Date and continuing through, and including June 30, 2004.
(b) Consulting Services. During the Consulting Period, Hagan shall provide, at the request of the Company's Chief Executive Officer, on an as-needed basis, not to exceed 50 hours per month the services (the "Consulting Services") specified below and in the Consulting Agreement:
(i) meetings with customers and vendors on behalf of the Company;
(ii) working with senior management of the Company on strategic planning;
(iii) working with senior management of the Company and the Company's advisors with respect to asset dispositions, if any, that the Company may choose to pursue;
(iv) working with senior management of the Company and the Company's advisors to develop a plan or reorganization in connection with the Company's Chapter 11 Case;
(v) assisting the Company's executive management during any transition period following the Retirement Date; and
(vi) such other senior management level tasks as the Company may reasonably request.
(5) HAGAN RELEASE
In exchange for, and subject to the receipt of, the consideration set forth herein, Hagan shall grant to the Company the following releases (collectively the "Releases"):
(a) General Release. In consideration of the payments and benefits received hereunder, Hagan agrees to release and waive all claims he may have against the Company. Hagan's release includes all claims that are related to (i) Hagan's employment with the Company; (ii) the voluntary or involuntary separation from that employment; (iii) the design or administration of any employee benefit program; (iv) any rights Hagan has to severance or similar benefits under any program, policy or procedure of the Company other than the payments recited in Section 3 of this Agreement; (v) any rights Hagan may have to the continued receipt of benefits, other than as recited in Section 3 of this Agreement; and (vi) any other claims or demands Hagan may have which arise under any contract or law or on any other basis, including, but not limited to, claims or demands under any severance plan or the Hagan Employment Agreement, Restricted Stock Agreement, Stock Option Agreement, or any other agreement. This release does not give up Hagan's rights to continued health insurance under COBRA as set forth above.
(b) Federal and State Law Release. Hagan also releases any rights or claims he may have under the Americans with Disabilities Act, which prohibits employers from discriminating against any qualified individual with a disability; Age Discrimination in
Employment Act, which prohibits age discrimination in employment; Title VII of the Civil Rights Act of 1964, which prohibits discrimination in employment based on race, color, national origin, religion or sex; the Equal Pay Act, which prohibits paying men and women unequal pay for equal work; Older Workers' Benefit Protection Act, which prohibits discrimination in employee benefits; state laws, which prohibit discrimination in employment based on, inter alia, race, color, religion, age, national origin, handicap, sex, or ancestry; any other federal, state or local laws or regulations prohibiting employment discrimination, restricting an employer's right to terminate employees, or otherwise regulating employment; any claims for wrongful discharge and all claims for alleged physical or personal injury, or emotional distress; any claims under the Worker Adjustment and Retraining Act or any similar law, which requires, among other things, that advance notice be given of certain work force reductions; and all claims under the Employee Retirement Income Security Act, such as claims relating to pension or health plan benefits. This release covers both claims that Hagan knows about and those he may not know about. Hagan expressly waives all rights afforded him by any statute that limits the effect of a release with respect to unknown claims to the maximum extent such statutes permit such waiver. This release and waiver by Hagan is on behalf of Hagan and his spouse (if any) and child or children (if any), heirs, beneficiaries, devisees, executors, administrators, attorneys, personal representatives, successors and assigns.
(c) Release of Non-Qualified Benefit Plan Claims. Without limiting the generality of the foregoing, Hagan shall also release all claims he has to payment of funds from (i) the Non-Qualified Benefit Plans, (ii) the Severance Payments set forth in Section 9 of the Hagan Employment Agreement, and (iii) the Key Employee Retention Agreement implemented by the Company as a part of its Chapter 11 Case.
(6) NON-ADMISSION OF LIABILITY
Hagan understands and agrees that the Company's willingness to make payments and pay benefits to him under this Agreement is not an admission of liability, or obligation to provide such consideration in the absence of Hagan signing this Agreement.
(7) RELEASE OF AGE DISCRIMINATION CLAIMS; PERIODS FOR REVIEW AND RECONSIDERATION
(a) Release of Age Discrimination Claims. Hagan understands and agrees that this document includes a release of claims arising under the Age Discrimination in Employment Act or comparable state law including but not limited to all claims relating to Hagan's separation from employment with the Company. Hagan understands and acknowledges that he has been given a period of twenty-one (21) days to review and consider this Agreement. Hagan further understands and acknowledges that he may use as much or all of this 21 day period as Hagan wishes before signing, and that Hagan has done so.
(i) Hagan again understands and acknowledges that Hagan is receiving additional consideration from the Company, in part, in exchange for the
release of age discrimination claims potentially arising under the Age Discrimination in Employment Act or comparable state law. Hagan further understands and acknowledges that the additional consideration given to Hagan by the Company in exchange for the release of age discrimination claims potentially arising under the Age Discrimination in Employment Act or comparable state law is more than the Company is required to pay under its normal policies and procedures.
(b) Encouragement to Consult with Attorney. Hagan understands and acknowledges that he is hereby advised to consult with an attorney prior to executing this Agreement. By signing below, Hagan warrants that he has had the opportunity to consult with an attorney prior to any execution of this Agreement, and to be fully and fairly advised by that legal counsel as to the terms of the Release set forth in this Agreement.
(c) Periods for Review and Reconsideration. Hagan understands that he has seven (7) days after signing this Agreement to revoke it by notice in writing delivered to AMERICAN COMMERCIAL LINES LLC; ATTN: Lisa L. Fleming - Revocation of Severance Release; 1701 Market Street, Jeffersonville, Indiana 47131-0610. The Releases set forth in this Agreement shall be binding, effective, and enforceable upon the expiration of this seven-day revocation period without such revocation being received, but not before such time. Hagan understands and agrees that the Initial Payment will not be paid prior to the expiration of this seven-day revocation period. In the event Hagan revokes this Agreement during the revocation period, the Company reserves the right to suspend the continuation of any wage or benefit as provided in Section 3 of this Agreement. Should the Company do so, Hagan will receive a COBRA Notice setting forth the effect of such cessation on Hagan's right to continued health care coverage.
(8) NO FUTURE LAWSUITS, NON-RELEASE OF FUTURE CLAIMS
(a) No Future Lawsuits. By signing this Agreement, Hagan promises never to file or pursue a claim, lawsuit or any other complaint or charge asserting any of the claims, lawsuits, complaints or charges that are released in this Agreement.
(b) Non-Release of Future Claims. This Agreement does not waive or release any rights or claims that Hagan may have under the Age Discrimination in Employment Act which may arise after the later of the date Hagan signs this Agreement, the Retirement Date, or the expiration of the Consulting Period.
(9) REPAYMENT OF BENEFITS BASED ON SUBSEQUENT ASSERTION OF CLAIM; INDEMNIFICATION FOR COSTS INCURRED BY THE COMPANY; NO LIMITATION ON COVENANT NOT TO SUE
(a) Repayment of Benefits Based on Subsequent Assertion of Claim. Hagan understands and agrees that he may not pursue any claim, lawsuit, or other charge or complaint released by the literal terms of this Agreement. Hagan further understands and agrees that if he should breach this covenant not to sue, and if a Court should, for any
reason, find his release of claims, as set forth in this Agreement, void, voidable, imperfect, or incomplete in any respect, he may be liable for the repayment of some or all of the compensation and benefits received hereunder, including but not limited to the value of any other benefits Hagan received pursuant to the terms of this Agreement. Statutes of limitations will run on all claims without regard to Hagan's execution of this Agreement. In addition, if Hagan breaches his covenant not to sue, as set forth in Section 8, Hagan shall forfeit all right to future benefits, if any.
(b) Indemnification for Costs Incurred by the Company. Hagan acknowledges and agrees that if he breaks his covenant not to sue or promise not to assert claims against the Company in the future, by filing a claim, lawsuit or other complaint against the Company or any other entity released under the terms of this Agreement, and a Court finds Hagan's actions to be in breach of the terms of this Agreement, Hagan will pay the Company's costs and reasonable attorneys' fees in defending such claim, lawsuit, or other complaint.
(c) No Limitation on Covenant Not to Sue. Nothing in this Section shall be construed to limit Hagan's covenant not to sue or promise not to assert claims, as set forth above.
(10) GOVERNING LAW
Except for matters subject to the jurisdiction of the Bankruptcy Court or subject to the Bankruptcy Code, this Agreement shall be governed and construed in all respects in accordance with the laws of the State of Indiana without regard to the conflict of laws rules contained therein. Any litigation arising from the employment relationship or any termination of employment, shall be brought in state or federal Court sitting in Clark County or Floyd County, Indiana respectively.
(11) SEVERABILITY AND CONSEQUENCES OF INVALID TERMS
Except as otherwise specified herein, if any portion of this Agreement is found void or unenforceable for any reason by any Court, the Court should enforce all portions of this Agreement to the maximum extent which would have been enforceable in the original Agreement. If such portion cannot be modified to be enforceable, the unenforceable portion will be severed from the remaining portions of this Agreement, which shall otherwise remain in full force and effect.
(12) RELEASE OF HAGAN, INDEMNITY, INSURANCE
(a) Hagan Released Claims. In agreeing to grant the Releases contained herein, the Company and Hagan hereby expressly acknowledge that Hagan is relinquishing good and valuable rights to receive payments pursuant to the terms and conditions of (i) the Hagan Employment Agreement, (ii) the Key Employee Retention Program, and (iii) the Non-Qualified Benefit Plans. The Company and Hagan further acknowledge that the Releases constitute good and valuable consideration for the
compensation and benefits that Hagan will receive pursuant to the terms of this Agreement.
(b) Chapter 11 Release. In consideration of the Releases, the Company shall use its best efforts to cause Hagan to be released by the Company, the Company's creditors, and any other third party, all in connection with the consummation of the Company's Chapter 11 plan of reorganization to the same extent, and by the same releasing parties, if any, that current officers in good standing are released in such Chapter 11 plan of reorganization (such a release is referred to herein as a "Chapter 11 Release"). Hagan acknowledges that neither the form nor timing of a Chapter 11 Release has been determined and that the Company's ability to grant such releases is subject to the approval of the Bankruptcy Court. Hagan further acknowledges that any such Chapter 11 Release shall not limit or otherwise impair or affect any liability of Hagan for any breach of the representations and warranties set forth in this Agreement.
(c) Continuing Indemnity Obligation. Subject to applicable bankruptcy law, to the extent that any suit is brought against Hagan by any party, for acts or occurrences taking place during, and allegedly arising out of, Hagan's employment by the Company that would have given rise to an obligation of the Company to defend, indemnify or hold Hagan harmless, pursuant to its organizational documents or any agreement or undertaking to which the Company is a party if Hagan were an active employee, officer or director, then the Company shall defend, indemnify and hold Hagan harmless to the fullest extent permitted by such organizational document, agreement or undertaking.
(d) Directors & Officers Liability Coverage. The Company hereby represents and warrants that, as of the date hereof it has in full force and effect an Officers and Directors Liability Policy (the "D&O Policy") which covers Hagan in his capacity as an officer and/or director of the Company. As additional consideration for the Releases set forth herein, which has been specifically bargained for, the Company hereby agrees that it will:
(i) provide Hagan with a copy of an insurance certificate evidencing the D&O Policy;
(ii) following the date hereof, provide Hagan with a copy of any material correspondence relating to the D&O Policy, including, but not limited to, any notice of cancellation or nonrenewal of the D&O Policy;
(iii) not take any action to limit or impair Hagan's access to such D&O Policy;
(iv) upon any cancellation or nonrenewal of the D&O Policy, exercise its right to extend the claim period for a one-year "discovery period" and pay such premiums required thereunder; and
(v) to the extent any claim is made against Hagan that would entitle him to coverage under the D&O Policy (as the same may be
extended or renewed, or during any discovery period coverage), give Hagan direct access to the coverage provide by the D&O Policy, and pay any deductible required by the D&O Policy.
(13) COOPERATION
In addition to providing Consulting Services as described herein,
following the Retirement Date, Hagan agrees to cooperate with the Company upon
reasonable request of the Board of Directors of the Company (the "Board") or its
designee, and to be reasonably available to the Company with respect to matters
arising out of Hagan's services to the Company. To the extent permitted by law,
Hagan agrees (i) not to voluntarily assist or otherwise cooperate voluntarily
with any non-government person or entity in any claim against the Company and
(ii) to notify the Company in writing immediately upon learning that he is to be
or is likely to be compelled to provide testimony, documents or any form of
assistance in any claim against the Company. Notwithstanding any other provision
of this Section, Hagan shall give truthful testimony in any investigations,
proceedings or legal actions relating to the Company.
(14) REPRESENTATIONS AND WARRANTIES
(a) Hagan Representations and Warranties. Hagan represents and warrants to the Company that:
(i) He has not, with respect to any transaction or state of facts existing prior to the Retirement Date, filed any claims, complaints, charges or lawsuits against the Company with any governmental agency, court or tribunal.
(ii) He has disclosed all necessary information to the Board in connection with the satisfaction of his duties owed to the Company.
(iii) He is not aware of (i) any material claims that could be brought by the Company or any of its subsidiaries or affiliates against any person or entity (including, without limitation, himself), (ii) any material claims that could be brought by any person or entity (including, without limitation, himself) against the Company; or (iii) any information that could give rise to such claim(s), that have not been disclosed to the Board or a committee of the Board.
(iv) His execution, delivery and performance of this Agreement does not and shall not conflict with, or result in the breach of or a violation of, any other agreement, instrument, order, judgment or decree to which he is a party or by which he is bound.
The Hagan Representations and Warranties set forth in this Section shall survive any release of Hagan in connection with the consummation of the Company's Chapter 11 plan of reorganization and shall remain in full force and effect until the expiration of any applicable limitations period.
(b) Company Representations and Warranties. The Company hereby represents and warrants to Hagan that:
(i) Subject to Section 16 hereof, the Company has received the requisite corporate authority to execute and deliver this Agreement, and perform its obligations hereunder.
(ii) This Agreement has been executed by a duly authorized officer of the Company and, subject to Section 16 hereof, constitutes the valid, binding and legal obligation of the Company, enforceable against the Company pursuant to the terms hereof.
(iii) The execution, delivery and performance of this Agreement by the Company will not violate any term or provision of article of incorporation or organization, by-law or other organizational document of the Company.
(iv) The execution, delivery and performance of this Agreement by the Company does not and shall not conflict with, or result in the breach of or a violation of, any other material agreement, instrument, order, judgment or decree to which the Company is a party or by which the Company is bound.
(v) Except for the approval of the Bankruptcy Court, as set forth in
Section 16 hereof, the Company is not required to obtain any other consent,
approval or authorization as a condition to the effectiveness of, or its
performance of, this Agreement.
(15) ENTIRE AGREEMENT
This Agreement contains the entire agreement between the Company and Hagan pertaining to the subject matter hereof and supersedes all prior and contemporaneous oral and written agreements and understandings in connection therewith, including but not limited to any Employment Agreement or Stock Agreement. There are no oral or written promises affecting this Agreement.
(16) COURT APPROVAL CONTINGENCY
The Company and Hagan acknowledge and agree that this Agreement is being entered into by the Company as a debtor and debtor in possession as the result of the Company's filing a voluntary petition for relief under Chapter 11 of the Bankruptcy Code on or about January 31, 2003 (as used herein, the "Chapter 11 Case"), in the United States Bankruptcy Court for the Southern District of Indiana (the "Bankruptcy Court") under case number 03-90305 9 (BHL) (jointly administered). The parties further agree as follows:
(a) this Agreement and all of the parties' obligations hereunder are subject to the approval of the Bankruptcy Court after notice and a hearing. If the Bankruptcy court does not approve this Agreement, this Agreement shall be void in its entirety, and no party shall have any rights or obligations hereunder;
(b) that, within 15 days following the execution of this Agreement by Hagan and the Company, the Company shall submit a motion (the "Motion") to the Bankruptcy
Court seeking approval of this Agreement. The Motion shall specifically request that the payment to Hagan of the Initial Payment, the Consulting Fees, and any other payments that may be required pursuant to the terms of this Agreement be Allowed (as that term is used in the Bankruptcy Code) as an administrative expense against the Company pursuant to Section 503(b) of the Bankruptcy Code. The Motion shall be noticed pursuant to the provisions of Sections 363(b), 365 and 503(b) of the Bankruptcy Code and Bankruptcy Rule 9019;
(c) the Company shall use its best efforts (i) to obtain, prior to filing the Motion, from the Official Unsecured Creditors Committee appointed in this case, consent to the Motion, this Agreement and the transactions contemplated herein; and (ii) to the extent there are any objections to the Motion, resolve the objections prior to any hearing on the Motion; and
(d) shall provide to Hagan and his counsel, if any, prior to filing the Motion, a copy of the Motion and the proposed order (the "Approval Order"), seeking approval of this Agreement. Both the Motion and the Approval Order shall be in a form and in substance satisfactory to by Hagan or his counsel, if any.
PLEASE READ THIS AGREEMENT CAREFULLY. IT CONTAINS A RELEASE OF KNOWN AND
UNKNOWN CLAIMS.
BY SIGNING BELOW, I ACKNOWLEDGE THAT I HAVE READ THIS RELEASE, THAT I
UNDERSTAND IT; AND THAT I AM ENTERING INTO IT VOLUNTARILY.
IN WITNESS WHEREOF, and intending to be legally bound, Hagan and the Company have each executed this Agreement, after a due reading of the whole.
MICHAEL C. HAGAN
AMERICAN COMMERCIAL LINES LLC, as a
debtor and debtor in possession
Checks and subsequent correspondence should be sent to (fill in address):
Please note that checks and subsequent correspondence may be sent via certified mail, return receipt requested.
EXHIBIT 10.15
SETTLEMENT AGREEMENT
This settlement agreement (the "Agreement") is made effective as of the ___ day of August, 2003 by and between Danielson Holding Corporation, a Delaware corporation ("DHC") and Michael C. Hagan ("Hagan").
RECITALS
1. Hagan is the President and Chief Executive Officer of American Commercial Lines LLC ("ACL"), a subsidiary of DHC, and has announced his intention to retire, effective as of October 31, 2003 (the "Retirement Date"), from all offices and other positions with ACL and its affiliated and subsidiary entities, other than Hagan's position as a director of ACL, and to resign, effective as of the date of this Agreement, from its parent entities and from Vessel Leasing LLC.
2. Hagan is a participant in DHC's 1995 Stock and Incentive Plan (the "Plan"). Hagan also holds shares of restricted DHC stock pursuant to that certain Restricted Stock Agreement between Hagan and DHC dated as of May 29, 2002 ("Restricted Stock Agreement").
3. Hagan and DHC wish to resolve all outstanding matters between them in a mutually acceptable way.
NOW THEREFORE, in consideration of the mutual promises contained herein, the parties hereto agree as follows:
1. Stock Option Agreement. All capitalized, defined terms used in this Section 1 shall have the meanings ascribed to them in the stock option agreement (hereinafter the "Stock Option Agreement") dated as of July 24, 2002, by and between Hagan and DHC.
(a) Time Vesting Options. The parties acknowledge that 26,250 Time Vesting Options vested on May 29, 2003.
(b) Other Options. The parties further acknowledge that no EBITDA Options or Compliance Options have vested.
(c) Termination of Employment. The parties agree that the retirement of Hagan shall be deemed to constitute a termination of employment, as set forth in Section 6 of the Stock Option Agreement. Notwithstanding such termination, DHC hereby agrees to extend for a one (1) year period commencing on the Retirement Date and terminating October 31, 2004 (the "Option Extension Period) during which Hagan is eligible to exercise the Option to purchase the vested Time Vesting Options, at the purchase price set forth in Section 2 of the Stock Option Agreement, with the Option being exerciseable in accordance with all of the relevant terms of the Stock Option Agreement. All Options which have not vested prior to the date hereof are hereby cancelled and no additional Options shall be eligible for vesting following the date hereof.
2. Restricted Stock Agreement. All capitalized, defined terms used in this Section 2 shall have the meanings ascribed to them in the Restricted Stock Agreement.
(a) Lapse of Restrictions. The parties acknowledge that the restrictions upon transfer with respect to 30,098 shares of Restricted Stock lapsed on May 29, 2003 and vested with Hagan (the "Vested Restricted Stock") and restrictions upon transfer with respect to 60,195 shares of Restricted Stock remain and are unvested (the "Unvested Restricted Stock") as of the date hereof.
(b) Termination of Employment. The parties agree that the retirement of Hagan shall be deemed to constitute a termination of employment, as set forth in Section 3 of the Restricted Stock Agreement. Accordingly, pursuant to the Restricted Stock Agreement, as of the Retirement Date, Hagan shall forfeit the Unvested Restricted Stock, and DHC shall pay to Hagan an amount equal to $51,165.70 reflecting the difference between the payment by DHC of $60,195 in consideration of the cancellation of the Unvested Restricted Stock pursuant to Section 3 of the Restricted Stock Agreement less $9,029.30 required to be paid by Hagan (but not previously paid) pursuant to Section 1 of the Restricted Stock Agreement.
3. Retirement and Resignation. Hagan shall resign, effective as of the Retirement Date from all offices and other positions with ACL's affiliated and subsidiary entities and as of the date of this Agreement from all offices and positions with ACL's parent entities and Vessel Leasing LLC.
4. Release, Exculpation and Waiver. As used in this Section 4, the terms "Related Parties," and "Claims" shall have the meaning ascribed to such terms in the Mutual Release (the "Mutual Release") dated as of May 29, 2002, to which DHC, Hagan, and multiple other parties are party.
(a) Release. DHC and Hagan, each for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, by these presents does for itself and for each of its Related Parties (each, a "Releasor" and, collectively, the "Releasors"), hereby expressly, unconditionally, generally, and individually and collectively waive, release, acquit and forever discharge one another and each other, and each of their respective Related Parties (collectively, the "Releasees") from every, any, and all Claims, which Claims against the Releasees, jointly or severally, any Releasor ever had, now has, or hereafter can, shall or may have, for, upon or by reason of any matter, act, failure to act, transaction, event, occurrence, cause, or thing whatsoever from the beginning of the world to the day of the date of this Release (the "Release Date") directly or indirectly relating to or arising out of American Commercial Lines Holdings, LLC ("ACL Holdings"), its wholly-owned subsidiary ACL, and/or ACL's affiliated, parent and subsidiary entities; provided, however, that nothing herein shall release any obligation of DHC or its Related Parties to indemnify its current and former directors, board of representatives members, or officers under its organizational documents, by-laws, employee-indemnification policies, state law, or any other agreement.
(b) Exculpation. DHC and Hagan and their respective Related Parties hereby exculpate one another and each other and each of their respective Related Parties from, and agree that each shall have and incur no liability to, nor be subject to any right or action by one another for acts, events or occurrences prior to the Release Date which directly or indirectly arise out of or are related to ACL Holdings, ACL and/or ACL's affiliated, parent and subsidiary entities; provided, however, that nothing herein shall exculpate DHC from any obligation to indemnify its
current and former directors, board of representatives members, or officers under its organizational documents, by-laws, employee-indemnification policies, state law, or any other agreement.
(c) Waiver. DHC and Hagan intend that this Release be effective as a full and final accord and satisfactory release of each and every matter specifically or generally referred to herein. Each party waives and relinquishes any rights and benefits to the full extent that they may lawfully waive all such rights and benefits pertaining to the subject matter of this Agreement. Each party acknowledges that it is aware that it may later discover facts in addition to or different from those which they now know or believe to be true with respect to the subject matter of this Release, but it is their intention to fully and finally forever settle and release any and all matters, disputes and differences, known and unknown, suspected and unsuspected, which now exist, may later exist or may previously have existed between them, and that in furtherance of this intention, the releases given in this Agreement shall be and remain in effect as full and complete general releases notwithstanding discovery or existence of any such additional or different facts.
5. Governing Law. This Release shall be governed by and construed in accordance with the internal laws of the State of Delaware, without regard to any conflicts of law provision that would require the application of the law of any other jurisdiction.
6. Entire Agreement. This Agreement shall constitute the entire agreement between Hagan and DHC relating to the subject matter hereof, and may not be amended, modified, or supplemented, and no provision hereof may be waived, in whole or in part, without the written agreement of Hagan and DHC.
7. Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the DHC and Hagan.
8. Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.
9. No Presumption Against Drafter. Each of the parties has jointly participated in the negotiation and drafting of this Agreement. In the event of any ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by each of the parties and no presumptions or burdens of proof shall arise favoring any party by virtue of the authorship of any of the provisions of this Agreement.
10. Further Assurances. In addition to the provisions of this Agreement, from time to time after the date of this Agreement, the parties hereto shall use all commercially reasonable efforts to execute and deliver such other instruments, documents, certificates, applications or agreements, as the case may be, and take such other reasonable actions as are necessary or desirable to effectuate the intent of this Agreement and to effectively evidence or implement the transactions contemplated under this Agreement.
IN WITNESS WHEREOF, and intending to be legally bound, Hagan and DHC have each executed this Agreement, after a due reading of the whole.
MICHAEL C. HAGAN
Dated: __________________________
DANIELSON HOLDING CORPORATION
By: _____________________________
Title:
Dated: ______________________
Exhibit 10.17
RELEASE AND WAIVER OF EMPLOYMENT AND
SEPARATION FROM EMPLOYMENT CLAIMS
This Release and Waiver of Employment and Separation From Employment Claims (hereinafter the "Release") is made and entered into this ___ day of _________, 2003 by and between JAMES J. WOLFF (hereinafter "Employee"), in favor of AMERICAN COMMERCIAL LINES LLC, a Delaware limited liability company with a business address of 1701 East Market Place, Jeffersonville, Indiana 47130, as debtor and debtor in possession, and all of its parent, related, affiliated and subsidiary companies, and all their predecessors, successors, employees, officers, directors, board of managers, members, interest holders, representatives, assigns, agents, insurers and employee benefit programs, and the trustees, administrators, fiduciaries and insurers of such employee benefit programs (collectively, the "Company").
RECITALS
(1) The Company and Employee have agreed that Employee's employment will end on May 30, 2003, and that he will be paid through such time.
(2) The Company has offered to provide certain severance benefits, as detailed below, to the Employee in exchange for Employee's execution of this Release.
(3) Employee desires to waive certain claims or potential claims Employee may have or could claim to have against the Company in order to receive these benefits.
(4) Employee and Company wish to enter into a consulting arrangement for certain services of Employee as outlined below.
(5) Employee and Company wish to resolve all outstanding matters between them in a mutually acceptable way, including but not limited to the termination of Employee's Employment Agreement with Company and Employee's separation from employment with Company.
NOW THEREFORE, in exchange for the good and valuable consideration provided herein, the receipt and sufficiency of which is hereby acknowledged, Employee and Company hereby agree as follows:
(1) CONCLUSION OF EMPLOYMENT
(a) Employee's active engagement as an employee of the Company will end on May 30, 2003 (hereinafter the "Separation Date"). Employee promises that on or before the Separation Date, he will return all files, records, credit cards, keys, identification, computers, computer records, cell phones, pagers, or other Company property which is in the Employee's possession or control, except for such items as Employee may be instructed to retain until the conclusion of the Consulting Period as defined below. In the event that Employee retains or receives Company property during
the Consulting Period, Employee covenants to return all such property on or before the conclusion of the Consulting Period.
(b) Employee agrees and acknowledges that he will not:
(i) disparage the Company in any manner.
(ii) disclose any confidential information, proprietary information, trade secrets, or other information which is not disseminated publicly (hereinafter collectively "Confidential Information") which Employee learned while employed by the Company.
(iii) solicit or help anyone solicit any employees of the Company to cease employment with the Company.
(iv) solicit or help anyone to solicit any customers or vendors of the Company to cease dealing with the Company.
(v) for two (2) years following the Separation Date, accept employment with or otherwise work or act for or on behalf of any person or entity engaged in the transportation of cargo by barge on the Inland Waterway System of the United States in competition with American Commercial Barge Line LLC; provided, however, that nothing in this paragraph shall prohibit Employee from acquiring an interest in or control of Global Materials Services LLC or any of its subsidiaries.
(c) Employee agrees that he will make himself available for consultation and will provide reasonable assistance to the Company during the six months following the Separation Date (the "Consulting Period") in order to ensure a smooth and orderly transition of Employee's duties and the continuance of Company's operations without interruption or delay. Such consultation services and reasonable assistance shall not exceed ten (10) hours per week.
(2) PAYMENTS TO EMPLOYEE
(a) Company agrees to pay Employee a lump sum Severance and Consulting Pay Benefit of one hundred seventy thousand dollars ($170,000) and to provide a benefits detailed below (collectively referred to as "Separation Pay"). Separation pay shall be made only when the Release has become irrevocable as explained below. Employee understands and acknowledges that by entering into this Agreement, Employee forfeits his rights, if any, to any other severance benefit under Company's normal programs or Employee's employment agreement.
(b) Payment of Separation Pay shall not commence until the Company's first normal pay cycle following the expiration of the applicable revocation period without a
revocation occurring and fulfillment of the contingency of bankruptcy court approval as set forth below. Nothing in this Release shall affect Employee's right to or the timing of Company's payment of any earned or accrued vacation pay.
(c) Employee understands and acknowledges that the Company will deduct from the Separation Pay all applicable payroll and withholding taxes, including but not limited to Social Security taxes, and all federal, state and applicable municipal taxes, and other deductions that the Company is required by law or has been authorized by Employee to deduct from wage payments.
(d) During the Consulting Period, Employee shall be available on an as-needed basis to provide information to assist company with its transition to a new Chief Financial Officer. During the Consulting Period, Employee shall be considered an Independent Contractor and agrees to execute the Company's standard Independent Contractor Agreement prior to the start of the Consulting Period.
(3) BENEFITS
(a) Employee may elect to continue to participate in the Company's group medical, dental and vision insurance plans for up to eighteen months, pursuant to his right to continued coverage required by federal law under the Consolidated Omnibus Budget Reconciliation Act ("COBRA") and will receive an appropriate COBRA notice setting forth Employee's rights and obligations.. During this period, if Employee becomes eligible to receive medical or dental benefits from any benefit plan (a "Primary Coverage Plan") maintained by any other person, then the benefits offered by the Company's plans shall become secondary to the benefits offered under the Primary Coverage Plan. Nothing in this paragraph shall alter the Company's reserved right to change or discontinue any benefit plan at any time.
(4) COMPLETE RELEASE
(a) In consideration of the payments and benefits received hereunder, Employee agrees to release and waive all claims he may have against the Company. Employee's release includes all claims that are related to (i) Employee's employment with the Company; (ii) the voluntary or involuntary separation from that employment; (iii) the design or administration of any employee benefit program; (iv) any rights Employee has to severance or similar benefits under any program, policy or procedure of the Company other than the payments recited in Section 2 or 3 of this Release; (v) any rights Employee may have to the continued receipt of benefits, other than as recited in Sections 2 and 3 of this Release; and (vi) any other claims or demands Employee may have which arise under any contract or law or on any other basis, including, but not limited to, claims or demands under any severance plan or Employee's Employment Agreement, or any other agreement. This release does not give up Employee's rights to continued health insurance under COBRA as set forth above.
(b) Employee also releases any rights or claims he may have under the Americans with Disabilities Act, which prohibits employers from discriminating against any qualified individual with a disability; Age Discrimination in Employment Act, which prohibits age discrimination in employment; Title VII of the Civil Rights Act of 1964, which prohibits discrimination in employment based on race, color, national origin, religion or sex; the Equal Pay Act, which prohibits paying men and women unequal pay for equal work; Older Workers' Benefit Protection Act, which prohibits discrimination in employee benefits; state laws, which prohibit discrimination in employment based on, inter alia, race, color, religion, age, national origin, handicap, sex, or ancestry; any other federal, state or local laws or regulations prohibiting employment discrimination, restricting an employer's right to terminate employees, or otherwise regulating employment; any claims for wrongful discharge and all claims for alleged physical or personal injury, or emotional distress; any claims under the Worker Adjustment and Retraining Act or any similar law, which requires, among other things, that advance notice be given of certain work force reductions; and all claims under the Employee Retirement Income Security Act, such as claims relating to pension or health plan benefits. This release covers both claims that Employee knows about and those he may not know about. Employee expressly waives all rights affordwolffed him by any statute that limits the effect of a release with respect to unknown claims to the maximum extent such statutes permit such waiver. This release and waiver by the Employee is on behalf of the Employee and his spouse (if any) and child or children (if any), heirs, beneficiaries, devisees, executors, administrators, attorneys, personal representatives, successors and assigns.
(5) NON-ADMISSION OF LIABILITY
Employee understands and agrees that the Company's willingness to make payments and pay benefits to him under the Release is not an admission of liability, or obligation to provide such consideration in the absence of Employee signing this Release.
(6) RELEASE OF AGE DISCRIMINATION CLAIMS; PERIODS FOR REVIEW AND RECONSIDERATION
(a) Release of Age Discrimination Claims. Employee understands and agrees that this document includes a release of claims arising under the Age Discrimination in Employment Act or comparable state law including but not limited to all claims relating to Employee's separation from employment with Company. Employee understands and acknowledges that he has been given a period of twenty-one (21) days to review and consider this Release. Employee further understands and acknowledges that he may use as much or all of this 21 day period as Employee wishes before signing, and that Employee has done so.
(i) Employee again understands and acknowledges that Employee is receiving the Separation Pay from the Company, in part, in exchange for the release of age discrimination claims potentially arising under the Age Discrimination in Employment Act or comparable state law. Employee
further understands and acknowledges that the part of the Separation Pay given to Employee by the Company in exchange for the release of age discrimination claims potentially arising under the Age Discrimination in Employment Act or comparable state law is more than the Company is required to pay under its normal policies and procedures.
(b) Encouragement to Consult with Attorney. Employee understands and acknowledges that he is hereby advised to consult with an attorney prior to executing the Release. By signing below, Employee warrants that he has had the opportunity to consult with an attorney prior to any execution of this Release, and to be fully and fairly advised by that legal counsel as to the terms of the Release.
(c) Periods for Review and Reconsideration. Employee understands that he has seven (7) days after signing this Release to revoke it by notice in writing delivered to AMERICAN COMMERCIAL LINES LLC; ATTN: Lisa L. Fleming - Revocation of Severance Release; 1701 Market Street, Jeffersonville, Indiana 47131-0610. This Release shall be binding, effective, and enforceable upon the expiration of this seven-day revocation period without such revocation being received, but not before such time. Employee understands and agrees that the Separation Pay will not be paid prior to the expiration of this seven-day revocation period. In the event Employee revokes this Agreement during the revocation period, Company reserves the right to suspend the continuation of any wage or benefit as provided in Section 2 or 3 of this Release. Should Company do so, Employee will receive a COBRA Notice setting forth the effect of such cessation on Employee's right to continued health care coverage.
(7) NO FUTURE LAWSUITS
By signing this Release, Employee promises never to file or pursue a claim, lawsuit or any other complaint or charge asserting any of the claims, lawsuits, complaints or charges that are released in this Release.
(8) NON-RELEASE OF FUTURE CLAIMS
This Release does not waive or release any rights or claims that Employee may have under the Age Discrimination in Employment Act which may arise after the later of the date Employee signs this Release, the Separation Date, or the expiration of the Consulting Period.
(9) REPAYMENT OF BENEFITS BASED ON SUBSEQUENT ASSERTION OF CLAIM; INDEMNIFICATION FOR COSTS INCURRED BY COMPANY; NO LIMITATION ON COVENANT NOT TO SUE
(a) Repayment of Benefits Based on Subsequent Assertion of Claim. Employee understands and agrees that Employee may not pursue any claim, lawsuit, or other charge or complaint released by the literal terms of this Release. Employee further
understands and agrees that if Employee should breach this covenant not to sue, and if a Court should, for any reason, find Employee's release of claims, as set forth in this Release, void, voidable, imperfect, or incomplete in any respect, Employee may be liable for the repayment of some or all of the Separation Pay including but not limited to the value of any other benefits Employee received pursuant to the terms of this Release. Statutes of limitations will run on all claims without regard to Employee's execution of this Release. In addition, if Employee breaches his covenant not to sue, as set forth in Section 7, Employee shall forfeit all right to future benefits, if any.
(b) Indemnification for Costs Incurred by Company. Employee acknowledges and agrees that if Employee breaks his covenant not to sue or promise not to assert claims against the Company in the future, by filing a claim, lawsuit or other complaint against the Company or any other entity released under the terms of this Release, and a Court finds Employee's actions to be in breach of the terms of this Release, the Employee will pay the Company's costs and reasonable attorneys' fees in defending such claim, lawsuit, or other complaint.
(c) No Limitation on Covenant Not to Sue. Nothing in this Section shall be construed to limit Employee's covenant not to sue or promise not to assert claims, as set forth above.
(10) GOVERNING LAW
This Agreement shall be governed and construed in all respects in accordance with the laws of the State of Indiana without regard to the conflict of laws rules contained therein. Any litigation arising from the employment relationship or any termination of employment, shall be brought in state or federal Court sitting in Clark County or Floyd County, Indiana respectively.
(11) SEVERABILITY AND CONSEQUENCES OF INVALID TERMS
Except as otherwise specified herein, if any portion of this Release is found void or unenforceable for any reason by any Court, the Court should enforce all portions of this Release to the maximum extent which would have been enforceable in the original Release. If such portion cannot be modified to be enforceable, the unenforceable portion will be severed from the remaining portions of this Release, which shall otherwise remain in full force and effect
(12) RELEASE OF EMPLOYEE
The Company shall use its best efforts to cause Employee to be released in connection with the consummation of the Company's Chapter 11 plan of reorganization to the same extent, if any, that current officers in good standing are released in such Chapter 11 plan of reorganization. Employee acknowledges that neither the form nor timing of such releases has been determined and that the Company's ability to grant such releases is subject to bankruptcy court approval. Employee further acknowledges that
any such release shall not limit or otherwise impair or affect any liability of Employee for any breach of the representations and warranties set forth in this Agreement.
(13) COOPERATION
In addition to providing consulting services as described herein, following the Separation Date, Employee agrees to cooperate with the Company upon reasonable request of the board of Directors of the Company (the "Board") or its designee, and to be reasonably available to the Company with respect to matters arising out of Employee's services to the Company. To the extent permitted by law, Employee agrees (i) not to voluntarily assist or otherwise cooperate voluntarily with any non-government person or entity in any claim against the Company and (ii) to notify the Company in writing immediately upon learning that he is to be or is likely to be compelled to provide testimony, documents or any form of assistance in any claim against the Company. Notwithstanding any other provision of this Section, Employee shall give truthful testimony in any investigations, proceedings or legal actions relating to the Company.
(14) EMPLOYEE'S REPRESENTATIONS AND WARRANTIES
Employee represents and warrants to the Company that:
(a) He has not, with respect to any transaction or state of facts existing prior to the Separation Date, filed any claims, complaints, charges or lawsuits against Company with any governmental agency, court or tribunal.
(b) He has disclosed all necessary information to the Board in connection with the satisfaction of his duties owed to the Company.
(c) He is not aware of (i) any material claims that could be brought by the Company or any of its subsidiaries or affiliates against any person or entity (including, without limitation, himself), (ii) any material claims that could be brought by any person or entity (including, without limitation, himself) against the Company; or (iii) any information that could give rise to such claim(s), that have not been disclosed to the Board or a committee of the Board.
(d) His execution, delivery and performance of this Agreement does not and shall not conflict with, or result in the breach of or a violation of, any other agreement, instrument, order, judgment or decree to which he is a party or by which he is bound.
The representations and warranties set forth in this Section shall survive any release of Employee in connection with the consummation of the Company's Chapter 11 plan of reorganization and shall remain in full force and effect until the expiration of any applicable limitations period.
(15) ENTIRE AGREEMENT
This Release contains the entire agreement between Company and Employee pertaining to the subject matter hereof and supersedes all prior and contemporaneous oral
and written agreements and understandings in connection therewith, including but not limited to any Employment Agreement or Stock Agreement. There are no oral or written promises affecting this Release.
(16) COURT APPROVAL CONTINGENCY
The Company and Employee acknowledge and agree that this Agreement is being entered into between Employee and the Company as a debtor and debtor in possession as the result of the Company's filing a voluntary petition for relief under Chapter 11 of the Bankruptcy Code on or about January 31, 2003, in the United States Bankruptcy Court for the Southern District of Indiana (the "Bankruptcy Court") under case number 03-90305 9 (BHL) (jointly administered). The parties further agree as follows:
(a) This Agreement and all of Company's obligations hereunder are subject to the approval of the Bankruptcy Court after notice and a hearing, and if the Bankruptcy court does not approve this Agreement, this Agreement shall be void in its entirety, and no party shall have any rights or obligations hereunder;
(b) The Company shall, within 15 days, submit a motion (the "Motion") to the Bankruptcy Court seeking approval of this Agreement. The Motion shall specifically request that the payment to Employee of Separation Pay be Allowed (as that term is used in the Bankruptcy Code) as an administrative expense against the Company pursuant to 11 U.S.C. Section 503(b). The Motion shall be noticed pursuant to the provisions of 11 U.S.C. Section 365 and Bankruptcy Rule 9019; and
(c) The Motion seeking approval of this Agreement and the proposed order approving this Agreement shall be in a form and in substance reasonably approved by Employee or his counsel, if any.
PLEASE READ THIS AGREEMENT CAREFULLY. IT CONTAINS A RELEASE OF KNOWN
AND UNKNOWN CLAIMS.
BY SIGNING BELOW, I ACKNOWLEDGE THAT I HAVE READ THIS RELEASE, THAT I
UNDERSTAND IT; AND THAT I AM ENTERING INTO IT VOLUNTARILY.
IN WITNESS WHEREOF, and intending to be legally bound, Employee has executed this Release after a due reading of the whole.
WITNESS JAMES J. WOLFF (THE "EMPLOYEE")
Checks and subsequent correspondence should be sent to (fill in address):
Please note that checks and subsequent correspondence may be sent via certified mail, return receipt requested.
EXHIBIT 10.20
July 28, 2003
Samuel Zell
President and Chief Executive Officer
Danielson Holding Corporation
Two North Riverside Plaza
Suite 600
Chicago, Illinois 60606
Dear Mr. Zell:
This letter agreement confirms our understanding that Danielson Holding Corporation (the "Company" or "you") has engaged Credit Suisse First Boston LLC and its affiliates, successors and assigns, as appropriate ("CSFB", "we" or "us"), to act as its exclusive financial advisor with respect to the Company's proposed Acquisition (as defined below) of the domestic waste-to-energy, independent power production and water and wastewater operations of Covanta Energy Corporation (the "Target").
As part of our engagement, we will, as requested:
(a) assist the Company in evaluating the Acquisition, including as necessary business and financial due diligence and analysis of the Target;
(b) assist the Company in developing a strategy to effectuate the Acquisition, including evaluating financing and structuring alternatives;
(c) advise the Company on the structuring and terms of any potential equity or equity-linked financing at the Company undertaken in connection with the Acquisition; and
(d) render a written opinion, upon further request, as to the fairness from a financial point of view to the Company of the consideration to be paid by the Company in the Acquisition (an "Opinion").
In connection with CSFB's engagement, the Company will furnish CSFB with all information concerning the Company and, to the extent available to the Company, the Target, which CSFB reasonably deems appropriate and will provide CSFB with access to the officers, directors, employees, accountants, counsel and other representatives (collectively, the "Representatives") of the Company and, as practicable, the Target, it being understood that CSFB will rely solely upon such information supplied by the Company, the Target and their respective Representatives without assuming any responsibility for independent investigation or verification thereof. In addition, the Company agrees to promptly advise CSFB of any material event or change in the business, affairs, condition (financial or otherwise) or prospects of the Company or, to the knowledge of the Company, the Target that occurs during the term of CSFB's engagement hereunder. All non-public information concerning the Company or the Target, which is given to CSFB in connection with this engagement, will be used solely in the course of the performance of our services hereunder and will be treated confidentially by us for so long as it remains non-public. Except as otherwise required by applicable law or judicial or regulatory process, CSFB will not disclose this information to a third party without the Company's consent.
As compensation for our financial advisory services hereunder, the Company agrees to pay CSFB as follows (subject to setoff as set forth below):
(1) if, and only if, (a) a definitive acquisition agreement and other necessary transaction documents pertaining to the Acquisition (the "Acquisition Documents") are mutually executed and delivered, and (b) to the extent necessary, the United States Bankruptcy Court approves the terms and conditions of the Acquisition Documents, then upon such occurrence of (a) and (b), the Company shall be obligated to pay CSFB $1 million in immediately available funds (the "Approval Payment"), which payment will be made within 2 business days after the reimbursement of any portion of the Company's expenses by the Target;
(2) if, and only if, the Acquisition closes, the Company shall pay CSFB an additional $3 million in immediately available funds (the "Closing Payment") within 1 business day after the closing of the Acquisition; and
(3) if, and only if, neither the Approval Payment nor the Closing Payment have been paid in accordance with this agreement on or before December 24, 2003, or the Company terminates this agreement (other than for CSFB's gross negligence or bad faith), the Company shall pay CSFB $750,000 in immediately available funds (the "Guaranteed Payment"), within 5 business days thereafter; it being understood that the entire Guaranteed Payment (to the extent paid) shall be credited against the Approval Payment or the Closing Payment (but shall not be credited against both the Approval Payment and the Closing Payment) if and when such Approval Payment or Closing Payment, as the case may be, is paid.
As compensation for our rendering of an Opinion, the Company agrees to pay CSFB an opinion fee equal to $500,000 (the "Opinion Fee"), payable upon the rendering of an Opinion to the Company's Board of Directors. The Opinion Fee will be fully creditable (to the extent paid) against the Approval Payment; provided, however, that if the Approval Payment has already been paid at the time the Opinion Fee becomes payable, the Opinion Fee will not be creditable against the Approval Payment and will instead be fully creditable (to the extent paid) against the Closing Payment.
In addition, the Company agrees to periodically reimburse CSFB for all customary and reasonable out-of-pocket expenses, including the customary and reasonable fees and expenses of its outside legal counsel, if any, and any other advisor retained by CSFB (it being understood that the retention of any such advisor, other than outside legal counsel, will be made only with the prior approval of the Company, which shall not be unreasonably withheld or delayed), resulting from or arising out of this engagement.
All fees and expenses payable hereunder are net of all applicable withholding and similar taxes.
In consideration of the mutual promises made herein, notwithstanding anything to the contrary in the letter agreement between CSFB, the Company and the Special Committee of the Board of Directors of the Company, dated December 20, 2002 (the "ACL Engagement Letter"), CSFB shall not be entitled to any payment of the Restructuring Fee (as such term is defined in the ACL Engagement Letter); provided, however, that, the parties shall allocate a portion (as agreed upon) of the Approval Payment, Closing Payment or Guaranteed Payment, as applicable, in respect of the services provided by CSFB pursuant to the ACL Engagement Letter. Notwithstanding anything to the contrary herein, CSFB shall continue to be entitled to reimbursement of out-of-pocket expenses pursuant to Section 3(c) of the ACL Engagement Letter without duplication hereunder. The ACL Engagement Letter shall continue in full force and effect as modified hereby.
For purposes of this agreement, "Acquisition" shall include, without limitation, any investment in or acquisition (whether in one or a series of transactions) of all or a majority of the capital stock, assets or other interests of the Target or any entity comprising the Target by the Company or its affiliates, regardless of the form any such investment or acquisition takes. Without limiting the generality of the foregoing, it is understood that any transaction resulting in the Company's ownership of more than 50% of Target's voting stock will be deemed a consummated Acquisition for purposes of determining if and when the full Approval Payment and Closing Payment are payable.
If we are requested to render an Opinion to the Company with respect to the fairness from a financial point of view of the consideration paid by the Company pursuant to the Acquisition, the nature and scope of our analysis as well as the form and substance of our Opinion shall be such as we reasonably deem appropriate. If requested by you, our Opinion shall be delivered in writing.
No advice or Opinion rendered by CSFB, whether formal or informal, may be disclosed, in whole or in part, or summarized, excerpted from or otherwise referred to without our prior written consent, which shall not be unreasonably withheld or delayed. In addition, neither CSFB, the Company, nor the terms of this engagement may be otherwise referred to without CSFB's or the Company's prior written consent, as the case may be (provided, that such restrictions on references to the Company only apply to references to the Company by the investment banking division of CSFB in connection with this engagement and furthermore, without limiting the generality of the foregoing, do not restrict, amend or alter any of CSFB's rights pursuant to the following paragraph and CSFB's policies and procedures related to its research analysts), which consent shall not be unreasonably withheld or delayed. The Company (and each employee, representative or other agent of the Company) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the Acquisition and all materials of any kind (including opinions or other tax analyses) that are provided to the Company relating to such tax treatment and structure. The obligations of the Company and CSFB pursuant to this paragraph shall survive any expiration or termination of this agreement or CSFB's engagement hereunder.
The Company acknowledges that CSFB may, at its option and expense and after announcement of the Acquisition, place announcements and advertisements or otherwise publicize the Acquisition and CSFB's role in it (which may include the reproduction of the Company's logo) on CSFB's Internet Website and in such financial and other newspapers and journals as it may choose, stating that CSFB has acted as financial advisor to the Company in connection with the Acquisition.
Since CSFB will be acting on behalf of the Company in connection with its engagement hereunder, the Company and CSFB agree to the indemnity provisions and other matters set forth in Annex A which is incorporated by reference into this agreement.
In addition, if the Target undertakes a public offering or private placement of debt securities, or the Company or one of its subsidiaries undertakes a public offering or private placement of debt securities for the benefit of the Target (in each case, a "Debt Financing"), CSFB shall have the right of first refusal to serve in the role of lead arranger, lead managing underwriter or exclusive placement agent or principal counterparty, as applicable, so long as the proposed terms, conditions and fees related to such transaction are at least as favorable to the Company as any other bona fide written offer to serve in such role made to the Company by an internationally recognized bulge bracket investment bank, in connection with any Debt Financing through December 31, 2005. As compensation for any such services in connection with a Debt Financing, the Company agrees to pay CSFB its customary fees to be mutually agreed upon at the appropriate time. The terms of any such additional engagements will be set forth in separate letter agreements containing terms and conditions to be mutually agreed upon, including without limitation appropriate indemnification provisions. The obligations of the Company pursuant to this paragraph shall survive any expiration or termination of this agreement or CSFB's engagement hereunder.
The Company further understands that if CSFB is asked to act for the Company in any other formal additional capacity relating to this engagement but not specifically addressed in this letter, such as acting as an underwriter in connection with the issuance of securities by the Company and/or the Target, then such activities shall constitute separate engagements and the terms and conditions of any such additional engagements will be embodied in one or more separate written agreements, containing provisions and terms to be mutually agreed upon, including without limitation appropriate indemnification provisions. The indemnity provisions in Annex A shall apply to any such additional engagements, unless superseded by an indemnity provision set forth in a separate agreement applicable to any such additional engagements, and shall remain in full force and effect regardless of any completion, modification or termination of CSFB's engagement(s).
CSFB's engagement hereunder may be terminated at any time by either CSFB or the Company upon ten days' prior written notice thereof to the other party; provided, however, that in the event of any termination of CSFB's engagement hereunder by the Company (other than for CSFB's gross negligence or bad faith) CSFB will continue to be entitled to the full Approval Payment and Closing Payment provided for herein, as applicable, if CSFB would be entitled to such payment or payments but for such termination of CSFB's engagement hereunder, less the amount of the Guaranteed Payment, if paid, in the event that at any time prior to the expiration of twelve months after any such termination the Company consummates, or enters into a definitive agreement providing for, an Acquisition; and provided, further, that no termination of CSFB's engagement hereunder shall affect the Company's obligation to reimburse CSFB for its out-of-pocket expenses as provided for herein and to indemnify CSFB and certain related persons and entities as provided in Annex A.
CSFB is a full service securities firm engaged in securities trading and brokerage activities as well as investment banking and financial advisory services. In the ordinary course of our trading and brokerage activities, CSFB or its affiliates may hold positions, for its own account or the accounts of customers, in equity, debt or other securities of the Company or any other company that may be involved in the matters contemplated by this agreement. Additionally, the Company acknowledges that CSFB is a contingent creditor to Covanta Energy Corporation pursuant to an existing letter of credit facility, and in such other capacity, may acquire information about the Target, Covanta Energy Corporation, and other prospective purchasers, CSFB shall have no obligation to disclose such information, or the fact that CSFB is in possession of such information, to the Company or to use such information on the Company's behalf. CSFB has adopted policies and procedures designed to preserve the independence of its research analysts whose views may differ from those of CSFB's investment banking division.
In connection with this engagement, CSFB is acting as an independent contractor and not in any other capacity, with duties owing solely to the Company. All aspects of the relationship created by this agreement shall be governed by and construed in accordance with the laws of the State of New York, applicable to contracts made and to be performed therein. All actions and proceedings arising out of or relating to this letter agreement shall be heard and determined exclusively in any New York state or federal court sitting in the Borough of Manhattan of the City of New York, to whose jurisdiction the Company hereby irrevocably submits. The Company hereby irrevocably waives any defense or objection to the New York forum designated above. Each of CSFB and the Company waives all right to trial by jury in any action, suit, proceeding or counterclaim (whether based upon contract, tort or otherwise) related to or arising out of the engagement of CSFB pursuant to, or the performance by CSFB of the services contemplated by, this agreement.
We are delighted to accept this engagement and look forward to working with you on this assignment. Please confirm that the foregoing is in accordance with your understanding by signing and returning to us the enclosed duplicate of this letter.
Very truly yours,
CREDIT SUISSE FIRST BOSTON LLC
Accepted and agreed to as of the date first written above:
DANIELSON HOLDING CORPORATION
ANNEX A
July 28, 2003
In further consideration of the agreements contained in our engagement letter dated the date hereof (the "engagement"), in the event that Credit Suisse First Boston LLC ("CSFB") or any of its affiliates, the respective directors, officers, partners, agents or employees of CSFB or any of its affiliates, or any other person controlling CSFB or any of its affiliates (collectively, "Indemnified Persons") becomes involved in any capacity in any action, claim, suit, investigation or proceeding, actual or threatened, brought by or against any person, including stockholders of Danielson Holding Corporation (the "Company"), in connection with or as a result of the engagement or any matter referred to in the engagement, the Company will reimburse such Indemnified Person for its reasonable and customary out-of-pocket legal and other expenses (including without limitation the out-of-pocket costs and expenses incurred in connection with investigating, preparing for and responding to third party subpoenas or enforcing the engagement) incurred in connection therewith as such out-of-pocket expenses are incurred, except to the extent that indemnification would be unavailable for such claims as provided below. The Company will also indemnify and hold harmless any Indemnified Person from and against, and the Company agrees that no Indemnified Person shall have any liability to the Company or its owners, parents, affiliates, security holders or creditors for, any losses, claims, damages or liabilities (including actions or proceedings in respect thereof) (collectively, "Losses") (A) related to or arising out of (i) the Company's actions or failures to act (including statements or omissions made or information provided by the Company or its agents) or (ii) actions or failures to act by an Indemnified Person with the Company's consent or in reasonable reliance on the Company's actions or failures to act (provided, that CSFB's unreasonable reliance on the Company's actions or failures to act shall be deemed to be included within clause (B))or (B) otherwise related to or arising out of the engagement or CSFB's performance thereof, except that this clause (B) shall not apply to any Losses that are finally determined by a court or arbitral tribunal to have resulted primarily from the bad faith or gross negligence of any Indemnified Person. If such indemnification is for any reason not available or insufficient to hold an Indemnified Person harmless, the Company agrees to contribute to the Losses involved in such proportion as is appropriate to reflect the relative benefits received (or anticipated to be received) by the Company, on the one hand, and by CSFB, on the other hand, with respect to the engagement or, if such allocation is determined by a court or arbitral tribunal to be unavailable, in such proportion as is appropriate to reflect other equitable considerations such as the relative fault of the Company on the one hand and of CSFB on the other hand; provided, however, that, to the extent permitted by applicable law, the Indemnified Persons shall not be responsible for amounts which in the aggregate are in excess of the amount of all fees actually received by CSFB from the Company in connection with the engagement. Relative benefits to the Company, on the one hand, and CSFB, on the other hand, with respect to the engagement shall be deemed to be in the same proportion as (i) the total value paid or proposed to be paid or received or proposed to be received by the Company or its security holders, as the case may be, pursuant to the transaction(s), whether or not consummated, contemplated by the engagement, bears to (ii) all fees actually received by CSFB in connection with the engagement.
The Company will not, without CSFB's prior written consent, which shall not be unreasonably withheld or delayed, settle, compromise, consent to the entry of any judgment in or otherwise seek to terminate any action, claim, suit, investigation or proceeding in respect of which indemnification may be sought hereunder (whether or not any Indemnified Person is a party thereto) unless such settlement, compromise, consent or termination includes a release of each Indemnified Person from any liabilities arising out of such action, claim, suit, investigation or proceeding. The Company will not permit any such settlement, compromise, consent or termination to include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of an Indemnified Person, without such Indemnified Person's prior written consent, which shall not be unreasonably withheld or delayed. No Indemnified Person seeking indemnification, reimbursement or contribution under this agreement will, without the Company's prior written consent, which shall not be unreasonably withheld or delayed, settle, compromise, consent to the entry of any judgment in or otherwise seek to terminate any action, claim, suit, investigation or proceeding referred to herein.
Prior to entering into any agreement or arrangement with respect to, or effecting, any merger, statutory exchange or other business combination or proposed sale or exchange, dividend or other distribution or liquidation of all or a significant portion of its assets in one or a series of transactions or any significant recapitalization or reclassification of its outstanding securities that does not directly or indirectly provide for the assumption of the obligations of the Company set forth herein, the Company will notify CSFB in writing thereof (if not previously so notified) and, if requested by CSFB, shall arrange in connection therewith alternative means of providing for the obligations of the Company set forth herein, including the assumption of such obligations by another party, insurance, surety bonds or the creation of an escrow, in each case in an amount and upon terms and conditions satisfactory to CSFB.
The Company's obligations hereunder shall be in addition to any rights that any
Indemnified Person may have at common law or otherwise. The Company acknowledges
that in connection with the engagement CSFB is acting as an independent
contractor and not in any other capacity with duties owing solely to the
Company. This agreement and any other agreements relating to the engagement
shall be governed by and construed in accordance with the laws of the State of
New York, applicable to contracts made and to be performed therein and, in
connection therewith, the parties hereto consent to the exclusive jurisdiction
of the Supreme Court of the State of New York sitting in New York County or the
United States District Court for the Southern District of New York and the
respective appellate courts thereof. Notwithstanding the foregoing, solely for
purposes of enforcing the Company's obligations hereunder, the Company consents
to personal jurisdiction, service and venue in any court proceeding in which any
claim subject to this agreement is brought by or against any Indemnified Person.
CSFB HEREBY AGREES, AND THE COMPANY HEREBY AGREES ON ITS OWN BEHALF AND, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF ITS SECURITY HOLDERS, TO WAIVE
ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM, COUNTER-CLAIM OR ACTION
ARISING OUT OF THE ENGAGEMENT OR CSFB'S PERFORMANCE THEREOF.
The provisions of this agreement shall apply to the engagement (including related activities prior to the date hereof) and any modification thereof and shall remain in full force and effect regardless of the completion or termination of the engagement. If any term, provision, covenant or restriction herein is held by a court of competent jurisdiction to be invalid, void or unenforceable or against public policy, the remainder of the terms, provisions and restrictions contained herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated.
DANIELSON HOLDING CORPORATION
Accepted and agreed to as of the date hereof:
CREDIT SUISSE FIRST BOSTON LLC
EXHIBIT 10.25
TAX SHARING AGREEMENT
THIS TAX SHARING AGREEMENT (this "AGREEMENT") is dated as of March 10, 2004 by and between Danielson Holding Corporation, a Delaware corporation (hereinafter referred to as "PARENT"), Covanta Energy Corp. ("COVANTA"), a Delaware corporation and, solely for purposes of Section 6 of this Agreement, Covanta Power International Holdings, Inc., a Delaware Corporation ("COVANTA INTERNATIONAL").
WITNESSETH
WHEREAS, Parent is the common parent corporation of an "affiliated group" of corporations (as it may be constituted from time to time, the "AFFILIATED GROUP"), as defined in Section 1504 of the Internal Revenue Code of 1986, as amended (the "CODE"); and
WHEREAS, Parent will file a U.S. consolidated federal income
tax return on behalf of the Affiliated Group for the taxable year ending
December 31, 2004, and generally will be required to file consolidated federal
income tax returns for subsequent years, which will, beginning on March 11,
2004, include Covanta and all of its current and future subsidiaries that would
be treated as members of an affiliated group of corporations, as defined in
Section 1504(a) of the Code, for which Covanta would be the common parent
corporation if Covanta and such subsidiaries were not members of the Affiliated
Group (each of such subsidiary and Covanta, a "SUBGROUP MEMBER," such affiliated
group of Subgroup Members, "COVANTA SUBGROUP" as listed in Appendix A attached
hereto);
WHEREAS, Covanta International will not be a member of the Affiliated Group; and
WHEREAS, it is the intent and desire of Parent and Covanta to enter into this Agreement, to provide, with respect to federal, state and local income taxes, for the amount and time of payments by Covanta to Parent and for the amount and time of payments by Parent to Covanta.
NOW, THEREFORE, Parent and Covanta, intending to be legally bound hereby, and in consideration of the mutual covenants herein contained, agree as follows:
1. Consolidated Federal Return.
A U.S. consolidated federal income tax return and estimated tax returns shall be prepared and filed by Parent for the taxable year ending December 31, 2004 (THE "2004 TAXABLE YEAR"), and for each subsequent taxable period in respect of which the Affiliated Group is required or permitted to file a consolidated federal income tax return. With respect to such tax return preparation, Parent shall act in good faith with regard to any and all Subgroup Members. All Subgroup Members shall cooperate with Parent in the preparation and filing of such tax return and shall provide such assistance and documents, without charge, as may be requested by Parent for that purpose. Parent shall have the right with respect to any consolidated federal income tax returns to determine (a) the manner in which such returns, documents or statements
shall be prepared and filed, including, without limitation, the manner in which
any item of income, gain, loss, deduction or credit shall be reported, (b)
whether any extensions should be requested, and (c) the elections that will be
made by any Subgroup Member. In addition, Parent shall have the sole right to
(x) contest, compromise, or settle any adjustments or deficiency proposed,
asserted or assessed as a result of any audit of any consolidated tax return,
(y) file, prosecute, compromise or settle any claim for refund, and (z)
determine whether any refunds shall be received by way of refund or credited
against tax liabilities. Each Subgroup Member and their respective counsel shall
cooperate, to the extent reasonably practicable, in the contest or compromise
of, or defense against any such suit, action or proceeding described above.
Parent may, and shall cause Subgroup Members to, execute and file such consents,
elections, and other documents as Parent determines are required or appropriate
for the proper filing of such returns.
2. Allocation of Federal Tax Liability
(a) Covanta agrees to pay to Parent, for each taxable year or portion thereof during the term of this Agreement, as the Covanta Subgroup's share of the tax liability of the Affiliated Group, an amount equal to the apportioned tax liability of the Covanta Subgroup determined under Regulation Section 1.1552 1(a)(1) with the modifications provided in Section 3 of this Agreement. For purposes of this Agreement, Covanta will be treated as the common parent corporation of the Covanta Subgroup. Accordingly, the Covanta Subgroup's proportionate share of the tax liability of the Affiliated Group shall be determined by multiplying the Affiliated Group's tax liability by a fraction, the numerator of which equals Covanta's Taxable Income (as defined below in Section 3), and the denominator of which equals the Affiliated Group's consolidated taxable income computed pursuant to Section 1552(a)(1) of the Code and Treasury Regulations Section 1.1552-1(a)(1). For purposes of this Agreement, tax liability shall include any liability for alternative minimum tax ("AMT"). The Covanta Subgroup shall compute its separate adjusted AMT in accordance with the principles of Proposed Treasury Regulations Sections 1.1552-1(g) and 1.1502-55(h)(6)(iv) as the excess (if any) of the AMT of the Affiliated Group over the AMT of the Affiliated Group as determined by excluding the Covanta Subgroup's income, gains, deductions and losses (with the modifications provided in Section 3 of this Agreement and assuming an AMT net operating loss as of the Closing Date of $556,399,000) and credits, and Covanta Subgroup's proportionate share of the AMT of the Affiliated Group shall be determined by multiplying the AMT of the Affiliated Group by a fraction, the numerator of which equals Covanta Subgroup's separate adjusted AMT and the denominator of which equals the sum of the separate adjusted AMT's of all members of the Affiliated Group (determined with the modifications provided in Section 3 of this Agreement and assuming an AMT net operating loss as of the Closing Date of $556,399,000); provided, however, Covanta shall pay Parent for any AMT liability actually incurred by Parent if such AMT liability would not have been incurred if in an earlier taxable year the Covanta Subgroup had computed its AMT liability under Section 55 et seq. of the Code (with the modifications provided in Section 3 of this Agreement and assuming an AMT net operating loss as of the Closing Date of $556,399,000) as if it had filed its own separate return as the common parent corporation of the Covanta Subgroup and had not been included in the U.S. consolidated federal income tax return filed by Parent on behalf of the Affiliated Group, provided further however, that the amount of such payment shall not exceed the excess of the cumulative Covanta Subgroup separate adjusted AMT (as defined in Proposed Treasury Regulations Section 1.1502-
55(h)(6)(iv) with the modifications provided in Section 3 of this Agreement and assuming an AMT net operating loss as of the Closing Date of $556,399,000) over the sum of (A) the cumulative AMT amount the Covanta Subgroup has paid under this Section 2(a) of this Agreement and (B) any reduction in Parent's AMT liability resulting from the inclusion of the Covanta Subgroup in Parent's Affiliated Group.
(b) The Covanta Subgroup's allocable share of the U.S. consolidated federal income tax liability of Parent for each year beginning with the 2004 Taxable Year, determined as provided in Section 2(a) above, shall be further apportioned among the Subgroup Members, other than Covanta Warren Energy Resources Co., LP ("WARREN"), Covanta Equity of Stanislaus, Inc. ("STANISLAUS"), Covanta Equity of Alexandria/Arlington, Inc. ("ALEXANDRIA"), Covanta Tampa Construction, Inc. ("TAMPA CONSTRUCTION"), and Covanta Tampa Bay, Inc. ("TAMPA BAY") (together, the "REMAINING DEBTORS") in a manner consistent with the allocation method provided in Section 2(a) above. The Tax Sharing Agreement between Covanta, Warren, Stanislaus and Alexandria dated as of March 10, 2004, the Tax Sharing Agreement between Covanta and Tampa Construction dated as of March 10, 2004 and the Tax Sharing Agreement between Covanta and Tampa Bay provide, with respect to federal, state and local income taxes, for the amount of payments by Covanta to the Remaining Debtors and for the amount of payments by the Remaining Debtors to Covanta.
(c) Covanta's payment of such apportioned tax liability
shall constitute a complete settlement of the federal income tax liability of
all Subgroup Members for such taxable year, except as otherwise provided in
Section 9 of this Agreement. Parent shall indemnify and hold harmless Covanta
against any liability for federal income tax (including alternative minimum tax
and additional amounts) relating to taxable years during the term of this
Agreement (including any liability for taxes attributable to other corporations
for which a Subgroup Member is liable under Regulation Section 1.1502-6) other
than such apportioned tax liability. All computations under this Agreement shall
be made on the basis that each Subgroup Member is a member of the Affiliated
Group and that such group files a consolidated return.
3. Taxable Income. For purposes of this Agreement, "Covanta's Taxable Income" shall be Covanta's taxable income computed in accordance with Regulation Section 1.1552-1(a)(1)(ii) (and shall not be negative), except that the following modifications will apply:
(i) Covanta's Taxable Income shall be computed in accordance with Regulation Section 1.1552-1(a)(1)(ii), assuming Covanta's separate taxable income is the amount that would be shown on the consolidated return for the Covanta Subgroup, had Covanta filed such return as the common parent corporation of the Covanta Subgroup;
(ii) for purposes of applying Regulation
Section 1.1552-1(a)(1)(ii)(a), for each Taxable Year (beginning the day
after the Closing Date), (A) the portion of the consolidated net
operating loss deduction attributable to Covanta shall be deemed to be
increased by the Adjustment Amount (as defined below) and (B) the net
operating loss deduction attributable to other members of the
Affiliated Group shall be accordingly reduced;
(iii) the "ADJUSTMENT AMOUNT" shall be the lesser of (A) the excess of Covanta's taxable income (computed as if Covanta had filed a separate return as the common parent
of the Covanta Subgroup) over the portion of the consolidated net
operating loss deduction attributable solely to the Covanta Subgroup
and actually available to be used by the Affiliated Group and (B) the
excess of $571,846,000 over: the sum of (i) the cumulative Adjustment
Amount for all prior periods (beginning after the Closing Date); (ii)
the cumulative amount of the consolidated net operating loss deduction
utilized by affiliates of the Parent listed in Appendix B attached
hereto for all prior periods (beginning after the Closing Date); and
(iii) the sum of any net operating losses that (x) expired unused for
such prior periods (except to the extent such expiration resulted from
a current-year loss of a Parent Affiliate (other than a Subgroup
Member) being used to offset Covanta's taxable income(computed as if
Covanta had filed a separate return as the common parent of the Covanta
Subgroup)) and (y) that would have expired unused for all such prior
periods had the Covanta Subgroup and the affiliates of Parent listed in
Appendix B been the only members of the Affiliated Group with Parent.
For purposes of this clause (iii), the amount of net operating loss and
time of expiration is as set forth on Appendix C (as adjusted due to a
change in law).
4. Limitations on Attribute Use.
Notwithstanding anything in this Agreement to the contrary, if Covanta realizes an item of income or gain as a result of any disposition of any of its assets that is subject to Section 384 of the Code, the portion of tax liability attributable to such item shall be paid in full by Covanta; provided, however, the amount of such payment shall not exceed the tax liability of Parent for such taxable year. Any remaining tax liability of the Affiliated Group shall be allocated pursuant to this Agreement without taking into account such item of income or gain.
5. No Current Payments for Utilization of Net Operating Losses.
Neither Covanta nor any other Subgroup Member shall have any liability to make payments to Parent or to any other member of the Affiliated Group for the utilization by the Covanta Subgroup of net operating losses deemed to be attributable to Covanta pursuant to Section 3(ii) of this Agreement.
6. Covanta International.
If the Affiliated Group or any member of the Affiliated Group is liable for any federal, state, local or foreign tax liability generated by Covanta International, or would be liable but for the use of any Affiliated Group attributes or offsets, then Covanta International will pay to Parent, on an after-tax basis, the amount of any such liability.
7. Payment of Tax.
(a) Each Subgroup Member shall pay to Covanta no later than 4 business days before the date on which the Affiliated Group's consolidated federal income tax return is required to be filed (taking account of any extensions thereof) such Subgroup Member's separate return tax liability determined as provided under Section 2(b) above plus its "Equitable Share" (as defined below) of any interest or penalties shown on the Affiliated Group's consolidated federal income tax return. Any payments made by the Remaining Debtors under this Agreement
will be counted towards their obligations under the Tax Sharing Agreement between Covanta, Warren, Stanislaus and Alexandria dated as of March 10, 2004, the Tax Sharing Agreement between Covanta and Tampa Construction dated as of March 10, 2004 and the Tax Sharing Agreement between Covanta and Tampa Bay dated as of March 10, 2004.
(b) Covanta shall pay to Parent no later than 2 business
days before the date on which the Affiliated Group's consolidated federal income
tax return is required to be filed (taking account of any extensions thereof)
Covanta Subgroup's separate return tax liability determined as provided under
Section 2 and 3 above plus its "Equitable Share" (as defined below) of any
interest or penalties shown on the Affiliated Group's consolidated federal
income tax return.
(c) To the extent that the interest and penalties shown on a return are directly related to items of income, deduction, credit, etc. of a particular "member" of the Affiliated Group as defined in Section 1504(a) of the Code (a "MEMBER"), or such Member's delay in providing information to Parent as provided in Section 1 above, such Member's Equitable Share of such interest and penalties is 100%. Section 3(ii) shall not apply for purposes of determining whether a consolidated net operating loss deduction is directly related to Covanta. Each Member's Equitable Share of any interest and penalties shown on the return that are not directly related to the items or delay of a particular Member (and so allocated to that particular Member) will be a ratable share of any such interest or penalties, determined by multiplying such interest or penalties by a fraction, the numerator of which equals the portion of the Affiliated Group's tax liability allocated to such Member determined as provided under Section 2 above (before interest or penalties) and the denominator of which equals the Affiliated Group's tax liability (before interest or penalties).
8. Estimated Tax Payments.
(a) If the Affiliated Group is required to make estimated federal income tax payments (including payments due at the time any extension of time is sought for the filing of the Affiliated Group's federal income tax return), Covanta shall, if requested by Parent, pay to Parent, no later than 2 business days before the date each estimated tax payment is to be made by Parent, that percentage of the estimated tax payment that equals the percentage which the estimated separate return tax liability of Covanta Subgroup bears to the sum of the Parties' estimated separate return tax liabilities for the taxable year computed as provided under Sections 2 and 3 above. Parent shall reasonably determine such estimates. If Covanta is required to make a payment to Parent for estimated taxes as provided in the preceding sentence, each Subgroup Member shall, if requested by Covanta, pay to Covanta, no later than 2 business days before the date Covanta is required to make a payment to Parent, that percentage of such payment that equals the percentage which the estimated separate return tax liability of such Subgroup Member bears to the Covanta Subgroup's estimated separate return tax liability for the taxable year computed as provided under Sections 2 and 3 above.
(b) Any estimated tax payments made by Covanta to Parent and by any Subgroup Member to Covanta under this Section 8 with respect to any taxable year shall be applied to reduce the amount, if any, owed by Covanta and the Subgroup Member, as applicable, under Section 7 hereof with respect to such year. Any excess of such estimated payments by
Covanta and the Subgroup Member, as applicable, over the amount described in
Section 7 for such year shall be repaid by Parent to Covanta and by Covanta to
the Subgroup Member, as applicable, no later than 10 business days after the
date of filing of the consolidated federal tax return for such taxable year or,
to the extent such excess represents all or a part of a tax refund to be
received by the Affiliated Group, no later than 10 business days after the
receipt of the refund.
9. Adjustments to Tax Liability.
(a) If the consolidated federal tax liability is adjusted for any taxable period, whether pursuant to an amended return, a claim for refund, a tax audit by the Internal Revenue Service or some other reason, the liability of the Parties and each Subgroup Member shall be recomputed to give effect to such adjustments. In the case of a refund, Parent shall make payment to Covanta, and Covanta shall make a payment to each Subgroup Member, for its share of the refund determined in the same manner as in Section 2 above, within 10 business days after the refund is received by Parent or Covanta, as applicable. In the case of an increase in tax liability, (i) each Subgroup Member shall pay to Covanta its allocable share of such increased tax liability (including its Equitable Share of any interest and penalties) within 5 business days after receiving notice of such liability from Covanta, and (ii) Covanta shall pay to Parent the Covanta Subgroup's share of such increase (including Covanta Subgroup's Equitable Share of any interest and penalties) within 10 business days after receiving notice of such liability from Parent. The Members recognize that a recomputation of the consolidated tax liability for any taxable year under this Section 9 is not necessarily the final liability for such year, and such liability may be recomputed more than once.
(b) Each Subgroup Member or any Covanta Tax Affiliate (as defined in the Investment and Purchase Agreement) shall be responsible for its tax liability relating to periods prior to (and including) the Closing Date. Thus, if the Affiliated Group pays any such tax resulting from any final determination or settlement with the IRS, or any other taxing authority, or any court decision relating to a tax period prior to the Closing Date, then such Subgroup Member shall reimburse Parent the amount of any tax, interest, penalties or other costs resulting from such final determination, settlement, or court decision.
10. Parent's Obligations. Parent shall:
(a) timely file returns and other documents and take such other action as may be necessary and appropriate to carry out the purpose of this Agreement; and
(b) subject to receipt by Parent of the payments required to be made pursuant to Section 7 of this Agreement, timely pay to the Internal Revenue Service the federal income taxes of the Affiliated Group, including deficiencies.
11. New Members of Affiliated Group.
For all taxable periods or portions thereof during which this Agreement remains in effect, if Covanta acquires (directly or indirectly) or organizes another entity treated as a corporation for federal, state or local tax purposes that is required to be included in the Affiliated Group's consolidated federal income tax return, then such corporation shall join in and be bound by this Agreement.
12. Amendment and Termination of Agreement.
(a) This Agreement may be amended or terminated in whole or in part only by a written instrument signed by all the parties hereto.
(b) This Agreement shall not be automatically terminated because Covanta ceases to be included in the Affiliated Group. In such case, Covanta shall be liable to Parent for an amount determined by multiplying the Affiliated Group's tax liability (calculated assuming Covanta was still a member of the Affiliated Group) by a fraction, the numerator of which equals Covanta's Taxable Income, and the denominator of which equals the Affiliated Group's consolidated taxable income so computed pursuant to Section 1552(a)(1) of the Code and Treasury Regulations Section 1.1552-1(a)(1) and assuming Covanta was still a member of the Affiliated Group. Such payment by Covanta shall constitute a complete settlement of the federal income tax liability of all Subgroup Members for such taxable year, except as otherwise provided in Section 9 of this Agreement. Parent shall indemnify and hold harmless Covanta against any liability for federal income tax (including alternative minimum tax and additional amounts) relating to taxable years during the term of this Agreement other than such apportioned tax liability.
13. Audits and Refund Claims.
Parent and a former Member shall also consult and furnish each other with information concerning the status of any tax audit or tax refund claim relating to a taxable year in which the former Member was included in the Affiliated Group and a consolidated federal income tax was filed. Parent shall have the right to make the final determination as to the response of the Affiliated Group to any audit and shall have the sole right to control any contest of any change proposed and any proposed disallowance of a refund claim by the Internal Revenue Service through the Appeals Office of the Internal Revenue Service and the courts in connection with any taxable year for which this Agreement is in effect. Each Member shall bear an equitable share of the cost of any such contest (including fees and expenses of outside accountants, lawyers or other experts)
14. State and Local Income Taxes.
The principles underlying the rights and obligations hereunder
of the Members in respect of federal income taxes shall be applied in respect of
any state or local tax (it being understood that the principles provided in
Section 3(ii) of this Agreement shall apply only to the extent Parent has net
operating losses for such applicable state and local taxes on the Closing Date)
based on or measured by all or any part of the net income or loss of the
Affiliated Group or several of its members (a "COMBINED TAX"). All of the
procedural and timing requirements of this Agreement applicable to federal
income taxes shall be equally applicable to any Combined Tax, with appropriate
adjustments thereto to reflect the differences, if any, in corresponding
provisions of the applicable income tax code, law or statute governing any such
Combined Tax and any administrative provisions relating thereto.
15. Entire Agreement. This Agreement contains the entire understanding of the parties hereto with respect to the subject matter contained herein.
16. Successors. This Agreement shall be binding upon and inure to the benefit of any successor, whether by statutory merger, acquisition of assets, or otherwise, to any of the parties hereto, to the same extent as if the successor had been an original party to the agreement.
17. Choice of Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.
18. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed by their duly authorized representatives on the first date mentioned herein.
DANIELSON HOLDING CORPORATION
By: ___________________________________
Name:
Title:
COVANTA ENERGY CORP.
By: ___________________________________
Name:
Title:
COVANTA POWER INTERNATIONAL HOLDINGS, INC.
By: ___________________________________
Name:
Title:
APPENDIX A
COVANTA SUBGROUP
Greenway Insurance Company of Vermont
DSS Environmental, Inc.
Covanta Cunningham Environmental Support, Inc.
Haverhill Power, Inc.
LMI, Inc.
Michigan Waste Energy, Inc.
Covanta Oahu Waste Energy Recovery, Inc.
Covanta Energy Group, Inc.
Covanta Energy Resource Corp.
Covanta Energy International, Inc.
Covanta Energy West, Inc.
Covanta Engineering Services, Inc.
Covanta Haverhill Properties, Inc.
Covanta Marion Land Corp.
Covanta Alexandria/Arlington, Inc.
Covanta Babylon, Inc.
Covanta Bristol, Inc.
Covanta Fairfax Inc.
Covanta Haverhill, Inc.
Covanta Hillsborough, Inc.
Covanta Huntington Res. Rec. 1 Corp.
Covanta Huntington Res. Rec. 7 Corp.
Covanta Huntsville, Inc.
Covanta Indianapolis, Inc.
Covanta Kent, Inc.
Covanta Lancaster, Inc.
Covanta Lee, Inc.
Covanta Long Island, Inc.
Covanta Marion, Inc.
Covanta Montgomery Inc.
Covanta Onondaga Five Corp.
Covanta Onondaga Four Corp.
Covanta Onondaga Inc.
Covanta Onondaga Three Corp.
Covanta Onondaga Two Corp.
Covanta Pasco, Inc.
Covanta Stanislaus, Inc.
Covanta Tulsa, Inc.
Covanta Union, Inc.
Covanta Systems, Inc.
Covanta Omega Lease, Inc.
Covanta Plant Services of New Jersey, Inc.
Covanta Projects of Hawaii, Inc.
Covanta Projects, Inc.
Covanta Energy Services, Inc.
Covanta Wallingford Associates, Inc.
Covanta Waste to Energy, Inc.
Covanta Secure Services, Inc.
Covanta Water Holdings, Inc.
Covanta Water Systems, Inc.
Covanta Warren Energy Resources Co, L.P.
Covanta Water Treatment Services, Inc.
Covanta Acquisition, Inc.
Covanta Bessemer, Inc.
Covanta Onondaga Operations, Inc.
Covanta OPW Associates, Inc.
Covanta OPWH, Inc.
Covanta Mid-Conn, Inc.
Covanta RRS Holdings, Inc.
Olmec Insurance, Ltd.
8309 Tujunga Avenue Corp.
Burney Mountain Power, Inc.
Covanta New Martinsville Hydroelectric, Corporation
ERC Energy, Inc.
ERC Energy II, Inc.
Covanta Geothermal Operations Holdings, Inc.
Heber Field Energy II, Inc.
Covanta Imperial Power Services, Inc.
Mammoth Power Co.
Mt. Lassen Power
Covanta New Martinsville Hydro Operations
Corporation
Covanta Geothermal Operations, Inc.
Covanta Heber Field Energy, Inc.
Covanta Hydro Energy, Inc.
Covanta Hydro Operations, Inc.
Covanta Power Equity Corp.
Covanta Power Pacific, Inc.
Covanta Power Plant Operations
Covanta SIGC Geothermal Operations, Inc.
Pacific Energy Resources, Inc.
Pacific Hydropower Co.
Pacific Oroville Power, Inc.
Pacific Recovery Corp.
Pacific Wood Fuels Co.
Pacific Wood Services Co.
Penstock Power Co.
Covanta Energy Construction, Inc.
Three Mountain Operations, Inc.
Covanta Hydro Operations West, Inc.
Covanta Tampa Bay, Inc.
Three Mountain Power LLC
Covanta Tampa Construction
Covanta Equity Stanislaus, Inc.
Covanta Equity of Alexandria/Arlington, Inc.
APPENDIX B
Danielson Insurance Co. (Mission Insurance Company Trust) Danielson Insurance Co. (Enterprise Insurance Company Trust) Danielson National Insurance Company (Mission National Insurance Company Trust) Danielson Indemnity Company (Holland-America Insurance Company Trust) Danielson Reinsurance Corporation (Mission Reinsurance Corporation Trust)
APPENDIX C
Schedule of Expiring Net Operating Losses
Year of Expiration Amount Expiring
------------------ ---------------
2004 $ 69,947,000
2005 106,225,000
2006 92,355,000
2007 89,790,000
2008 31,688,000
2009 39,665,000
2010 23,600,000
2011 19,755,000
2012 38,255,000
2019 33,635,000
2022 26,931,000
Total $ 571,846,000
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EXHIBIT 10.26
CORPORATE SERVICES AND EXPENSE REIMBURSEMENT AGREEMENT
THIS CORPORATE SERVICES AND EXPENSE REIMBURSEMENT AGREEMENT (hereinafter, this "Agreement") is made and entered into as of the __ day of November, 2003, by and between DANIELSON HOLDING CORPORATION, a Delaware corporation (hereinafter, ("Parent") and COVANTA ENERGY CORPORATION, a Delaware corporation and a subsidiary of Parent (hereinafter, the "Company"). Parent and the Company are sometimes referred to herein individually as a "Party" and collectively as the "Parties".
RECITALS
WHEREAS, Parent is a publicly-owned holding company with no independent operations;
WHEREAS, the Company is an operating company whose financial statements and operations will be consolidated with Parent's for accounting, securities and disclosure requirements, and other matters;
WHEREAS, Parent will incur certain expenses for or on behalf of the Company, as a reporting company under the Securities Exchange Act of 1934, as amended ("Exchange Act") and as listed company on the American Stock Exchange; and
WHEREAS, the Company intends to pay or reimburse Parent for services provided or expenses incurred for or on behalf of the Company and to maintain Parent's operations as a publicly-traded company, pursuant to the terms and on the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the Parties agree as follows:
1. Services. Parent shall provide, or cause to be provided, the following administrative services (collectively the "Services"):
(a) Providing assistance in matters of shareholder relations, including, without limitation, maintaining communications with Parent's and the Company's stock transfer agent, responding to shareholder and market inquiries and requests for information and materials, and maintaining shareholder records relating to stock options;
(b) Obtaining the services of and coordinating with professional advisors in connection with Parent's and the Company's business, including, without limitation, accountants, auditors, attorneys, brokers, advisors, consultants and banks;
(c) Coordinating the acquisition and maintenance of appropriate insurance for Parent and the Company, including directors and officers ("D&O") insurance and errors and omissions ("E&O") insurance;
(d) Maintaining the financial accounts of Parent, including, but not limited to, settling accounts payable with vendors and other creditors of the Company;
(e) Maintaining appropriate financial, tax, accounting and general business records of Parent and the Company, assisting with the preparation and submission of filings required by the Securities and Exchange Commission, the American Stock Exchange and applicable rating agencies (and any other applicable regulatory body);
(f) Providing support with regard to the information and technology needs of the Company in the ordinary course of its business;
(g) Contesting any tax deficiencies or adjustments or performing any other functions as provided in the tax sharing agreement between Parent and the Company dated ____ (the "Tax Sharing Agreement"); and
(h) Such other functions as may be requested by the Company, from time to time, and agreed to by Parent.
2. Reimbursable Operating Expenses of Parent. In addition to reimbursing Parent for its actual costs in providing the Services, the Company shall reimburse Parent for the actual cost of the following operating expenses incurred by Parent in connection with its operations (collectively, the "Reimbursable Operating Expenses"):
(a) All audit, legal, appraisal, engineering, environmental, financial and other professional and/or consulting services incurred by Parent;
(b) Phone and fax charges, postage, and supplies;
(c) Fees and expenses of Parent's stock transfer agent;
(d) Fees and expenses related to the maintenance of Parent's website;
(e) Fees and expenses of meetings and travel of directors and officers of Parent, including directors' fees;
(f) Temporary employees or independent contractors engaged to assist on Parent matters;
(g) Filing fees and other fees or expenses payable to or in connection with filings made with the Securities and Exchange Commission and other regulatory agencies;
(h) Listing fees and other fees payable to the American Stock Exchange or such other exchange or stock market on which the Parent's securities may trade;
(i) Fees and expenses payable to rating agencies;
(j) Printing fees associated with notices or other communications to holders of Parent's or Company's securities and registration statements, reports, proxy statements and other reports filed with the Securities and Exchange Commission;
(k) Income, sales, use, franchise and other taxes paid to Federal, state and local governments by Parent and not covered by the tax sharing agreement between Parent and the Company;
(l) Premiums for D&O Insurance, E&O Insurance and such other insurance as Parent shall deem necessary or desirable to obtain in connection with its operations;
(m) Reimbursement of payments to Equity Group Investments, LLC ("EGI") under that certain services agreement, approved by the Audit Committee of Parent, pursuant to which Parent reimburses EGI for operating expenses, currently in the amount of $20,000 per month, incurred by EGI on behalf of or for the benefit of Parent;
(n) Salaries and other compensation payable to officers of Parent;
(o) All costs and expenses incurred by Parent for the services Parent provides under the Tax Sharing Agreement on behalf of or for the benefit of Company or any of its subsidiaries; and
(p) All such other out-of-pocket expenditures directly related to Parent's activities and reasonably determined to be appropriate and advisable by any officer of Parent.
3. Term.
(a) The term of this Agreement shall be deemed to have commenced
on the date hereof and shall continue (i) until such time as Parent shall give
to the Company at least ninety (90) calendar days advance written notice of its
intention to terminate this Agreement, in which event this Agreement shall
terminate on the date specified in such notice; or (ii) termination pursuant to
Section 7 hereof.
(b) Termination of Obligations. In the event of the termination of this Agreement, neither Party shall have any further rights, obligations or liabilities under this Agreement except (i) those which are accrued through the effective date of such termination, and (ii) reasonable costs and expenses, including, without limitation, severance and early termination costs, incurred by Parent upon a termination of this Agreement including, without limitation, costs associated with (x) the redeployment of personnel hired by Parent to perform Services hereunder; or (y) the termination of third-party agreements entered into by Parent relating to the provision by Parent or such third parties of Services hereunder (it being acknowledged that, when practicable, the Parties shall endeavor to have any such agreements entered into by the Company, rather than Parent).
4. Independent Contractor. Parent shall serve as an independent contractor and the Company shall have no control over the selection, retention, terms of employment or discharge
of Parent's employees, representatives, or subcontractors, and no control over the specific manner in which the Services shall be performed.
5. Cost Reimbursement. In exchange for performing the Services for the Company, the Company shall reimburse Parent on a monthly basis for Parent's actual cost in providing the Services and for the Reimbursable Operating Expenses (as such term is defined in Section 2 hereof) Parent incurs during the immediately preceding month. Parent shall submit to the Company for payment each month an invoice for amounts due under this Agreement (an "Invoice"). All Invoices shall specify the Services provided to the Company under the Agreement for the invoiced month and Parent's costs therefor. To the extent that any of the Services or Reimbursable Operating Expenses to be reimbursed hereunder are known and fixed at the beginning of any month, Parent may invoice the Company for reimbursement of such amounts on a prospective monthly basis. The Invoices shall also detail all Expenses incurred. The Company shall pay all Invoices within five (5) business days of receipt thereof; provided, however, that if the Company fails to make a payment under its first lien Credit Agreement with Deutsche Bank and Bank of America, as agents, then until such breach is cured, the Company shall not make payments to Parent hereunder and the Company shall be deemed to be in default hereunder.
6. Indemnification. Parent shall provide the Company the benefit of the same standard of judgment and effort in rendering the Services hereunder as Parent applies to its own corporate functions and operations. However, Parent and its officers, directors, member, affiliates, agents and employees shall not be liable to the Company or to any other person for any act or omission in the course of performance of their duties hereunder except for their gross negligence or willful misconduct. The Company shall defend, indemnify and save harmless Parent and its officers, directors, members, affiliates, agents and employees from and against any and all liabilities, claims, damages, costs and expenses (including reasonable attorney's fees and amounts reasonably paid in settlement) incurred by reason of or arising out of the performance or nonperformance of its duties under or by reason of this Agreement; provided, however, there shall be no such indemnification for liabilities, claims, damages, costs or expenses incurred by any such person or entity by reason of their gross negligence or willful misconduct in the conduct of their duties under or by reason of this Agreement. Expenses incurred by an indemnitee hereunder shall be paid by the Company in advance upon request of such indemnitee that the Company pay such expenses The Company's indemnification and advancement of expenses obligations hereunder shall survive any termination of this Agreement.
7. Default. In the event of a material default (hereinafter a "Default") by either Party to this Agreement, the Party suffering from such Default (hereinafter the "Non-Defaulting Party") shall serve written notice to the Party in Default (hereinafter the "Defaulting Party") setting forth with reasonable particularity the nature of the alleged Default, and the specific remedy or performance sought by the Non-Defaulting Party (hereinafter the "Default Notice") of the Defaulting Party to cure the Default. The Defaulting Party shall have five (15) business days from its receipt of the Default Notice, other than a payment default, to either cure the Default or, if the Default is not capable of being cured within fifteen (15) business days, to make substantial efforts and progress towards curing the Default. In the event that the Defaulting Party does not cure the Default or make substantial efforts and progress towards curing the Default within fifteen (15) business days of its receipt of the Default Notice, then the Non-Defaulting Party may
deliver a second notice (hereinafter the "Notice of Termination") to the Defaulting Party informing the Defaulting Party that this Agreement has been terminated as of the Date of the Notice of Termination. Notwithstanding the foregoing, in the event of a payment default by the Company, Parent shall have the right to terminate this Agreement in the event such payment default is not cured within five (5) days following delivery of the Default Notice to the Company.
8. Notice. Whenever, under the terms of this Agreement, any notice is required or permitted to be served upon the other Party, said notice may be served upon the other Party by personal service, overnight carrier, or by certified mail. Any such notice shall be deemed given when personally received by the Party to whom the notice is directed; provided, however, in the event notice is mailed, such notice shall be deemed given when deposited in the United States Mail with postage prepaid. Notices shall be in writing and, until further notification in writing, shall be delivered to the following addresses:
To Parent:
Philip G. Tinkler, CFO
Danielson Holding Corporation
Two North Riverside Plaza
Suite 600
Chicago, IL 60606
with a required copy to:
Danielson Holding Corporation
David S. Stone, Esq., Acting General Counsel
Neal, Gerber & Eisenberg LLP
Two North LaSalle Street
Suite 2200
Chicago, IL 60602
To the Company:
Covanta Energy Corporation
with a required copy to:
9. Assignment. The Parties to this Agreement may not assign or otherwise transfer all or any part of their rights or obligations under this Agreement without the prior written consent of the other Party; provided that Parent may subcontract to affiliated and unaffiliated entities, firms and organizations for those services Parent reasonably deems necessary or advisable to accomplish the Services specified above.
10. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Illinois, but without regard to the conflicts of laws provisions thereof.
11. Validity. This Agreement sets forth the entire understanding of the Parties and has been duly executed and delivered on behalf of each of the Parties and constitutes the legal, valid, binding and enforceable obligation of each such Party.
12. Headings. The paragraph headings contained herein are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope or intent of this Agreement or in any way affect the terms and provisions hereof.
13. Counterparts. This Agreement may be signed in counterparts, each of which shall constitute an original and all of which together shall constitute one and the same Agreement.
14. Entire Agreement; Amendments. This Agreement contains the entire agreement between the Parties pertaining to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings in connection therewith. There are no agreements, understandings, conditions, warranties, or representations, oral or written, express or implied, with reference to the subject matter hereof that are not merged herein or superseded by this Agreement. This Agreement may not be changed orally, but only by an agreement in writing signed by duly authorized officers of each of the Parties.
IN WITNESS WHEREOF, each of the Parties hereto, intending to be legally bound hereby, have caused this Agreement to be executed by their duly authorized officers, on the day and year first above written.
DANIELSON HOLDING CORPORATION
By: ________________________________________________
Name: Philip Tinkler
Its: Chief Financial Officer
COVANTA ENERGY CORPORATION
By: ________________________________________________ Name: ______________________________________________ Its: ______________________________________________
Exhibit 10.28
CREDIT AGREEMENT
DATED AS OF MARCH 10, 2004
AMONG
COVANTA POWER INTERNATIONAL HOLDINGS, INC.
AND
EACH OF ITS SUBSIDIARIES PARTY HERETO,
THE LENDERS LISTED HEREIN,
AS LENDERS,
BANK OF AMERICA, N.A.,
AS ADMINISTRATIVE AGENT,
AND
DEUTSCHE BANK SECURITIES, INC.
AS DOCUMENTATION AGENT
BANK OF AMERICA, N.A.
AND
DEUTSCHE BANK SECURITIES, INC.
AS CO-LEAD ARRANGERS
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS............................................................................... 1
1.1 Certain Defined Terms......................................................................... 1
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement............ 30
1.3 Other Definitional Provisions and Rules of Construction....................................... 30
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS................................................ 30
2.1 Commitments; Making of Loans; the Register; Optional Notes.................................... 30
2.2 Interest on the Loans......................................................................... 32
2.3 Fees.......................................................................................... 33
2.4 Repayments, Prepayments; General Provisions Regarding Payments; Application of
Proceeds of Collateral........................................................................ 33
2.5 Use of Proceeds............................................................................... 36
2.6 Increased Costs; Taxes; Capital Adequacy...................................................... 37
2.7 Statement of Lenders; Obligation of Lenders to Mitigate....................................... 40
2.8 Joint and Several Liability; Payment Indemnifications......................................... 41
2.9 Rights of Subrogation, Contribution, Etc...................................................... 41
SECTION 3. CONDITIONS TO LOANS....................................................................... 42
3.1 Conditions to Closing Date.................................................................... 42
SECTION 4. COMPANY'S REPRESENTATIONS AND WARRANTIES.................................................. 51
4.1 Organization, Powers, Qualification, Good Standing, Business and Subsidiaries................. 51
4.2 Authorization of Borrowing, etc............................................................... 52
4.3 Financial Condition........................................................................... 53
4.4 No Material Adverse Change; No Restricted Payments............................................ 53
4.5 Title to Properties; Liens; Real Property; Intellectual Property.............................. 54
4.6 Litigation; Adverse Facts..................................................................... 54
4.7 Payment of Taxes.............................................................................. 55
4.8 Performance of Agreements; Material Contracts................................................. 55
4.9 Governmental Regulation....................................................................... 55
4.10 Securities Activities......................................................................... 56
4.11 Employee Benefit Plans........................................................................ 56
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TABLE OF CONTENTS
(continued)
PAGE
4.12 Certain Fees.................................................................................. 57
4.13 Environmental Protection...................................................................... 57
4.14 Employee Matters.............................................................................. 58
4.15 Matters Relating to Collateral................................................................ 58
4.16 Disclosure.................................................................................... 59
4.17 Cash Management System........................................................................ 60
4.18 Matters Relating to Loan Parties.............................................................. 60
4.19 Investigation................................................................................. 61
4.20 Matters Relating to Bankruptcy Proceedings.................................................... 61
4.21 Subordinated Indebtedness..................................................................... 61
4.22 Reporting to IRS.............................................................................. 61
SECTION 5. COMPANY'S AFFIRMATIVE COVENANTS........................................................... 62
5.1 Financial Statements and Other Reports........................................................ 62
5.2 Existence, etc................................................................................ 67
5.3 Payment of Taxes and Claims; Tax.............................................................. 67
5.4 Maintenance of Properties; Insurance; Application of Net Insurance/ Condemnation
Proceeds...................................................................................... 68
5.5 Inspection Rights; Lender Meeting............................................................. 70
5.6 Compliance with Laws, etc..................................................................... 70
5.7 Environmental Matters......................................................................... 70
5.8 Execution of the Personal Property Collateral Documents After the Closing Date................ 72
5.9 Matters Relating to Real Property Collateral.................................................. 73
5.10 Deposit Accounts; Repatriation of Foreign Cash................................................ 73
5.11 Further Assurances............................................................................ 74
5.12 Most Favored Nations Payments................................................................. 75
SECTION 6. BORROWERS' NEGATIVE COVENANTS............................................................. 76
6.1 Indebtedness.................................................................................. 76
6.2 Liens and Related Matters..................................................................... 78
6.3 Investments; Acquisitions..................................................................... 80
6.4 Contingent Obligations; Performance Guaranties................................................ 81
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TABLE OF CONTENTS
(continued)
PAGE
6.5 Restricted Payments........................................................................... 82
6.6 Financial Covenants........................................................................... 83
6.7 Restriction on Fundamental Changes; Asset Sales............................................... 84
6.8 Transactions with Shareholders and Affiliates................................................. 86
6.9 Restriction on Leases......................................................................... 86
6.10 [Intentionally Omitted]....................................................................... 87
6.11 Conduct of Business........................................................................... 87
6.12 Amendments to Related Agreements, Debt Documentation and Organizational Documents............. 87
6.13 End of Fiscal Years; Fiscal Quarters.......................................................... 88
6.14 Amendment to Pension Plans.................................................................... 88
SECTION 7. EVENTS OF DEFAULT......................................................................... 88
7.1 Failure to Make Payments When Due............................................................. 88
7.2 Default in Other Agreements................................................................... 89
7.3 Breach of Certain Covenants................................................................... 89
7.4 Breach of Warranty............................................................................ 89
7.5 Other Defaults Under Loan Documents........................................................... 90
7.6 Involuntary Bankruptcy; Appointment of Receiver, etc.......................................... 90
7.7 Voluntary Bankruptcy; Appointment of Receiver, etc............................................ 90
7.8 Judgments and Attachments..................................................................... 91
7.9 Dissolution................................................................................... 91
7.10 Employee Benefit Plans........................................................................ 91
7.11 Material Adverse Effect....................................................................... 91
7.12 Change in Control............................................................................. 92
7.13 Invalidity of Intercreditor Agreement; Failure of Security; Repudiation of Obligations........ 92
7.14 Termination of Material Contracts............................................................. 92
7.15 Default under Existing IPP International Project Guaranties................................... 92
SECTION 8. ADMINISTRATIVE AGENT...................................................................... 93
8.1 Appointment................................................................................... 93
8.2 Powers and Duties; General Immunity........................................................... 93
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(continued)
PAGE
8.3 Independent Investigation by Lenders; No Responsibility For Appraisal of
Creditworthiness.............................................................................. 95
8.4 Right to Indemnity............................................................................ 95
8.5 Successor Agents.............................................................................. 96
8.6 Collateral Documents and Intercreditor Agreement.............................................. 96
8.7 Administrative Agent May File Proofs of Claim................................................. 97
SECTION 9. MISCELLANEOUS............................................................................. 97
9.1 Successors and Assigns; Assignments and Participations in Loans............................... 97
9.2 Expenses..................................................................................... 101
9.3 Indemnity.................................................................................... 101
9.4 Set-Off...................................................................................... 102
9.5 Ratable Sharing.............................................................................. 103
9.6 Amendments and Waivers....................................................................... 104
9.7 Independence of Covenants.................................................................... 105
9.8 Notices; Effectiveness of Signatures......................................................... 105
9.9 Survival of Representations, Warranties and Agreements....................................... 106
9.10 Failure or Indulgence Not Waiver; Remedies Cumulative........................................ 106
9.11 Marshalling; Payments Set Aside.............................................................. 106
9.12 Severability................................................................................. 107
9.13 Obligations Several; Independent Nature of Lenders' Rights; Damage Waiver.................... 107
9.14 Release of Security Interest................................................................. 107
9.15 Headings..................................................................................... 108
9.16 Applicable Law............................................................................... 108
9.17 Construction of Agreement.................................................................... 108
9.18 Consent to Jurisdiction and Service of Process............................................... 108
9.19 Waiver of Jury Trial......................................................................... 109
9.20 Confidentiality.............................................................................. 110
9.21 Release of Parties; Waivers.................................................................. 110
9.22 No Fiduciary Duty............................................................................ 111
9.23 Counterparts; Effectiveness.................................................................. 111
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(continued)
PAGE
9.24 No Third Party Beneficiaries................................................................. 112
9.25 Disbursing Agents; Non-Confirming Holders.................................................... 112
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EXHIBITS
I. FORM OF NOTE
II. FORM OF COMPLIANCE CERTIFICATE
III. FORM OF ASSIGNMENT AGREEMENT
IV. [INTENTIONALLY OMITTED]
V. [INTENTIONALLY OMITTED]
VI. FORM OF OPINIONS OF LOAN PARTIES' COUNSEL
VII. FORM OF SECURITY AGREEMENT
VIII. FORM OF CEA Stock Pledge AgREEMENT
IX. FORM OF INTERCREDITOR AGREEMENT
X. FORM OF MORTGAGE XI. FORM OF LENDER ACKNOWLEDGMENT
SCHEDULES
1.1A PRINCIPAL LEASE, SERVICE AND OPERATING AGREEMENTS
1.1B BUDGET
2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES
3.1C CORPORATE STRUCTURE
3.1P CASH MANAGEMENT SYSTEM
4.1 COMPANY AND SUBSIDIARIES
4.5B REAL PROPERTY
4.5C INTELLECTUAL PROPERTY
4.6 LITIGATION
4.8A CERTAIN ALLEGED DEFAULTS
4.8C MATERIAL CONTRACTS
4.11 MATTERS RELATING TO EMPLOYEE BENEFIT PLANS
4.13 ENVIRONMENTAL MATTERS
4.14 EMPLOYEE MATTERS (BATAAN)
6.1(v) CERTAIN EXISTING INDEBTEDNESS
6.2 CERTAIN EXISTING LIENS
6.3(v) CERTAIN EXISTING INVESTMENTS
6.4(iii) CERTAIN EXISTING CONTINGENT OBLIGATIONS
6.6E STIPULATED ADJUSTED EBITDA
6.8 CERTAIN TRANSACTIONS WITH AFFILIATES
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COVANTA POWER INTERNATIONAL HOLDINGS, INC.
CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of March 10, 2004 and entered into by and among COVANTA POWER INTERNATIONAL HOLDINGS, INC., a Delaware corporation ("COMPANY" or "CPIH"); EACH OF COMPANY'S SUBSIDIARIES LISTED ON THE SIGNATURE PAGES HEREOF (each such Subsidiary and Company individually referred to herein as a "BORROWER" and, collectively (this and other capitalized terms used in the recitals hereto without definition being used as defined in subsection 1.1), on a joint and several basis, as "BORROWERS"); THE PERSONS IDENTIFIED ON THE SIGNATURE PAGES HEREOF AS LENDERS (each individually referred to herein as a "LENDER" and collectively as "Lenders"); DEUTSCHE BANK SECURITIES, INC. ("DEUTSCHE BANK"), as documentation agent for Lenders (in such capacity, "DOCUMENTATION AGENT"); and BANK OF AMERICA, N.A. ("BANK OF AMERICA"), as administrative agent for Lenders (in such capacity, "ADMINISTRATIVE AGENT").
R E C I T A L S
WHEREAS, on April 1, 2002 (the "PETITION DATE"), Covanta Energy Corporation, a Delaware corporation ("COVANTA"), and certain of its Domestic Subsidiaries, including Borrowers (collectively, the "DEBTORS"), filed voluntary petitions for relief under the Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York (such proceedings being jointly administered under Case Nos. 02-40826 through 02-40949, 02-16322, 03-13679 through 03-13685, and 03-13687 through 03-13709 are hereinafter referred to as the "CHAPTER 11 CASES"), and each Borrower has operated its businesses and managed its properties as a debtor-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code;
WHEREAS, the Debtors have proposed, their creditors have approved, and the Bankruptcy Court has confirmed, the Plan of Reorganization;
WHEREAS, pursuant to the Plan of Reorganization, certain outstanding pre-Petition Date secured indebtedness shall be refinanced in full under this Agreement with Loans deemed made hereunder;
NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Borrowers, Lenders and Agents agree as follows:
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS.
The following terms used in this Agreement shall have the following meanings:
"ADDITIONAL INTEREST LOANS" has the meaning assigned to that term in subsection 2.2B.
"ADJUSTED EBITDA" means, for any period, (i) without duplication, the aggregate amount derived by combining the amounts for such period of (a) "Operating income (loss)", plus (b) Net Depreciation and Amortization Expense, minus (ii) the amount (expressed as a positive number) for such period of "Minority interests", as each such line item referred to in clause (i)(a) and clause (ii) is reflected in Company's consolidated statement of income prepared in conformity with GAAP and reported in a manner consistent with Company's reporting of such amount in its quarterly or annual report (as the case may be) on Form 10Q or 10K, respectively, prior to the Closing Date, whether such line items are so titled or otherwise titled.
"ADMINISTRATIVE AGENT" has the meaning assigned to that term in the introduction to this Agreement and also means and includes any successor Administrative Agent appointed pursuant to subsection 8.5.
"AFFILIATE", as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person (other than exclusively as a result of such Person's role as a senior executive of that Person or a Project manager or operator), whether through the ownership of voting securities or by contract or otherwise.
"AGENTS" means Administrative Agent and Documentation Agent, and "AGENT" means either one of them.
"AGGREGATE AMOUNTS DUE" has the meaning assigned to that term in subsection 9.5.
"AGREEMENT" means this Credit Agreement dated as of March 10, 2004, as it may be amended, restated, supplemented or otherwise modified from time to time.
"APPROVED FUND" means a Fund that is administered or managed by (i) a Lender, (ii) an Affiliate of a Lender or (iii) an entity or an Affiliate of an entity that administers or manages a Lender.
"APPROVED PLAN OF REORGANIZATION" has the meaning assigned to that term in subsection 3.1E.
"ASSET SALE" means (A) the sale by CEA of any of the Capital Stock of Company to any Person or (B) the sale by Company or any of its Subsidiaries to any Person of (i) any of the Capital Stock of any of Company's Subsidiaries, (ii) substantially all of the assets of any division or line of business of Company or any of its Subsidiaries, or (iii) any other assets (whether tangible or intangible) of Company or any of its Subsidiaries (other than (a) inventory sold in the ordinary course of business and (b) any such other assets to the extent that the aggregate value of such assets sold in any single transaction or related series of transactions is equal to $250,000 or less and the aggregate value of all such other assets since the Closing Date is equal to $1,000,000 or less, in each case so long as not less than 90% of the consideration received for such assets shall be cash); provided, however, that Asset Sales shall not include (1)
any sale or discount, in each case without recourse, of accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof (provided, that sales and discounts of not more than $2,000,000 in face value of accounts receivable may be excluded from Asset Sales pursuant to this clause (1), and the sole consideration received in connection with any such sale of accounts receivable shall be cash), (2) any sale or exchange of specific items of equipment, so long as the purpose of each such sale or exchange is to acquire (and results within 120 days of such sale or exchange in the acquisition of) replacement items of equipment which are the functional equivalent of the item of equipment so sold or exchanged (provided, that any cash received in connection with any such sale or exchange that is not expended as part of such sale or exchange to obtain such replacement items of equipment, to the extent in excess of the amounts set forth in clause (b) of this definition, shall be deemed cash proceeds of an Asset Sale), (3) disposals of obsolete, worn out or surplus property in the ordinary course of business (provided, that not less than 75% of the consideration, if any, received in connection with any such disposal shall be cash, and any such cash received, to the extent in excess of the amounts set forth in clause (b) of this definition, shall be deemed cash proceeds of an Asset Sale), (4) any discount or compromise of notes or accounts receivable for less than the face value thereof, to the extent Company deems necessary in order to resolve disputes that occur in the ordinary course of business, or (5) any sale of shares in the Madurai Project Entity permitted under subsection 6.7(vi).
"ASSIGNMENT AGREEMENT" means an Assignment Agreement in substantially the form of Exhibit III annexed hereto.
"ASSUMPTIONS" has the meaning assigned to that term in subsection 4.11D.
"AVAILABLE CASH" has the meaning given to that term in subsection 2.4(A)(ii).
"BANK OF AMERICA" has the meaning assigned to that term in the introduction to this Agreement.
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled "Bankruptcy", as now and hereafter in effect, or any successor statute.
"BANKRUPTCY COURT" means the United States Bankruptcy Court for the Southern District of New York and any other court properly exercising jurisdiction over any relevant Chapter 11 Case.
"BORROWERS" has the meaning assigned to that term in the introduction to this Agreement.
"BUDGET" means (i) with respect to Fiscal Year 2004, the budget delivered by Company to Lenders on or prior to the Closing Date pursuant to subsection 3.1G, setting forth projected cash receipts and expenditures for Company and its Subsidiaries for each calendar month and each Fiscal Quarter from the Closing Date through December 31, 2004, and projected net cash flows for Company and its Subsidiaries for each Fiscal Year thereafter through December 31, 2007, as such budget may be supplemented pursuant to subsection 5.1(i), and (ii) with respect to each Fiscal Year after 2004, the budget delivered by Company to Lenders pursuant to subsection 5.1(xvi), setting forth projected cash receipts and expenditures for
Company and its Subsidiaries for each calendar month and Fiscal Quarter during such Fiscal Year and projected net cash flows for Company and its Subsidiaries for each Fiscal Year thereafter through December 31, 2007, as such budget may be supplemented pursuant to subsection 5.1(i).
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York, the State of Texas or the State of California or is a day on which banking institutions located in any such state are authorized or required by law or other governmental action to close.
"CANADIAN LENDERS" means Non-US Lenders, if any, that are (i) Lenders on the Closing Date in addition to being Canadian Loss Sharing Lenders (as defined in the Existing Intercreditor Agreement) immediately prior to the Closing Date or (ii) Non-US Lenders domiciled in Canada that (a) hold Loan Exposure originally held on the Closing Date by one or more Non-US Lenders referred to in clause (i) and (b) received such Loan Exposure directly from another Canadian Lender. Each reference herein to Canadian Lenders shall be a reference to such Persons solely with respect to Commitments and Loan Exposure held by such Canadian Lenders on the Closing Date.
"CAPITAL LEASE", as applied to any Person, means any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person.
"CAPITAL STOCK" means the capital stock or other equity interests of a Person.
"CASH MANAGEMENT SYSTEM" means the cash management system of Company and its Subsidiaries in the United States described in Schedule 3.1P annexed hereto, as such Cash Management System may be modified pursuant to subsection 5.10.
"CASH ON HAND" means, as of any date of determination, the aggregate amounts on deposit in the Cash Management System in the United States as of the close of business on the preceding Business Day.
"CEA" means Covanta Energy Americas, Inc., a Delaware corporation.
"CEA STOCK PLEDGE AGREEMENT" means the Pledge Agreement executed and delivered by CEA on the Closing Date, substantially in the form of Exhibit VIII annexed hereto (it being understood that such Pledge Agreement shall contain a covenant requiring CEA to pay to Collateral Agent any proceeds received by it from or in connection with the sale of any of the common stock of Company to any Person), as such Pledge Agreement may thereafter be amended, restated, supplemented or otherwise modified from time to time.
"CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Section 9601 et seq.), or any successor statute, and all implementing regulations promulgated thereunder.
"CHANGE IN CONTROL" means the occurrence of any one or more of the following: (i) DHC shall cease to own, directly, 80% or more of the outstanding Capital Stock of Covanta;
(ii) Covanta shall cease to own, directly or indirectly, 100% of the outstanding Capital Stock of CEA; (iii) CEA shall cease to own, directly, 100% of the outstanding common stock of Company; or (iv) the occurrence of a change in the composition of the Governing Body of Company such that less than one of the members of such Governing Body is a Continuing Member.
"CHAPTER 11 CASES" has the meaning assigned to that term in the recitals to this Agreement.
"CLOSING DATE" means the date on which each of the conditions described in subsection 3.1 have been satisfied or waived by Agents and Requisite Lenders (or such other Lenders as may be required under subsection 9.6).
"COLLATERAL" means, collectively, all of the real, personal and mixed property (including Capital Stock) in which Liens are purported to be granted pursuant to the Collateral Documents, as security for the Obligations.
"COLLATERAL AGENT" means Bank of America, in its capacity as Collateral Agent under the Intercreditor Agreement and the Collateral Documents.
"COLLATERAL DOCUMENTS" means the Security Agreement, the CEA Stock Pledge Agreement, the Foreign Pledge Agreements, the Control Agreements, the Mortgages and all other instruments or documents (pursuant to which a Lien to secure all or any portion of the Obligations is purported or intended to be created, granted, evidenced or perfected) delivered from time to time by any Loan Party pursuant to this Agreement or any of the other Loan Documents, as such instruments and documents may be amended, restated, supplemented or otherwise modified from time to time.
"COMMITMENT" means the commitment of a Lender to convert certain outstanding pre-Petition Date secured claims into Loans pursuant to subsection 2.1A, and "COMMITMENTS" means such commitments of all Lenders in the aggregate. The original amount of each Lender's Commitment is set forth opposite its name on Schedule 2.1 annexed hereto and the aggregate original amount of the Commitments is $90,000,000; provided, however, that the Commitment of each Lender shall be increased by the amount of any Loan deemed made by it on or after the Closing Date pursuant to subsection 2.1A(ii); and provided further, however, that the Commitments of Lenders shall be adjusted to give effect to any assignments of the Commitments pursuant to subsection 9.1B.
"COMMODITIES AGREEMENT" means any long-term or forward purchase contract or option contract to buy, sell or exchange commodities or similar agreement or arrangement to which Company or any of its Subsidiaries is a party unless, under the terms of such contract, option contract agreement or arrangement Company expects to make or take delivery of the commodities which are the subject thereof.
"COMPANY" has the meaning assigned to that term in the introduction to this Agreement.
"COMPETITOR" means any Person (and its Affiliates) primarily engaged in the business of (i) the generation and sale of electricity or (ii) municipal waste management.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form of Exhibit II annexed hereto.
"CONFIRMATION ORDER" means the Findings of Fact, Conclusions of Law and Order under 11 U.S.C. Section 1129 and Rule 3020 of the Federal Rules of Bankruptcy Procedure Confirming Debtors' Second Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code entered by the Bankruptcy Court on March 5, 2004 in the Chapter 11 Cases, without modification, revision or amendment.
"CONSOLIDATED CASH INTEREST EXPENSE" means, for any period, Consolidated Interest Expense for such period to the extent paid or payable in cash.
"CONSOLIDATED FACILITIES CAPITAL EXPENDITURES" means, for any period, the aggregate of all cash expenditures by Company and its Subsidiaries during that period that, in conformity with GAAP, would be included in "additions to property, plant or equipment" or comparable items reflected in the consolidated statement of cash flows of Company and its Subsidiaries for that or any other period.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, (i) total interest expense, net of interest income, of Company and its Subsidiaries on a consolidated basis with respect to all outstanding Indebtedness of Company and its Subsidiaries to the extent such Indebtedness is or is required to be reflected on the consolidated balance sheet of Company and its Subsidiaries in conformity with GAAP, but excluding any Indebtedness consisting of Non Recourse Debt, and (ii) to the extent not included in the calculation of the amount described in clause (i), all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and net costs under Interest Rate Agreements, but excluding, however, from clauses (i) and (ii) any amounts referred to in subsection 2.3 payable to Agents and Lenders on or before the Closing Date.
"CONSOLIDATED LEVERAGE RATIO" means, as at any date of determination, the ratio of (a) Total Debt as at such date to (b) Adjusted EBITDA for the four-Fiscal Quarter period most recently ended prior to such date.
"CONTINGENT OBLIGATION", as applied to any Person, means any
direct or indirect liability, contingent or otherwise, of that Person (i) with
respect to any Indebtedness, lease, dividend or other obligation of another if
the primary purpose or intent thereof by the Person incurring the Contingent
Obligation is to provide assurance to the obligee of such obligation of another
that such obligation of another will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected (in whole or in part) against loss in respect
thereof, (ii) with respect to any letter of credit issued for the account of
that Person or as to which that Person is otherwise liable for reimbursement of
drawings, or (iii) under Hedge Agreements. Contingent Obligations shall include
(a) the direct or indirect guaranty, endorsement (otherwise than for collection
or deposit in the ordinary course of business), co-making, discounting with
recourse or sale with recourse by such Person of the
obligation of another, (b) the obligation to make take-or-pay or similar
payments if required regardless of non-performance by any other party or parties
to an agreement, and (c) any liability of such Person for the obligation of
another through any agreement (contingent or otherwise) (1) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, stock purchases, capital contributions or otherwise) or
(2) to maintain the solvency or any balance sheet item, level of income or
financial condition of another if, in the case of any agreement described under
subclauses (1) or (2) of this sentence, the primary purpose or intent thereof is
as described in the preceding sentence. The amount of any Contingent Obligation
shall be equal to the amount (if stated) of the obligation so guaranteed or
otherwise supported or, if less, the amount to which such Contingent Obligation
is specifically limited, or, if the amount of any Contingent Obligation is not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by Company in good faith based upon reasonable
assumptions. No obligations under Performance Guaranties shall constitute
Contingent Obligations.
"CONTINUING MEMBER" means, as of any date of determination, any member of the Governing Body of Company who (i) is the member of the Governing Body on the Closing Date that was acceptable to Agents as indicated to Company by Agents, or (ii) if the Person referred to in clause (i) is no longer a member of the Governing Body of Company, is acceptable to Agents and Requisite Lenders as indicated to Company by Agents and Requisite Lenders.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any provision of any Security issued by that Person or of any material indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject.
"CONTROL AGREEMENT" means an agreement, satisfactory in form and substance to Administrative Agent and executed by the financial institution or securities intermediary at which a Deposit Account or a Securities Account, as the case may be, is maintained, pursuant to which such financial institution or securities intermediary confirms and acknowledges Collateral Agent's security interest in such account, and agrees that the financial institution or securities intermediary, as the case may be, will comply with instructions originated by Collateral Agent as to disposition of funds in such account, without further consent by Company or any Subsidiary, as such agreement may be amended, restated, supplemented or otherwise modified from time to time.
"CORPORATE SERVICES REIMBURSEMENT AGREEMENT" means the corporate services reimbursement agreement entered into by DHC and Covanta on the Closing Date, as such agreement may be amended, restated, supplemented or otherwise modified from time to time.
"COVANTA" has the meaning assigned to such term in the recitals to this Agreement.
"CPIH" has the meaning assigned to that term in the introduction to this Agreement.
"CPIH REVOLVER AVAILABILITY" means, as at any date of determination, the sum of (i) the CPIH Revolver Loan Commitments of all CPIH Revolver Lenders minus (ii) the aggregate principal amount of all CPIH Revolving Loans.
"CPIH REVOLVER CREDIT AGREEMENT" means (i) that certain credit agreement dated as of the date hereof by and among Borrowers, as borrowers, and the Investor Parties and the other financial institutions listed on the signature pages thereof, as lenders, and (ii) any credit agreement entered into by Borrowers to refinance, replace, renew or extend, in whole or in part, the credit agreement referenced in clause (i) and the Indebtedness thereunder (provided, that (a) the terms of such credit agreement and such Indebtedness as so refinanced, replaced, renewed or extended shall not be more disadvantageous to Company and its Subsidiaries and the Lenders (in a manner deemed material by Agents or Requisite Lenders so notifying Agents or Company) than the CPIH Revolver Credit Agreement in effect on the Closing Date, (b) the aggregate amount of Indebtedness outstanding, and additional commitments to extend credit, if any, under the CPIH Revolver Credit Agreement as refinanced, replaced, renewed or extended, shall not exceed the aggregate amount of the commitments to extend credit in effect under the CPIH Revolver Credit Agreement on the Closing Date, (c) the obligations under (and the Liens securing) such credit agreement as refinanced, replaced, renewed or extended shall be subject to the Intercreditor Agreement on terms substantively identical to the terms applicable to the obligations in effect under the CPIH Revolver Credit Agreement on the Closing Date, and (d) Company shall provide to Agents reasonable prior advance written notice of such proposed refinancing, replacement, renewal or extension and copies of all material contracts or other agreements being entered into in connection therewith), in the case of clause (i) or (ii) as such credit agreement may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under subsection 6.12.
"CPIH REVOLVER DOCUMENTS" means the "Loan Documents" as defined in the CPIH Revolver Credit Agreement.
"CPIH REVOLVER LENDERS" means the "Lenders" as defined in the CPIH Revolver Credit Agreement.
"CPIH REVOLVER LOAN COMMITMENT" means, as at any date of determination, the commitment of a CPIH Revolver Lender to make CPIH Revolver Loans to Borrowers pursuant to subsection 2.1A of the CPIH Revolver Credit Agreement.
"CPIH REVOLVER LOAN EXPOSURE" means, with respect to any CPIH Revolver Lender as of any date of determination (i) prior to the termination of the CPIH Revolver Loan Commitments, that CPIH Revolver Lender's CPIH Revolver Loan Commitment, and (ii) after the termination of the CPIH Revolver Loan Commitments, the aggregate outstanding principal amount of the CPIH Revolver Loans of that CPIH Revolver Lender.
"CPIH REVOLVER LOANS" means the loans made (or deemed made) by CPIH Revolver Lenders to Borrowers pursuant to subsection 2.1A of the CPIH Revolver Credit Agreement.
Domestic Intercreditor Agreement
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap agreement, or option contract to buy, sell or exchange currencies or other similar agreement or arrangement to which Company or any of its Subsidiaries is a party.
"D.E. SHAW" means D.E. Shaw Laminar Portfolios, L.L.C. a Delaware limited liability company.
"DEBTORS" has the meaning assigned to that term in the recitals to this Agreement.
"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or similar account maintained with a Person engaged in the business of banking, including a savings bank, savings and loan association, credit union or trust company.
"DETROIT L/CS" means the letters of credit issued under the Detroit L/C Credit Agreement on the Closing Date.
"DETROIT L/C CREDIT AGREEMENT" means (i) that certain credit agreement dated as of the date hereof by and among Domestic Borrowers, as borrowers, the Detroit L/C Lenders, as lenders, and Bank of America and Deutsche Bank, as agents for such lenders, and (ii) any credit agreement entered into by Domestic Borrowers to refinance, replace, renew or extend in whole or in part, the credit agreement referenced in clause (i) and the Indebtedness and letters of credit issued thereunder as permitted pursuant to the New L/C Facility Agreement, in each case as such credit agreement may be amended, restated, supplemented or otherwise modified from time to time.
"DETROIT L/C LENDERS" means the "Lenders" under and as defined in the Detroit L/C Credit Agreement.
"DEUTSCHE BANK" has the meaning assigned to that term in the introduction to this Agreement.
"DHC" means Danielson Holding Corporation, a Delaware corporation.
"DIP AGENTS" means the Persons identified as "Agents" under the DIP Credit Agreement, in their capacities as agents for DIP Lenders under the DIP Credit Agreement.
"DIP CREDIT AGREEMENT" means that certain Debtor-In-Possession Credit Agreement dated as April 1, 2002, by and among Covanta and certain of its Subsidiaries, as debtors and debtors-in-possession, the financial institutions listed on the signature pages thereof, as lenders, and Bank of America and Deutsche Bank, as agents for such lenders, as such agreement is in effect immediately prior to the Closing Date.
"DIP CREDIT DOCUMENTS" means the "Loan Documents" as defined in the DIP Credit Agreement.
"DIP LENDER" means each of the "Lenders" under the DIP Credit Agreement on the Closing Date, in its capacity as a lender under the DIP Credit Agreement.
"DISTRIBUTABLE CASH" has the meaning assigned to that term in subsection 3.1T.
"DOCUMENTATION AGENT" has the meaning assigned to that term in the introduction to this Agreement and also means and includes any successor Documentation Agent appointed pursuant to subsection 8.5.
"DOLLARS" and the sign "$" mean the lawful money of the United States.
"DOMESTIC BORROWERS" means Covanta and the Subsidiaries thereof party from time to time to the Detroit L/C Credit Agreement and New L/C Facility Agreement.
"DOMESTIC CASH EQUIVALENTS" means, as at any date of
determination, (i) marketable securities (a) issued or directly and
unconditionally guaranteed as to interest and principal by the United States
Government or (b) issued by any agency of the United States the obligations of
which are backed by the full faith and credit of the United States, in each case
maturing within 30 days after such date; (ii) marketable direct obligations
issued by any state of the United States or any political subdivision of any
such state or any public instrumentality thereof, in each case maturing within
30 days after such date and having, at the time of the acquisition thereof, the
highest rating obtainable from either Standard & Poor's ("S&P") or Moody's
Investors Service, Inc. ("MOODY'S"); (iii) commercial paper maturing no more
than 30 days from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least "A-1" from S&P or at least "P-1" from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within 30
days after such date and issued or accepted by any Lender or by any commercial
bank organized under the laws of the United States or any state thereof or the
District of Columbia that (a) is at least "adequately capitalized" (as defined
in the regulations of its primary Federal banking regulator) and (b) has Tier 1
capital (as defined in such regulations) of not less than $100,000,000; (v)
shares of any money market mutual fund that (a) has at least 95% of its assets
invested continuously in the types of investments referred to in clauses (i) and
(ii) above, (b) has net assets of not less than $500,000,000, and (c) has the
highest rating obtainable from either S&P or Moody's; and (vi) such other
securities as Company and Agents may agree on from time to time.
"DOMESTIC LOAN DOCUMENTS" means the "Credit Documents" as defined in each of the Detroit L/C Credit Agreement and New L/C Facility Agreement.
"DOMESTIC SUBSIDIARY" means any Subsidiary of any Borrower that is incorporated or organized under the laws of the United States, any state thereof or in the District of Columbia.
"ELIGIBLE ASSIGNEE" means (i) any Person that is (a) a commercial bank organized under the laws of the United States or any state thereof, (b) a savings and loan association or savings bank organized under the laws of the United States or any state thereof, (c) a commercial bank organized under the laws of any other country or a political subdivision thereof, provided that (1) such bank is acting through a branch or agency located in the United States or (2) such bank is organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development or a political subdivision of such country, or (d) any other financial institution that extends credit or buys loans (or other evidences of debt) as one of its
businesses; (ii) any Person that is a Lender at the time of the relevant assignment; or (iii) any other Person designated as an Eligible Assignee pursuant to the prior written consent of Agents in their sole discretion; provided that neither Company nor any Affiliate of Company nor any Competitor shall be an Eligible Assignee.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as defined in Section 3(3) of ERISA which is maintained or contributed to by Company, any of its Subsidiaries or any of their respective ERISA Affiliates.
"EMPLOYMENT AGREEMENTS" means those employment agreements entered into on the Closing Date by Company with such Persons as Agents shall approve prior to the Closing Date, in each case providing for the exclusive employment of such Persons by Company and its Subsidiaries, in the form provided to Agents pursuant to subsection 3.1C on or prior to the Closing Date.
"ENFORCING LENDERS" has the meaning assigned to that term in subsection 9.5B.
"ENVIRONMENTAL CLAIM" means any investigation, notice, notice of violation, claim, action, suit, proceeding, demand, abatement order or other order or directive (conditional or otherwise), by any Government Authority or any other Person, arising (i) pursuant to or in connection with any actual or alleged violation of any Environmental Law, or (ii) in connection with any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment.
"ENVIRONMENTAL LAWS" means any and all current or future statutes, ordinances, orders, rules, regulations, guidance documents, judgments, Governmental Authorizations, or any other requirements of any Government Authority relating to (i) environmental matters, including those relating to any Hazardous Materials Activity, (ii) the generation, use, storage, transportation or disposal of Hazardous Materials, or (iii) occupational safety and health, industrial hygiene, land use or the protection of human, plant or animal health or welfare, in any manner applicable to Company or any of its Subsidiaries or any Facility.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto.
"ERISA AFFILIATE" means, as applied to any Person, (i) any corporation that is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is a member; (ii) any trade or business (whether or not incorporated) that is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member.
"ERISA EVENT" means (i) a "reportable event" within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for 30-day notice to the PBGC has been waived by regulation) that would reasonably be expected to have a Material Adverse Effect; (ii) the failure
to meet the minimum funding standard of Section 412 of the Internal Revenue Code
with respect to any Pension Plan (whether or not waived in accordance with
Section 412(d) of the Internal Revenue Code) or the imposition of a Lien on the
property of Company or any of its Subsidiaries pursuant to Section 412(n) of the
Internal Revenue Code, except any such failure or imposition attributable to an
error made in good faith which results in the imposition of liability or a Lien
on Company and its Subsidiaries and their respective ERISA Affiliates of an
immaterial amount, so long as such error, failure and imposition are promptly
corrected after discovery of such error by Company or any of its Subsidiaries,
or the failure to make by its due date a required installment of a material
amount under Section 412(m) of the Internal Revenue Code with respect to any
Pension Plan or the failure to make any required contribution of a material
amount to a Multiemployer Plan; (iii) the provision by the administrator of any
Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to
terminate such plan in a distress termination described in Section 4041(c) of
ERISA; (iv) the withdrawal by Company, any of its Subsidiaries or any of their
respective ERISA Affiliates from any Pension Plan with two or more contributing
sponsors or the termination of any such Pension Plan resulting in material
current liability of Company or any of its Subsidiaries pursuant to Section 4063
or 4064 of ERISA; (v) the institution by the PBGC of proceedings to terminate
any Pension Plan, or the occurrence of any event or condition would reasonably
be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension Plan;
(vi) the imposition of material current liability on Company, any of its
Subsidiaries or any of their respective ERISA Affiliates pursuant to Section
4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of
ERISA; (vii) the withdrawal of Company, any of its Subsidiaries or any of their
respective ERISA Affiliates in a complete or partial withdrawal (within the
meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if it
would reasonably be expected that Company or any of its Subsidiaries will incur
material liability therefor (in excess of the contribution that would otherwise
have been due absent such withdrawal), or the receipt by Company, any of its
Subsidiaries or any of their respective ERISA Affiliates of notice from any
Multiemployer Plan that it is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated
under Section 4041A or 4042 of ERISA; (viii) the assertion of a material claim
(other than routine claims for benefits) against any Employee Benefit Plan other
than a Multiemployer Plan or the assets thereof, or against Company, any of its
Subsidiaries or any of their respective ERISA Affiliates in connection with any
Employee Benefit Plan if such assertion or the liability with respect thereto
would reasonably be expected to have a Material Adverse Effect; (ix) receipt
from the Internal Revenue Service of notice of the failure of any Pension Plan
(or any other Employee Benefit Plan intended to be qualified under Section
401(a) of the Internal Revenue Code) to qualify under Section 401(a) of the
Internal Revenue Code, or of the failure of any trust forming part of any
Pension Plan to qualify for exemption from taxation under Section 501(a) of the
Internal Revenue Code, in either case if such failure would reasonably be
expected to have a Material Adverse Effect; or (x) the imposition of a Lien on
the property of Company or any of its Subsidiaries pursuant to Section
401(a)(29) of the Internal Revenue Code or pursuant to ERISA with respect to any
Pension Plan.
"EVENT OF DEFAULT" has the meaning assigned to that term in
Section 7.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute.
"EXISTING DETROIT L/CS" means, collectively, (i) Irrevocable Standby Letter of Credit Number SBY501806 issued by UBS Bank, in the available amount of $96,731,392.81 as of the Closing Date, for the benefit of PMCC Leasing Corporation and Resource Recovery Business Trust - A, and (ii) Irrevocable Standby Letter of Credit Number SBY501835 issued by UBS Bank, in the available amount of $41,460,161.38 as of the Closing Date for the benefit of Aircraft Services Corporation and Resource Recovery Business Trust - B.
"EXISTING INTERCREDITOR AGREEMENT" means the "Intercreditor Agreement" as defined in the DIP Credit Agreement on the Closing Date, as such "Intercreditor Agreement" is in effect on the Closing Date.
"EXISTING IPP INTERNATIONAL PROJECT GUARANTIES" means, collectively, (i) the existing guaranty by Covanta Energy Group of the obligations of certain Subsidiaries of Company under certain agreements relating to the Haripur Project, the Samalpatti Project and the Trezzo Project, (ii) the existing guaranty by Covanta Projects, Inc. of the obligations of certain Subsidiaries of Company under certain agreements relating to the Quezon Project, and (iii) the existing guaranty by Covanta of certain Subsidiaries of Company under certain agreements relating to the Balaji/Madurai Project and the LICA Project, as each such guaranty may be amended, restated, supplemented or otherwise modified to the extent permitted hereunder.
"FACILITIES" means any and all real property (including all buildings, fixtures or other improvements located thereon) now, hereafter or heretofore owned, leased, operated or used by any Borrower or any of its Subsidiaries, by any of their respective predecessors or by any Person who is an Affiliate of Borrower or any of its Subsidiaries prior to the Closing Date.
"FIFRA" means the Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. Section 136 et seq.), or any successor statute, and all implementing regulations promulgated thereunder.
"FIRST PRIORITY" means, with respect to any Lien purported to be created in any Collateral pursuant to any Collateral Document, that (i) such Lien is perfected and has priority over any other Lien on such Collateral (other than Liens permitted pursuant to subsections 6.2A(iii) through (vi)) and (ii) such Lien is the only Lien (other than Liens permitted pursuant to subsection 6.2) to which such Collateral is subject.
"FISCAL QUARTER" means a fiscal quarter of any Fiscal Year.
"FISCAL YEAR" means the fiscal year of Company and its Subsidiaries ending on December 31st of each calendar year.
"FLOOD HAZARD PROPERTY" means any real property that is subject to a Mortgage and is located in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards.
"FOREIGN CASH EQUIVALENTS" means, as at any date of determination, (i) securities issued or directly and fully guaranteed by the government of the country within which an Investment by Company or any of its Subsidiaries has been or is being made and (ii) time deposits and certificates of deposit of commercial banks having offices in such country, in
each case with a long term unsecured debt rating of at least equal to (a) the
rating of the relevant government, in the event that such government is rated
below investment grade by either Moody's or S&P, or when there is no Moody's or
S&P rating of such government, (b) investment grade in the event that the
relevant government is rated above investment grade by either Moody's or S&P, or
(c) "A" or better to the extent that the relevant government is rated better
than "A" by either Moody's or S&P, and (iii) such other securities as Company
and Administrative Agent may agree on from time to time.
"FOREIGN PLEDGE AGREEMENT" means each pledge agreement or similar instrument governed by the laws of a country other than the United States, executed on the Closing Date or from time to time thereafter in accordance with subsection 5.8 by Company or any Domestic Subsidiary that owns Capital Stock of one or more Foreign Subsidiaries organized in such country, in form and substance satisfactory to Collateral Agent, as such Foreign Pledge Agreement may be amended, restated, supplemented or otherwise modified from time to time.
"FOREIGN SUBSIDIARY" means any Subsidiary of any Borrower that is not a Domestic Subsidiary.
"FUND" means any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.
"FUNDING AND PAYMENT OFFICE" means (i) the office of Administrative Agent located at 901 Main St., 14th Floor, Mc: TX1-492-14-11, Dallas, Texas 75202 or (ii) such other office of Administrative Agent as may from time to time hereafter be designated as such in a written notice delivered by Administrative Agent to Company and each Lender.
"FUNDING BORROWER" has the meaning assigned to that term in subsection 2.8C.
"GAAP" means, subject to the limitations on the application thereof set forth in subsection 1.2, accounting principles generally accepted in the United States set forth in opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as are approved by the American Institute of Certified Public Accountants.
"GEOTHERMAL SALE" means (i) the sale or other disposition by Covanta and its Subsidiaries of all or substantially all of their respective (1) Capital Stock in Heber Geothermal Company, Heber Field Company and Second Imperial Geothermal Company, L.P., and (2) Capital Stock in non-debtor Affiliate Mammoth-Pacific L.P., which entities own or lease geothermal plants and facilities in California (the "GEOTHERMAL BUSINESS"), and (ii) the assumption and/or assignment by Covanta and its Subsidiaries of certain contracts related to the Geothermal Business, in the case of both clauses (i) and (ii) occurring prior to or concurrently with the consummation of the Plan of Reorganization.
"GOVERNING BODY" means the board of directors or other body having the power to direct or cause the direction of the management and policies of a Person that is a corporation, partnership, trust or limited liability company.
"GOVERNMENT AUTHORITY" means any political subdivision or department thereof, any other governmental or regulatory body, commission, central bank, board, bureau, organ or instrumentality or any court, in each case whether federal, state, local or foreign.
"GOVERNMENTAL AUTHORIZATION" means any permit, license, registration, authorization, plan, directive, consent, order or consent decree of or from, or notice to, any Government Authority.
"GROSS RECEIPTS" means, in respect of any Asset Sale, the total cash payments (including any cash received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) received from such Asset Sale minus any repayment of debt related to the assets sold in such Asset Sale which is made in connection therewith and is not prohibited under this Agreement.
"HAZARDOUS MATERIALS" means (i) any chemical, material or
substance at any time defined as or included in the definition of (a) "hazardous
wastes" or "mixed wastes" as defined in RCRA or in any other Environmental Law;
(b) "hazardous substances", "pollutants" or "contaminants" as defined in CERCLA
or in any other Environmental Law; (c) "chemical substances" or "mixtures" as
defined in TSCA or any other substance which is tested pursuant to TSCA or any
other Environmental Law, or the manufacture, processing, distribution, use or
disposal of which is regulated or prohibited pursuant to TSCA or any other
Environmental Law, including without limitation polychlorinated biphenyls and
electrical equipment which contains any oil or dielectric fluid containing
regulated concentrations of polychlorinated biphenyls; (d) "insecticides",
"fungicides", "pesticides" or "rodenticides" as defined in FIFRA or any other
Environmental Law; or (e) "infectious waste" or "biohazardous waste" as defined
in any Environmental Law; (ii) asbestos or any asbestos-containing materials;
(iii) urea formaldehyde foam insulation; (iv) any oil, petroleum, petroleum
fraction or petroleum derived substance; (v) any drilling fluids, produced
waters and other wastes associated with the exploration, development or
production of crude oil, natural gas or geothermal resources; (vi) any flammable
substances or explosives; (vii) any radioactive materials; and (viii) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any Government Authority or which may or could pose a hazard to the
health and safety of the owners, occupants or any Persons in the vicinity of any
Facility or to the indoor or outdoor environment.
"HAZARDOUS MATERIALS ACTIVITY" means any past, current, proposed or threatened activity, event or occurrence involving any Hazardous Materials, including the use, manufacture, possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, construction, treatment, abatement, removal, remediation, disposal, disposition or handling of any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing.
"HEDGE AGREEMENT" means (i) an Interest Rate Agreement or a Currency Agreement designed to hedge against fluctuations in interest rates or currency values, respectively, or (ii) a forward agreement or arrangement designed to hedge against fluctuation in electricity rates pertaining to electricity produced by a Project so long as the contractual arrangements relating to such Project contemplate that Company or its Subsidiaries shall deliver such electricity to third parties.
"HIGH YIELD INDENTURE" means (i) the indenture pursuant to which the High Yield Notes are issued and (ii) any replacement indenture entered into in connection with a refinancing, renewal, replacement or extension of the High Yield Notes permitted under the Detroit L/C Credit Agreement and New L/C Facility Agreement, in each case as such indenture or replacement indenture may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under the Detroit L/C Credit Agreement.
"HIGH YIELD NOTES" means (i) the $230,000,000 in aggregate principal amount at maturity of 8.25% Senior Notes due 2010 of Covanta issued pursuant to the High Yield Indenture, and (ii) any Indebtedness incurred to refinance, renew, replace or extend the High Yield Notes permitted to be incurred under the Detroit L/C Credit Agreement; provided, that the initial principal amount (and issue price) of such High Yield Notes on the Closing Date shall be $205,000,000.
"INDEBTEDNESS", as applied to any Person, means (i) all
indebtedness for borrowed money, (ii) that portion of obligations with respect
to Capital Leases that is properly classified as a liability on a balance sheet
in conformity with GAAP, (iii) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed money,
(iv) any obligation owed for all or any part of the deferred purchase price of
property or services received by such Person (excluding any such obligations
incurred under ERISA), which purchase price is (a) due more than six months from
the date of incurrence of the obligation in respect thereof or (b) evidenced by
a promissory note or similar written instrument, but excluding in either case
current trade payables incurred in the ordinary course of business and payable
in accordance with customary practices, (v) Synthetic Lease Obligations, and
(vi) all indebtedness secured by any Lien on any property or asset owned by that
Person regardless of whether the indebtedness secured thereby shall have been
assumed by that Person or is nonrecourse to the credit of that Person. Any
obligations under Interest Rate Agreements and Currency Agreements (and Hedge
Agreements that protect against fluctuation in electricity rates) constitute (1)
in the case of Hedge Agreements, Contingent Obligations, and (2) in all other
cases, Investments, and in neither case constitute Indebtedness. For purposes of
this Agreement, the Indebtedness of any Person shall include the Indebtedness of
any partnership or joint venture in which such Person is a general partner or a
joint venturer, unless the Indebtedness of such partnership or joint venture is
expressly Non Recourse Debt of such partnership or joint venture.
"INDEMNIFIED LIABILITIES" has the meaning assigned to that term in subsection 9.3.
"INDEMNITEE" has the meaning assigned to that term in subsection 9.3.
"INSURANCE PREMIUM FINANCERS" means Persons who are non-Affiliates of Company that advance insurance premiums for Company and its Subsidiaries pursuant to Insurance Premium Financing Arrangements.
"INSURANCE PREMIUM FINANCING ARRANGEMENTS" means, collectively, such agreements as Company and its Subsidiaries shall enter into after the Closing Date with Insurance Premium Financers pursuant to which such Insurance Premium Financers shall advance insurance premiums for Company and its Subsidiaries. Such Insurance Premium
Financing Arrangements (i) shall provide for the benefit of such Insurance Premium Financers a security interest in no property of Company or any of its Subsidiaries other than gross unearned premiums for the insurance policies, (ii) shall not purport to prohibit any portion of the Liens created in favor of Collateral Agent (for the benefit of Secured Parties) pursuant to the Collateral Documents, and (iii) shall not contain any provision or contemplate any transaction prohibited by this Agreement and shall otherwise be in form and substance reasonably satisfactory to Agents.
"INTELLECTUAL PROPERTY" means all patents, trademarks, tradenames, copyrights, technology, software, know-how and processes used in or necessary for the conduct of the business of Borrowers and their Subsidiaries as currently conducted that are material to the condition (financial or otherwise), business or operations of Borrowers and their Subsidiaries, taken as a whole.
"INTERCOMPANY MASTER NOTE" means a promissory note evidencing Indebtedness of Company and each of its Subsidiaries which (a) to the extent the Indebtedness evidenced thereby is owed to any Borrower, is pledged pursuant to the Collateral Documents, and (b) to the extent the Indebtedness evidenced thereby is owed by a Subsidiary of Company, is senior Indebtedness of such Subsidiary (except to the extent that requiring such Indebtedness to be senior would breach a contractual obligation binding on such Subsidiary), except that any such Indebtedness owed by any Borrower to any Subsidiary which is not a Borrower shall be subordinated in right of payment to the payment in full of the Obligations pursuant to the terms of such note.
"INTERCREDITOR AGREEMENT" means that certain Intercreditor Agreement executed and delivered on the Closing Date by Borrowers, CEA, Lenders, Agents, Collateral Agent, CPIH Revolver Lenders, the agents under the CPIH Revolver Documents, in the form of Exhibit IX annexed hereto, as it may thereafter be amended, restated, supplemented or otherwise modified from time to time.
"INTEREST PAYMENT DATE" means the last Business Day of each month, commencing on the first such date to occur after the Closing Date.
"INTEREST RATE AGREEMENT" means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement to which any Borrower or any of Subsidiary of any Borrower is a party.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter, and any successor statute.
"INVESTMENT" means (i) any direct or indirect purchase or
other acquisition by Company or any of its Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person (including any Subsidiary of
Company), (ii) any direct or indirect redemption, retirement, purchase or other
acquisition for value, by any Subsidiary of Company from any Person other than
Company or any of its Subsidiaries, of any equity Securities of such Subsidiary,
(iii) any direct or indirect loan, advance (other than advances to employees for
moving, entertainment and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business) or capital contribution by
Company or any of its Subsidiaries to any other Person, including all
indebtedness and accounts receivable from that other Person that are not current assets or did not arise from sales or services to that other Person in the ordinary course of business, (iv) Interest Rate Agreements or Currency Agreements not constituting Hedge Agreements, or (v) Commodities Agreements not constituting Hedge Agreements. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment. No account receivable owed by a Person to Company or any of its Subsidiaries that on the relevant date of determination constitutes a current asset and arose from sales or services to such Person in the ordinary course of business shall constitute an Investment on such date.
"INVESTOR PARTIES" means D.E. Shaw, SZ Investments, LLC, a Delaware limited liability company, and Third Avenue Trust, on behalf of the Third Avenue Value Fund Series.
"IP COLLATERAL" means, collectively, the Intellectual Property that constitutes Collateral.
"IPP INTERNATIONAL BUSINESS" means the assets and operations of the business of Covanta and its Subsidiaries referred to by Covanta as the "IPP International business" prior to the Closing Date, including the Haripur Project, the Samalpatti Project, the Trezzo Project, the Quezon Project, the Balaji/Madurai Project, the Linasa Project, the Don Pedro Project, the Rio Volcan Project, the Bataan Project, the Magellan Project, the Linan Project, the Huantai Project, the Yanjiang Project and the Island Power Project.
"JOINT VENTURE" means a joint venture, partnership or other similar arrangement, whether in corporate, partnership or other legal form.
"LEASEHOLD PROPERTY" means any leasehold interest of any Borrower as lessee under any lease of real property.
"LENDER" and "LENDERS" means the Persons identified as "Lenders" and listed on the signature pages of this Agreement, together with their successors and permitted assigns pursuant to subsection 9.1 or subsection 9.25.
"LIEN" means any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing.
"LOAN" or "LOANS" means one or more of the Loans made or deemed made by Lenders pursuant to subsection 2.1A and any Additional Interest Loan made pursuant to subsection 2.2B.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Collateral Documents, the Intercreditor Agreement and all amendments, waivers and consents relating thereto.
"LOAN EXPOSURE" means, with respect to any Lender as of any date of determination, the aggregate outstanding principal amount of the Loan of that Lender.
"LOAN PARTY" means each Borrower and CEA, and "LOAN PARTIES" means all such Persons, collectively.
"MADURAI PROJECT ENTITY" has the meaning assigned to that term in subsection 6.7(vi).
"MAGELLAN SUBSIDIARY" means Magellan Cogeneration, Inc., a Philippines corporation.
"MANAGEMENT SERVICES AND REIMBURSEMENT AGREEMENT" means the management services and reimbursement agreement entered into by Company, Covanta and certain of their respective Subsidiaries on the Closing Date, in form and substance satisfactory to the Agents, as such agreement may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted thereunder and under subsection 6.12.
"MANDATORY PAYMENT" means any amount described in subsections 2.4A(ii)(a)-(e) to be applied as a prepayment of the Loans and/or the CPIH Revolver Loans and/or a permanent reduction of the CPIH Revolver Commitments, as determined pursuant to subsection 2.4A.
"MARGIN STOCK" has the meaning assigned to that term in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect upon the business, operations, properties, assets, condition (financial or otherwise) or prospects of Borrowers, taken as a whole, or Company and its Subsidiaries, taken as a whole, or (ii) the impairment of the ability of Loan Parties taken as a whole to perform, or of Administrative Agent or Lenders to enforce, the Obligations.
"MATERIAL CONTRACT" means (i) the principal service or operating agreement, if any, with respect to each waste-to-energy Project and the principal power sales agreement, if any, with respect to each independent power plant Project to which Company or any of its Subsidiaries is a party, each of which is in existence as of the Closing Date and is described on Schedule 1.1A annexed hereto, and (ii) any other contract or other arrangement to which Company or any of its Subsidiaries is a party (other than the Loan Documents) for which breach, nonperformance, cancellation or failure to renew would reasonably be expected to have a Material Adverse Effect.
"MATERIAL LEASEHOLD PROPERTY" means a Leasehold Property reasonably determined by Administrative Agent to be of material value as Collateral or of material importance to the operations of Company or any of its Subsidiaries.
"MATERIAL SUBSIDIARY" means, with respect to any Person, any
Subsidiary of such Person now existing or hereafter acquired or formed by such
Person which, on a consolidated basis for such Subsidiary and all of its
Subsidiaries, (i) for the most recent fiscal year of such Person accounted for
more than 1% of the consolidated revenues of such Person and its Subsidiaries,
(ii) as at the end of such fiscal year, was the owner of more than 1% of the
consolidated assets of such Person and its Subsidiaries, or (iii) is capitalized with more than $500,000 of equity.
"MATURITY DATE" means March 10, 2007.
"MORTGAGE" means (i) a security instrument (whether designated as a deed of trust or a mortgage or by any similar title) executed and delivered by any Loan Party, substantially in the form of Exhibit X annexed hereto or in such other form as may be approved by Administrative Agent in its sole discretion, in each case with such changes thereto as may be recommended by Administrative Agent's local counsel based on local laws or customary local mortgage or deed of trust practices, or (ii) at Administrative Agent's option, in the case of any real property or Material Leasehold Property that is the subject of subsection 5.9, an amendment to an existing Mortgage, in form satisfactory to Administrative Agent, in either case as such security instrument or amendment may be amended, restated, supplemented or otherwise modified from time to time. "MORTGAGES" means all such instruments collectively, whether executed as of or subsequent to the Closing Date.
"MULTIEMPLOYER PLAN" means any Employee Benefit Plan that is a "multiemployer plan" as defined in Section 3(37) of ERISA.
"NET ASSET SALE PROCEEDS" means, with respect to any Asset Sale, Gross Receipts received from such Asset Sale, net of any bona fide direct costs incurred in connection with such Asset Sale, including (i) income taxes reasonably estimated to be actually payable prior to the earlier of (a) the date which is eighteen months from the date of such Asset Sale and (b) the Maturity Date as a result of any gain recognized in connection with such Asset Sale, (ii) additional Taxes actually payable upon the closing of such Asset Sale (including any transfer Taxes or Taxes on gross receipts), (iii) actual, reasonable and documented out-of-pocket fees and expenses (including reasonable legal fees, reasonable fees to advisors and severance costs that are due (pursuant to a Contractual Obligation, or written employment policy applicable to terminated employees generally, of Company or any of its Subsidiaries in effect prior to such Asset Sale or pursuant to applicable law) and payable immediately upon consummation of such Asset Sale to employees of Company and its Subsidiaries that are terminated as a result thereof) paid to Persons other than Company and its Subsidiaries and their respective Affiliates in connection with such Asset Sale (including fees necessary to obtain any required consents of such Persons to such Asset Sale), and (iv) payment of the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness (other than Loans) that is (x) secured by a valid, enforceable and perfected Lien on the stock or assets in question that is permitted under subsection 6.2 and (y) required to be repaid under the terms of such Indebtedness as a result of such Asset Sale (without duplication of amounts deducted in calculating the Gross Receipts from such Asset Sale) and is permitted to be paid under the Loan Documents.
"NET DEPRECIATION AND AMORTIZATION EXPENSE" means, for any period, the sum (expressed as a positive number) of (i) "Depreciation" for such period plus (ii) "Amortization" for such period, as each such line item referred to in clauses (i) and (ii) is reflected in Company's consolidated statement of cash flows prepared in conformity with GAAP and reported in a manner consistent with Company's reporting of such amount in its quarterly or annual report (as
the case may be) on Form 10Q or 10K, respectively, prior to the Closing Date, whether such line items are so titled or otherwise titled.
"NET INDEBTEDNESS PROCEEDS" means the cash proceeds (net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith (including reasonable legal fees and expenses)) from the incurrence of Indebtedness by Company or any of its Subsidiaries.
"NET INSURANCE/CONDEMNATION PROCEEDS" means any cash payments
or proceeds received by Company or any of its Subsidiaries (i) under any
business interruption or casualty insurance policy in respect of a covered loss
thereunder or (ii) as a result of the taking of any assets of Company or any of
its Subsidiaries by any Person pursuant to the power of eminent domain,
condemnation or otherwise, or pursuant to a sale of any such assets to a
purchaser with such power under threat of such a taking, in each case net of (a)
income taxes reasonably estimated to be actually payable prior to the earlier of
(1) the date which is eighteen months from the date of such receipt and (2) the
Maturity Date as a result of the receipt of such payments of proceeds and (b)
any actual, reasonable and documented out-of-pocket fees and expenses (including
reasonable legal fees, reasonable fees to advisors and severance costs that are
due (pursuant to a Contractual Obligation, or written employment policy
applicable to terminated employees generally, of Company or any of its
Subsidiaries in effect prior to the event causing or relating to the payment
referred to in clause (i) or (ii) above or pursuant to applicable law) and
payable on or prior to the receipt of such payment or proceeds to employees of
Company and its Subsidiaries that have been terminated as a result of the
relevant loss, taking or sale) paid to Persons other than Company and its
Subsidiaries and their respective Affiliates in connection with the relevant
loss, taking or sale or the adjustment or settlement of any claims of Company or
such Subsidiary in respect thereof; provided, however, that Net
Insurance/Condemnation Proceeds shall be reduced in an amount equal to the
amount of proceeds Subsidiaries of Company are legally bound or required,
pursuant to agreements in effect on the Closing Date, or which were entered into
after the Closing Date with respect to the financing or acquisition of a
Project, to use for purposes other than a Mandatory Payment.
"NEW L/C FACILITY AGREEMENT" means (i) that certain credit agreement dated as of the date hereof by and among the Domestic Borrowers, as borrowers, and the Investor Parties and the other financial institutions listed on the signature pages thereof, as lenders, and (ii) any credit agreement entered into by Domestic Borrowers to refinance, replace, renew or extend, in whole or in part, the credit agreement referenced in clause (i) and the Indebtedness and letters of credit issued thereunder as permitted under the Detroit L/C Credit Agreement, in each case as such credit agreement may be amended, restated, supplemented or otherwise modified from time to time.
"9.25% DEBENTURES" means the "9.25% Debenture Claims" as such term is defined in the Approved Plan of Reorganization.
"NON RECOURSE DEBT" means, with respect to any Subsidiary of Company, Indebtedness of such Subsidiary with respect to which the recourse of the holder or obligee of such Indebtedness is limited to (i) assets associated with the Project (which in any event shall not include assets held by any Borrower other than a Borrower, if any, whose sole business is the
ownership and/or operation of such Project and substantially all of whose assets are associated with such Project) in respect of which such Indebtedness was incurred and/or (ii) such Subsidiary or the equity interests in such Subsidiary, but in the case of clause (ii) only if such Subsidiary's sole business is the ownership and/or operation of such Project and substantially all of such Subsidiary's assets are associated with such Project.
"NON-US LENDER" means a Lender that is organized under the laws of any jurisdiction other than the United States or any state or other political subdivision thereof.
"NOTES" means any promissory notes of Borrowers issued pursuant to subsection 2.1D to evidence the Loans of any Lenders, substantially in the form of Exhibit I annexed hereto, as they may be amended, restated, supplemented or otherwise modified from time to time.
"OBLIGATIONS" means all obligations of every nature of Loan Parties under the Loan Documents, including any liability of such Loan Party on any claim arising out of or relating to the Loan Documents, whether or not the right to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed or contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any bankruptcy, insolvency, reorganization or other similar proceeding. Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Loan Documents include (a) the obligation to pay principal, interest (including all interest which accrues after the commencement of any case or proceeding in bankruptcy after the insolvency of, or for the reorganization of, any Loan Party, whether or not allowed in such case or proceeding), charges, expenses, fees, attorneys' fees and disbursements, indemnities and other amounts payable by any Borrower and any other Loan Party under any Loan Document and (b) the obligation to reimburse any amount in respect of any of the foregoing that any Agent or any Lender, in its sole discretion, may elect to pay or advance on behalf of such Borrower or other Loan Party.
"OFFICER" means the president, chief executive officer, a vice president, chief financial officer, treasurer, general partner (if an individual), managing member (if an individual) or other individual appointed by the Governing Body or the Organizational Documents of a corporation, partnership, trust or limited liability company to serve in a similar capacity as the foregoing.
"OFFICER'S CERTIFICATE" means, as applied to any Person that is a corporation, partnership, trust or limited liability company, a certificate executed on behalf of such Person by one or more Officers of such Person or one or more Officers of a general partner or a managing member if such general partner or managing member is a corporation, partnership, trust or limited liability company; provided, that any Officer's Certificate delivered pursuant to subsection 2.4A(ii)(f) or 5.1(v) shall be executed by a senior financial officer of Company reasonably acceptable to Administrative Agent.
"ORGANIZATIONAL DOCUMENTS" means the documents (including Bylaws, if applicable) pursuant to which a Person that is a corporation, partnership, trust or limited liability company is organized.
"PARTICIPANT" means a purchaser of a participation in the rights and obligations under this Agreement pursuant to subsection 9.1C.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto.
"PENSION PLAN" means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to section 412 of the Internal Revenue Code or section 302 of ERISA.
"PERFORMANCE GUARANTY" means any agreement entered into by Company or any of its Subsidiaries under which Company or any such Subsidiary guarantees the performance of a Subsidiary of Company under a principal lease, service or operating agreement relating to a Project.
"PERMITTED ENCUMBRANCES" means the following types of Liens (excluding any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or by ERISA, any such Lien relating to or imposed in connection with any Environmental Claim, and any such Lien expressly prohibited by any applicable terms of any of the Collateral Documents):
(i) Liens for taxes, assessments or governmental charges or claims the payment of which is not, at the time, required by subsection 5.3;
(ii) statutory Liens of landlords, statutory Liens and rights of set-off of banks, statutory Liens of carriers, warehousemen, mechanics, repairmen, workmen and materialmen, and other Liens imposed by law, in each case incurred in the ordinary course of business (a) for amounts not yet overdue or (b) for amounts that are overdue and that (in the case of any such amounts overdue for a period in excess of 5 days) are being contested in good faith by appropriate proceedings, so long as (1) such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts, and (2) in the case of a Lien with respect to any portion of the Collateral, such contest proceedings conclusively operate to stay the sale of any portion of the Collateral on account of such Lien;
(iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money), so long as no foreclosure, sale or similar proceedings have been commenced with respect to any portion of the Collateral on account thereof;
(iv) any attachment or judgment Lien not constituting an Event of Default under subsection 7.8;
(v) leases or subleases granted to third parties in accordance with any applicable terms of the Collateral Documents and not interfering in any material respect with the ordinary conduct of the business of Company or any of its Subsidiaries or
resulting in a material diminution in the value of any Collateral as security for the Secured Obligations;
(vi) easements, rights-of-way, restrictions, encroachments, and other minor defects or irregularities in title to the real property of Company and its Subsidiaries, in each case which do not and will not interfere in any material respect with the ordinary conduct of the business of Company or any of its Subsidiaries or result in a material diminution in the value of any Collateral as security for the Secured Obligations;
(vii) any (a) interest or title of a lessor or sublessor under any lease not prohibited by this Agreement, (b) restriction or encumbrance that the interest or title of such lessor or sublessor may be subject to, or (c) subordination of the interest of the lessee or sublessee under such lease to any restriction or encumbrance referred to in the preceding clause (b), so long as the holder of such restriction or encumbrance agrees to recognize the rights of such lessee or sublessee under such lease;
(viii) Liens arising from filing UCC financing statements relating solely to leases not prohibited by this Agreement;
(ix) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;
(x) any zoning or similar law or right reserved to or vested in any governmental office or agency to control or regulate the use of any real property;
(xi) Liens securing obligations (other than obligations representing Indebtedness for borrowed money) under operating, reciprocal easement or similar agreements entered into in the ordinary course of business of Company and its Subsidiaries; and
(xii) licenses of Intellectual Property granted by Company or any of its Subsidiaries in the ordinary course of business and not interfering in any material respect with the ordinary conduct of the business of Company or such Subsidiary.
Other Liens on assets of Borrowers and their Subsidiaries permitted under this Agreement (which are not Permitted Encumbrances) are described in subsection 6.2A.
"PERMITTED SUPPLEMENTAL LOAN AMOUNT" means, on and as of the "Determination Date" (as defined in the Approved Plan of Reorganization), the excess of (i) the aggregate amount of "New CPIH Funded Debt" (as defined in the Approved Plan of Reorganization) that shall be issued by "Reorganized Covanta" (as defined in the Approved Plan of Reorganization), after giving effect to the adjustment described in the first proviso to the definition of such term in the Approved Plan of Reorganization, over (ii) $90,000,000.
"PERSON" means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, Joint Ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments (whether
federal, state or local, domestic or foreign, and including political subdivisions thereof) and agencies or other administrative or regulatory bodies thereof.
"PETITION DATE" has the meaning assigned to that term in the recitals to this Agreement.
"PLAN OF REORGANIZATION" means the Debtors' Second Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code as filed with the Bankruptcy Court on January 14, 2004 (and as revised and amended through March 2, 2004), together with the Reorganization Plan Supplement to Debtors' Second Joint Plan of Reorganization filed with the Bankruptcy Court on February 18, 2004 in connection therewith.
"PLEDGED COLLATERAL" means the "Pledged Collateral" as defined in each of the Security Agreement and the CEA Stock Pledge Agreement.
"POTENTIAL EVENT OF DEFAULT" means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default.
"PREPETITION CREDIT AGREEMENT" means the Revolving Credit and Participation Agreement dated as of March 14, 2001, among Company, certain of its Subsidiaries, the financial institutions listed on the signature pages thereof, Deutsche Bank, as Documentation Agent, and Bank of America, as Administrative Agent, as amended, restated, supplemented or otherwise modified through the Closing Date and as it may hereafter be amended, restated, supplemented or otherwise modified.
"PREPETITION CREDIT DOCUMENTS" means all "Loan Documents" as defined in the Prepetition Credit Agreement.
"PREPETITION LENDERS" means the Persons identified as "Lenders" under the Prepetition Credit Agreement, in their capacities as lenders under the Prepetition Credit Agreement, together with their successors and permitted assigns.
"PREPETITION OBLIGATIONS" means all "Obligations" as defined in the Prepetition Credit Agreement.
"PREPETITION SECURED CLAIMS" means, collectively, the "Secured Bank Claims" and the "9.25% Debenture Claims", as such terms are defined in the Approved Plan of Reorganization.
"PREPETITION UNSECURED CLAIMS" means "Parent and Holding Company Unsecured Claims" that are "Allowed," as such terms are defined in the Approved Plan of Reorganization.
"PROCEEDINGS" means any action, suit, proceeding (whether administrative, judicial or otherwise), governmental investigation or arbitration.
"PROJECT" means any waste-to-energy facility, electrical generation plant, cogeneration plant, water treatment facility or other facility for the generation of electricity or
engaged in another line of business in which Company and its Subsidiaries are permitted to be engaged hereunder for which a Subsidiary or Subsidiaries of Company was, is or will be (as the case may be) an owner, operator, manager or builder, and shall also mean any two or more of such plants or facilities in which an interest has been acquired in a single transaction, so long as such interest constitutes an existing Investment on the Closing Date permitted under this Agreement; provided, however, that a Project shall cease to be a Project of Company and its Subsidiaries at such time that Company or any of its Subsidiaries ceases to have any existing or future rights or obligations (whether direct or indirect, contingent or matured) associated therewith.
"PRO RATA SHARE" means with respect to all payments, computations and other matters relating to the Commitment of any Lender or any Loans deemed made by any Lender, the percentage obtained by dividing (i) the Loan Exposure of that Lender by (ii) the aggregate Loan Exposure of all Lenders, in any such case as the applicable percentage may be adjusted by assignments permitted pursuant to subsection 9.1. The initial Pro Rata Share of each Lender is set forth opposite the name of that Lender in Schedule 2.1 annexed hereto.
"PTO" means the United States Patent and Trademark Office or any successor or substitute office in which filings are necessary or, in the opinion of Administrative Agent, desirable in order to create or perfect Liens on any IP Collateral.
"PUHCA" has the meaning assigned to that term in subsection 4.9.
"PURPA" means the Public Utility Regulatory Policies Act of 1978, as amended.
"RCRA" means the Resource Conservation and Recovery Act, as amended (42 U.S.C. Section 6901 et seq.), or any successor statute, and all implementing regulations promulgated thereunder.
"REAL PROPERTY ASSET" means, at any time of determination, any interest then owned by any Borrower in any real property.
"RECORDED LEASEHOLD INTEREST" means a Leasehold Property with respect to which a Record Document (as hereinafter defined) has been recorded in all places necessary or desirable, in Administrative Agent's reasonable judgment, to give constructive notice of such Leasehold Property to third-party purchasers and encumbrancers of the affected real property. For purposes of this definition, the term "RECORD DOCUMENT" means, with respect to any Leasehold Property, (a) the lease evidencing such Leasehold Property or a memorandum thereof, executed and acknowledged by the owner of the affected real property, as lessor, or (b) if such Leasehold Property was acquired or subleased from the holder of a Recorded Leasehold Interest, the applicable assignment or sublease document, executed and acknowledged by such holder, in each case in form sufficient to give such constructive notice upon recordation and otherwise in form reasonably satisfactory to Administrative Agent.
"REGISTER" has the meaning assigned to that term in subsection 2.1C.
"RELATED AGREEMENTS" means the CPIH Revolver Documents, the Management Services and Reimbursement Agreement, the Existing IPP International Project Guaranties and
the Tax Sharing Agreement, as such agreements and instruments may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under subsection 6.12.
"RELEASE" means any releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing or migrating of Hazardous Materials into the indoor or outdoor environment (including the abandonment, discarding or disposal of any barrels, containers or other closed receptacles containing any Hazardous Materials), including the movement of any Hazardous Materials through the air, soil, surface water or groundwater.
"REQUISITE DIP LENDERS" means DIP Lenders having or holding more than 50% of the aggregate credit exposure under the "Tranche A L/Cs" and the "Tranche B L/Cs" (as such terms are defined in the DIP Credit Agreement).
"REQUISITE LENDERS" means Lenders having or holding more than 50% of the aggregate Loan Exposure of all Lenders; provided, however, that prior to the Closing Date, for purposes of this definition, the Loan Exposure of each Lender shall equal the original Commitment of such Lender on the Closing Date.
"RESTRICTED PAYMENT" means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of Company now or hereafter outstanding, except a dividend payable solely in shares of that class of stock to the holders of that class, (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of Company now or hereafter outstanding, (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock of Company now or hereafter outstanding, and (iv) any payment or prepayment of principal of, premium, if any, or interest on, or redemption, purchase, retirement, defeasance (including in-substance or legal defeasance), sinking fund or similar payment with respect to, any Indebtedness of Company and its Subsidiaries other than (a) the Obligations, (b) Indebtedness owed by a Subsidiary to a Borrower, (c) payments under the CPIH Revolver Credit Agreement and (d) other amounts required to be paid under this Agreement.
"SECURED OBLIGATIONS" means the obligations secured by the Collateral pursuant to the Collateral Documents.
"SECURED PARTIES" means the "Secured Parties" as defined in the Intercreditor Agreement.
"SECURITIES" means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated, certificated or uncertificated, or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to time, and any successor statute.
"SECURITIES ACCOUNT" means an account to which a financial asset is or may be credited in accordance with an agreement under which the Person maintaining the account undertakes to treat the Person for whom the account is maintained as entitled to exercise the rights that comprise the financial asset.
"SECURITY AGREEMENT" means the Security Agreement executed and delivered on the Closing Date by Borrowers, substantially in the form of Exhibit VII annexed hereto, as such Security Agreement may thereafter be amended, restated, supplemented or otherwise modified from time to time.
"SOLVENT" means, with respect to any Person, that as of the
date of determination, in light of all of the facts and circumstances existing
at such time, (i) the then fair saleable value of the property of such Person is
(a) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (b) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and due considering all financing alternatives and
potential asset sales reasonably available to such Person; (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
"SUBORDINATED INDEBTEDNESS" means, collectively, (i) Indebtedness under the Unsecured Creditor Notes and the Unsecured Creditor Notes Indenture and (ii) any other Indebtedness of Company or any of its Subsidiaries incurred from time to time and subordinated by its terms in right of payment to the Obligations.
"SUBSIDIARY" means, with respect to any Person, any corporation, partnership, trust, limited liability company, association, joint venture or other business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the members of the Governing Body is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof. Unless otherwise specified herein or unless the context otherwise requires, any reference to a "Subsidiary" contained herein means a Subsidiary of Company.
"SYNTHETIC LEASE OBLIGATION" means the monetary obligation of a Person under (i) a so-called synthetic, off-balance sheet or tax retention lease, or (ii) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).
"TAX" or "TAXES" means any present or future tax, levy, impost, duty, charge, fee, deduction or withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed, including interest, penalties, additions to tax and any similar liabilities with respect thereto; except that, in the case of a Lender, there shall be excluded franchise taxes and all taxes that are imposed on the overall income or profits of such Lender by the United States or by any other Government Authority under the laws of which Lender is organized or has its principal office or maintains its applicable lending office.
"TAX NOTE" has the meaning assigned to that term in subsection 3.1F(iv).
"TAX SHARING AGREEMENT" means the tax sharing agreement entered into by DHC, Covanta and Company on the Closing Date, in form and substance satisfactory to the Agents, as such agreement may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under subsection 6.12.
"TOTAL DEBT" means, as at any date of determination, (i) the
aggregate stated balance sheet amount of all Indebtedness of Company and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP, minus
(ii) the amounts of "Current portion of project debt" and "Project Debt",
whether such line items are so titled or otherwise titled, as such line items
are or would be reflected in Company's consolidated balance sheet as at such
date prepared in conformity with GAAP and reported in a manner consistent with
Company's reporting of such amounts in its quarterly or annual report (as the
case may be) on Form 10Q or 10K, respectively, prior to the Closing Date, minus
(iii) any portion of Indebtedness of Company and its Subsidiaries under the Tax
Sharing Agreement included in the amount described in clause (i) above.
"TREASURY REGULATIONS" means the Treasury Regulations promulgated under the Internal Revenue Code.
"TSCA" means the Toxic Substances Control Act of 1976, as amended (15 U.S.C. Section 2601 et seq.), or any successor statute, and all implementing regulations promulgated thereunder.
"UBS BANK" means UBS AG, Stamford Branch.
"UCC" means the Uniform Commercial Code (or any similar or equivalent legislation) as in effect in any applicable jurisdiction.
"UNITED STATES" means the United States of America.
"UNSECURED CREDITOR NOTES" has the meaning assigned to that term in subsection 3.1F(iv).
"UNSECURED CREDITOR NOTES INDENTURE" means the Indenture pursuant to which the Unsecured Creditor Notes are issued.
1.2 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS UNDER AGREEMENT.
Except as otherwise expressly provided in this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP. Financial statements and other information
required to be delivered by Company to Lenders pursuant to clauses (iii) and
(iv) of subsection 5.1 shall be prepared in accordance with GAAP as in effect at
the time of such preparation (and delivered together with the reconciliation
statements provided for in subsection 5.1(vi)). Except as otherwise permitted by
this Agreement, calculations in connection with the definitions, covenants and
other provisions of this Agreement shall utilize GAAP as in effect on the date
of determination, applied in a manner consistent with that used in preparing the
financial statements referred to in subsection 4.3. If at any time any change in
GAAP would affect the computation of any financial ratio or requirement set
forth in any Loan Document, and Company, Administrative Agent or Requisite
Lenders shall so request, Administrative Agent, Lenders and Company shall
negotiate in good faith to amend such ratio or requirement to preserve the
original intent thereof in light of such change in GAAP (subject to the approval
of Requisite Lenders); provided that, until so amended, such ratio or
requirement shall continue to be computed in accordance with GAAP prior to such
change therein and Company shall provide to Administrative Agent and Lenders
reconciliation statements provided for in subsection 5.1(vi).
1.3 OTHER DEFINITIONAL PROVISIONS AND RULES OF CONSTRUCTION.
A. Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference.
B. References to "Sections" and "subsections" shall be to Sections and subsections, respectively, of this Agreement unless otherwise specifically provided.
C. The use in any of the Loan Documents of the word "include" or "including", when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation" or "but not limited to" or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter.
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 COMMITMENTS; MAKING OF LOANS; THE REGISTER; OPTIONAL NOTES.
A. COMMITMENTS. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Borrowers herein set forth, each Lender severally agrees (i) that a portion of its outstanding Prepetition Secured Claims equal to the amount set forth opposite its name on Schedule 2.1 annexed hereto shall be converted to (and shall be deemed to be a loan made by such Lender as) a Loan on the Closing Date, and (ii) that on the "Determination Date" (as defined in the Approved Plan of Reorganization), a portion of its outstanding Prepetition Secured Claims equal to its Pro Rata Share of any Permitted
Supplemental Loan Amount shall be converted to (and shall be deemed to be a loan made by such Lender as) a Loan pursuant to Section 4.3 of the Approved Plan of Reorganization. The amount of each Lender's Pro Rata Share of the Loans is set forth opposite its name on Schedule 2.1 annexed hereto. The aggregate original principal amount of the Loans of all Lenders is $90,000,000, and the aggregate principal amount of the Loans of all Lenders shall increase from time to time by the principal amount of any Permitted Supplemental Loans. Loans deemed made under this subsection 2.1A and subsequently repaid or prepaid may not be reborrowed. All Loans and all other amounts owed hereunder with respect to the Loans shall be paid in full no later than the Maturity Date. Loans shall include any Additional Interest Loans added to the principal balance thereof pursuant to subsection 2.2B. Borrowers hereby jointly and severally agree to the foregoing and promise to repay such Loans in accordance with the terms of this Agreement.
B. NO DISBURSEMENT OF FUNDS. All Loans described in clause (i) of subsection 2.1A shall, upon satisfaction or waiver of the conditions precedent specified in subsection 3.1, be deemed made (without any funding of any amounts therefor) on the Closing Date by Lenders simultaneously in the respective amounts set forth on Schedule 2.1 annexed hereto. All Loans described in clause (ii) of subsection 2.1A shall be deemed made (without any funding of any amounts therefor) by Lenders simultaneously and proportionately to their respective Pro Rata Shares on the date the relevant Permitted Supplemental Loan Amount is permitted to be converted to a Loan pursuant to the Approved Plan of Reorganization.
C. THE REGISTER. Administrative Agent, acting for these purposes solely as an agent of Borrowers (it being acknowledged that Administrative Agent, in such capacity, and its officers, directors, employees, agent and affiliates shall constitute Indemnitees under subsection 9.3), shall maintain (and make available for inspection by Borrowers and Lenders upon reasonable prior notice at reasonable times) at its address referred to in subsection 9.8 a register for the recordation of, and shall record, the names and addresses of Lenders and the Commitment and Loans of each Lender from time to time (the "REGISTER"). Borrowers, Administrative Agent and Lenders shall deem and treat the Persons listed as Lenders in the Register as the holders and owners of the corresponding Commitments and Loans listed therein for all purposes hereof; all amounts owed with respect to any Commitment or Loan shall be owed to the Lender listed in the Register as the owner thereof; and any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is listed in the Register as a Lender shall be conclusive and binding on any subsequent holder, assignee or transferee of the corresponding Commitments or Loans. Each Lender shall record on its internal records the amount of its Loans and Commitments and each payment in respect hereof, and any such recordation shall be conclusive and binding on Borrowers, absent manifest error, subject to the entries in the Register, which shall, absent manifest error, govern in the event of any inconsistency with any Lender's records. Failure to make any recordation in the Register or in any Lender's records, or any error in such recordation, shall not affect any Loans or Commitments or any Obligations in respect of any Loans.
D. OPTIONAL NOTES. If so requested by any Lender by written notice to Company (with a copy to Administrative Agent) at least two Business Days prior to the Closing Date or at any time thereafter, Borrowers shall execute and deliver to such Lender (and/or, if applicable and if so specified in such notice, to any Person who is an assignee of such Lender pursuant to
subsection 9.1) on the Closing Date (or, if such notice is delivered after the date which is two Business Days prior to the Closing Date, promptly after Company's receipt of such notice) a promissory note or promissory notes to evidence such Lender's Loan, substantially in the form of Exhibit I annexed hereto, with appropriate insertions.
2.2 INTEREST ON THE LOANS.
A. RATE OF INTEREST. Subject to the provisions of subsections 2.2C, 2.2E and 2.6, each Loan shall bear interest on the unpaid principal amount thereof from the date made or deemed made until repayment in full at the rate of 10.50% per annum.
B. INTEREST PAYMENTS. Subject to the provisions of subsection 2.2C, interest on each Loan shall be payable in arrears on and to each Interest Payment Date applicable to that Loan, upon any prepayment of that Loan (to the extent accrued on the amount being prepaid) and at maturity (including final maturity). All interest payments on the Loans will be made pro rata in accordance with the outstanding principal balance under each Loan. On each Interest Payment Date, (i) interest accruing on the principal amount of the Loans at a rate of 6% per annum shall be payable in cash and (ii) Borrowers shall apply all Available Cash first to the payment of the remaining interest accruing on the Loans (other than any Additional Interest Loans) at a rate of 4.50% per annum to the full extent of such Available Cash and second, to the extent of any excess, to the payment of interest accruing on all Additional Interest Loan at a rate of 4.50% per annum; provided that if the amount of Available Cash on such Interest Payment Date is insufficient to pay the accrued interest on the Loans under this clause (ii) then the difference between the interest then due and payable under this clause (ii) with respect to the Loans and the interest actually paid in cash with respect to the Loans under this clause (ii) shall be added to the principal amount of the Loans on such Interest Payment Date (any and all such amounts that have been added to the principal amount of outstanding Loans, are referred to herein as the "ADDITIONAL INTEREST LOANS").
C. DEFAULT RATE. Upon the occurrence and during the continuation of any Event of Default, the outstanding principal amount of all Loans and, to the extent permitted by applicable law, any interest payments thereon not paid when due and any fees and other amounts then due and payable hereunder, shall thereafter bear interest (including post petition interest in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws) payable upon demand at a rate that is 2.00% per annum in excess of the interest rate otherwise payable under this Agreement for Loans. Payment or acceptance of the increased rates of interest provided for in this subsection 2.2C is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Administrative Agent or any Lender.
D. COMPUTATION OF INTEREST. Interest on the Loans and other amounts bearing interest hereunder shall be computed on the basis of a 365-day or 366-day year, as the case may be. In computing interest on any Loan, the date of the making of such Loan shall be included; and the date of payment of such Loan shall be excluded; provided that if a Loan is repaid on the same day on which it is made, one day's interest shall be paid on that Loan or funded drawing.
E. MAXIMUM RATE. Notwithstanding the foregoing provisions of this subsection 2.2, in no event shall the rate of interest payable by Borrowers with respect to any Loan exceed the maximum rate of interest permitted to be charged under applicable law.
2.3 FEES.
Borrowers, jointly and severally, agree to pay to Agents such fees in the amounts and at the times separately agreed upon between Company and Agents. All fees referenced in this subsection 2.3 shall be earned when payable and shall be non-refundable.
2.4 REPAYMENTS, PREPAYMENTS; GENERAL PROVISIONS REGARDING PAYMENTS; APPLICATION OF PROCEEDS OF COLLATERAL .
A. PREPAYMENTS AND REDUCTIONS IN COMMITMENTS.
(i) Voluntary Prepayments. Borrowers may, upon not less than one Business Day's prior written or telephonic notice given to Administrative Agent by 12:00 Noon (New York City time) on the date required and, if given by telephone, promptly confirmed in writing to Administrative Agent, who will promptly notify each Lender whose Loans are to be prepaid of such prepayment, at any time and from time to time prepay any Loans on any Business Day in whole or in part in an aggregate minimum amount of $1,000,000 and integral multiples of $500,000 in excess of that amount (or, if the amount of the Loans is less than such aggregate minimum amount, an amount equal to the amount of the Loans). Notice of prepayment having been given as aforesaid, the principal amount of the Loans specified in such notice shall become due and payable on the prepayment date specified therein. Any such voluntary prepayment shall be applied as specified in subsection 2.4A(iii).
(ii) Mandatory Payments. Mandatory Payments shall be made in the amounts and under the circumstances set forth below, all such Mandatory Payments to be applied as set forth below or as more specifically provided in subsection 2.4A(iii), except to the extent the Intercreditor Agreement requires application thereof in a different manner than as set forth in this subsection 2.4A(ii) or subsection 2.4A(iii):
(a) Net Asset Sale Proceeds. No later than two days after the date of receipt by CEA, Company or any of its Subsidiaries of any Net Asset Sale Proceeds in respect of any Asset Sale, Company shall make a Mandatory Payment in an aggregate amount equal to the remaining amount of such Net Asset Sale Proceeds.
(b) Net Insurance/Condemnation Proceeds. No later than the fifth Business Day following the date of receipt by Administrative Agent or by Company or any of its Subsidiaries of any Net Insurance/Condemnation Proceeds that are required to be used for a Mandatory Payment pursuant to the provisions of subsection 5.4C, Company shall make a Mandatory Payment in an aggregate amount equal to the amount of such Net Insurance/Condemnation Proceeds.
(c) Issuance of Indebtedness. On the date of receipt of the Net Indebtedness Proceeds from the issuance of any Indebtedness of Company or any of its Subsidiaries after the Closing Date, other than Indebtedness permitted pursuant to subsections 6.1(i) through (vii), Company shall make a Mandatory Payment in an aggregate amount equal to such Net Indebtedness Proceeds.
(d) Tax Refunds. If after the Closing Date, Company or any of its Subsidiaries receives any payment of a cash refund or rebate of any Tax, the Borrowers shall no later than the Business Day following the date of receipt of such refund or rebate make a Mandatory Payment in the amount of such Tax refund or rebate, except to the extent such application would constitute a material violation of a valid Contractual Obligation in connection with a Project of Company or any of its Subsidiaries to remit such refund or rebate to the client of such Project.
(e) Excess Cash. If as of the last Business Day of any calendar month the sum of (1) Cash On Hand (after giving effect to the aggregate interest to be paid on such date pursuant to subsection 2.2C) plus (2) CPIH Revolver Availability (after giving effect to any voluntary repayment of outstanding CPIH Revolver Loans to be made on such date that are made on such date), exceeds $10,000,000, then Borrowers shall apply an amount equal to such excess (provided, that, in the event that such application would cause Cash On Hand to be less than $6,000,000, then such excess amount so applied shall be reduced such that Cash On Hand is not less than $6,000,000) (the amount so applied as it may be adjusted pursuant to the foregoing proviso, "AVAILABLE Cash")): first, to the payment of interest due and payable on the Loans pursuant to clause subsection 2.2B(ii); and second, to repay outstanding Loans.
(f) Calculations of Net Proceeds Amounts; Additional Prepayments and Reductions Based on Subsequent Calculations. Concurrently with the receipt of any amount which would require a Mandatory Payment pursuant to subsections 2.4A(ii)(a) - (e), Company shall deliver to Administrative Agent an Officer's Certificate demonstrating the calculation of the amount of the applicable Net Asset Sale Proceeds, Net Insurance/Condemnation Proceeds, Net Indebtedness Proceeds, cash in the Cash Management System or Tax refund or rebate, as the case may be, that gave rise to such Mandatory Payment. In the event that Company shall subsequently determine that the actual amount was greater than the amount set forth in such Officer's Certificate, Company shall promptly make an additional Mandatory Payment in an amount equal to the amount of such excess, and Company shall concurrently therewith deliver to Administrative Agent an Officer's Certificate demonstrating the derivation of the additional amount resulting in such excess.
(iii) Application of Prepayments. Except as provided in subsection 2.4C and to the extent the Intercreditor Agreement requires application of any Mandatory Payment in a different manner than as set forth in this sentence, (1) any voluntary prepayments pursuant to subsection 2.4A(i) shall be applied to repay outstanding Loans, and (2) any
Mandatory Payment made pursuant to subsections 2.4A(ii)(a) - (d) shall be applied to repay Loans and/or to permanently reduce Commitments in accordance with the provisions of the Intercreditor Agreement, and the application of Mandatory Payments to Loans and/or Commitments required under the terms of the Intercreditor Agreement shall apply as if set forth herein.
(iv) Application of Payments to Loans. Any payments of the Loans, whether by voluntary prepayment, mandatory prepayment, scheduled payments or otherwise shall be applied: first, to all Loans (other than Additional Interest Loans); and second, to all Additional Interest Loans.
B. GENERAL PROVISIONS REGARDING PAYMENTS.
(i) Manner and Time of Payment. All payments by Borrowers of principal, interest, fees and other Obligations shall be made in Dollars in same day funds, without defense, setoff or counterclaim, free of any restriction or condition, and delivered to Administrative Agent not later than 12:00 Noon (New York City time) on the date due at the Funding and Payment Office for the account of Lenders; funds received by Administrative Agent after that time on such due date shall be deemed to have been paid by Borrowers on the next succeeding Business Day. Each Borrower hereby authorizes Administrative Agent to charge its accounts with Administrative Agent in order to cause timely payment to be made to Administrative Agent of all principal, interest, fees and expenses due hereunder (subject to sufficient funds being available in its accounts for that purpose). Anything contained herein to the contrary notwithstanding, Borrowers jointly and severally promise to repay all Loans when due in accordance with the terms hereof.
(ii) Application of Payments to Principal and Interest. All payments in respect of the principal amount of any Loan shall include payment of accrued interest on the principal amount being repaid or prepaid, and all such payments (and, in any event, any payments in respect of any Loan on a date when interest is due and payable with respect to such Loan) shall be applied to the payment of interest before application to principal.
(iii) Apportionment of Payments. Aggregate payments of principal and interest shall be apportioned among all outstanding Loans to which such payments relate, in each case proportionately to Lenders' respective Pro Rata Shares. Administrative Agent shall promptly distribute to each Lender, at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Lender may request, its Pro Rata Share of all such payments received by Administrative Agent.
(iv) Payments on Business Days. Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest hereunder.
(v) Notation of Payment. Each Lender agrees that before disposing of any Note held by it, or any part thereof (other than by granting participations therein), that Lender will make a notation thereon of all Loans evidenced by that Note and all principal
payments previously made thereon and of the date to which interest thereon has been paid; provided that the failure to make (or any error in the making of) a notation of any Loan made under such Note shall not limit or otherwise affect the Obligations of Borrowers hereunder or under such Note with respect to any Loan or any payments of principal or interest on such Note.
C. APPLICATION OF PROCEEDS OF COLLATERAL AND PAYMENTS AFTER EVENT OF DEFAULT. Except to the extent the Intercreditor Agreement requires application in a different manner than as set forth in this subsection 2.4C, upon the occurrence and during the continuation of an Event of Default, either if requested by Requisite Lenders or upon termination of the Commitments (a) all Mandatory Payments or other payments received on account of the Obligations, whether from any Borrower, or otherwise, shall be applied by Administrative Agent against the Obligations and (b) all proceeds received by Administrative Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the discretion of Administrative Agent, be held by Administrative Agent as Collateral for, and/or (then or at any time thereafter) applied in full or in part by Administrative Agent against, the applicable Secured Obligations (as defined in the Collateral Documents), in each case in the following order of priority:
(i) to the payment of all costs and expenses of such sale, collection or other realization, all other expenses, liabilities and advances made or incurred by Administrative Agent in connection therewith, and all amounts for which Agents are entitled to compensation (including the fees described in subsection 2.3), reimbursement and indemnification under any Loan Document and all advances made by Administrative Agent thereunder for the account of the applicable Loan Party, and to the payment of all costs and expenses paid or incurred by Administrative Agent in connection with the Loan Documents, all in accordance with subsections 8.4, 9.2 and 9.3 and the other terms of this Agreement and the Loan Documents;
(ii) thereafter, to the extent of any excess such proceeds, to the payment of all Obligations, for the ratable benefit of the holders thereof (subject to the provisions of subsection 2.4B(ii) hereof); and
(iii) thereafter, to the extent of any excess such proceeds, to the payment to or upon the order of such Loan Party or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.
2.5 USE OF PROCEEDS.
No portion of the proceeds of any borrowing under this Agreement shall be used by any Borrower or any Subsidiary of any Borrower in any manner that might cause the borrowing or the application of such proceeds to violate Regulation U, Regulation T or Regulation X of the Board of Governors of the Federal Reserve System or any other regulation of such Board or to violate the Exchange Act, in each case as in effect on the date or dates of such borrowing and such use of proceeds.
2.6 INCREASED COSTS; TAXES; CAPITAL ADEQUACY.
A. COMPENSATION FOR INCREASED COSTS. Subject to the provisions of subsection 2.6B (which shall be controlling with respect to the matters covered thereby), in the event that any Lender shall determine (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or other Government Authority, in each case that becomes effective after the date hereof, or compliance by such Lender with any guideline, request or directive issued or made after the date hereof by any central bank or other Government Authority (whether or not having the force of law):
(i) subjects such Lender to any additional Tax (other than any withholding tax with respect to which subsection 2.6B applies) with respect to this Agreement or any of its obligations hereunder (including with respect to maintaining any Commitment hereunder) or any payments to such Lender of principal, interest, fees or any other amount payable hereunder;
(ii) imposes, modifies or holds applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets held by, or deposits or other liabilities in or for the account of, or advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Lender; or
(iii) imposes any other condition (other than with respect to Taxes) on or affecting such Lender or its obligations hereunder;
and the result of any of the foregoing is to increase the cost to such Lender of agreeing to make, making or maintaining its Loans or Commitments or to reduce any amount received or receivable by such Lender with respect thereto; then, in any such case, Borrowers shall promptly pay, on a joint and several basis, to such Lender, upon receipt of the statement referred to in subsection 2.7A, such additional amount or amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall determine) as may be necessary to compensate such Lender on an after-tax basis for any such increased cost or reduction in amounts received or receivable hereunder.
B. TAXES.
(i) Payments to Be Free and Clear. All sums payable by Borrowers under this Agreement and the other Loan Documents shall be paid free and clear of, and without any deduction or withholding on account of, any Tax imposed, levied, collected, withheld or assessed by or within the United States or any political subdivision in or of the United States or any other jurisdiction from or to which a payment is made by or on behalf of Borrowers or by any federation or organization of which the United States or any such jurisdiction is a member at the time of payment.
(ii) Grossing-up of Payments. If any Borrower or any other Person is required by law to make any deduction or withholding on account of any such Tax from any sum
paid or payable by Borrowers to Administrative Agent or any Lender under any of the Loan Documents:
(a) Borrowers shall notify Administrative Agent of any such requirement or any change in any such requirement as soon as Borrowers become aware of it (it being understood and agreed that no such notice shall be required with respect to Canadian Lenders, if any);
(b) Borrowers shall pay any such Tax when such Tax is due, such payment to be made (if the liability to pay is imposed on any Borrower) for their own account or (if that liability is imposed on Administrative Agent or such Lender, as the case may be) on behalf of and in the name of Administrative Agent or such Lender;
(c) the sum payable by Borrowers in respect of which the relevant deduction, withholding or payment is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, Administrative Agent or such Lender, as the case may be, receives on the due date a net sum equal to what it would have received had no such deduction, withholding or payment been required or made; and
(d) within 30 days after paying any sum from which any or all of them are required by law to make any deduction or withholding, and within 30 days after the due date of payment of any Tax which any or all of them are required by clause (b) above to pay, Borrowers shall deliver to Administrative Agent evidence satisfactory to the other affected parties of such deduction, withholding or payment and of the remittance thereof to the relevant taxing or other authority.
(iii) Evidence of Exemption from U.S. Withholding Tax.
(a) Each Lender that is organized under the laws of any jurisdiction other than the United States or any state or other political subdivision thereof (for purposes of this subsection 2.6B(iii), a "NON-US LENDER") shall (1) to the extent such Non-US Lender is not a Canadian Lender, deliver to Administrative Agent and to Company, on or prior to the Closing Date (in the case of each Lender listed on the signature pages hereof) or on or prior to the date of the Assignment Agreement pursuant to which it becomes a Lender (in the case of each other Lender), and at such other times as may be necessary in the determination of Company or Administrative Agent (each in the reasonable exercise of its discretion), two original copies of Internal Revenue Service Form W-8BEN or W-8ECI (or any successor forms) properly completed and duly executed by such Lender, together with any other certificate or statement of exemption required under the Internal Revenue Code or the regulations issued thereunder to establish that such Lender is not subject to United States withholding tax with respect to any payments to such Lender of interest payable under any of the Loan Documents, and (2) to the extent such Non-US Lender is a Canadian Lender, deliver to Administrative Agent and to Company, on or prior to the Closing Date
(in the case of each Canadian Lender listed on the signature pages hereof) or on or prior to the date of the Assignment Agreement pursuant to which it becomes a Canadian Lender (in the case of each other Canadian Lender), and at such other times as may be necessary in the determination of Company or Administrative Agent (each in the reasonable exercise of its discretion), two original copies of any forms, properly completed and duly executed by such Lender, required under the Internal Revenue Code or the regulations issued thereunder to establish that such Canadian Lender is eligible for a reduced withholding tax rate under the "Convention Between the United States of America and Canada with Respect to Taxes on Income and Capital" or any successor thereto.
(b) Each Non-US Lender hereby agrees, from time to time after the initial delivery by such Lender of such forms, whenever a lapse in time or change in circumstances renders such forms, certificates or other evidence so delivered obsolete or inaccurate in any material respect, that such Lender shall promptly (1) deliver to Administrative Agent and to Company two original copies of renewals, amendments or additional or successor forms, properly completed and duly executed by such Lender, together with any other certificate or statement of exemption required in order to confirm or establish that such Lender is not subject to United States withholding tax with respect to payments to such Lender under the Loan Documents (or, if such Lender is a Canadian Lender, to confirm or establish that such Lender is eligible for the relevant reduced withholding tax rate) or (2) notify Administrative Agent and Company of its inability to deliver any such forms, certificates or other evidence.
(c) Borrowers shall not be required to pay any additional amount to any Non-US Lender under clause (c) of subsection 2.6B(ii) if such Lender shall have failed to satisfy the requirements of clause (a) or (b)(1) of this subsection 2.6B(iii); provided that if such Lender shall have satisfied the requirements of subsection 2.6B(iii)(a) on the date such Lender became a Lender, nothing in this subsection 2.6B(iii)(c) shall relieve Borrowers of their obligation to pay any amounts pursuant to subsection 2.6B(ii)(c) in the event that, as a result of any change in any applicable law, treaty or governmental rule, regulation or order, or any change in the interpretation, administration or application thereof, such Lender is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent date establishing the fact that such Lender is not subject to withholding as described in subsection 2.6B(iii)(a) (or, to the extent such Lender is a Canadian Lender, establishing the fact that such Lender is eligible for the relevant reduced withholding tax rate).
(d) Notwithstanding anything contained in this subsection to the contrary, Borrowers shall be required to pay additional amounts to each Canadian Lender under clause (c) of subsection 2.6B(ii) with respect to any Loan Exposure held by such Canadian Lender in its capacity as a Canadian Lender notwithstanding that such Lender fails to deliver forms, certificates or other evidence establishing the fact that such Lender is not subject to withholding as described in subsection 2.6B(iii)(a)(1).
(iv) Indemnity for Withheld Amounts. Borrowers hereby agree to indemnify Lenders and Agents for the full amount of any deduction or withholding on account of any Taxes imposed, levied, collected, withheld or assessed by or within the United States or any political subdivision in or of the United States or any other jurisdiction from or to which a payment is made by or on behalf of Borrowers or by any federation or organization of which the United States or any such jurisdiction is a member at the time of payment (including any such Taxes imposed by any jurisdiction on amounts payable under this subsection 2.6B) that Borrowers are required to pay pursuant to subsection 2.6B(ii) but were paid by Agents or Lenders with respect to sums payable by Borrowers under this Agreement and the other Loan Documents and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made promptly, and in any event within 10 days after, the relevant Lender or Agent makes demand therefor in writing.
C. CAPITAL ADEQUACY ADJUSTMENT. If any Lender shall have determined that the adoption, effectiveness, phase-in or applicability after the date hereof of any law, rule or regulation (or any provision thereof) regarding capital adequacy, or any change therein or in the interpretation or administration thereof by any Government Authority charged with the interpretation or administration thereof, or compliance by any Lender with any guideline, request or directive regarding capital adequacy (whether or not having the force of law) of any such Government Authority, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of, or with reference to, such Lender's Loans, Commitments, or other Obligations to a level below that which such Lender or such controlling corporation could have achieved but for such adoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of such Lender or such controlling corporation with regard to capital adequacy), then from time to time, within five Business Days after receipt by Borrowers from such Lender of the statement referred to in subsection 2.7A, Borrowers shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling corporation on an after-tax basis for such reduction.
2.7 STATEMENT OF LENDERS; OBLIGATION OF LENDERS TO MITIGATE.
A. STATEMENTS. Each Lender claiming compensation or reimbursement pursuant to subsection 2.6 or 2.7B shall deliver to Company (with a copy to Administrative Agent) a written statement, setting forth in reasonable detail the basis of the calculation of such compensation or reimbursement, which statement shall be conclusive and binding upon all parties hereto absent manifest error; provided that a Lender claiming compensation or reimbursement pursuant to subsection 2.6B(ii) due to circumstances in effect as of the Closing Date shall not be required to deliver more than one such statement to Borrowers or Administrative Agent, and such statement shall remain effective with respect to this Agreement until all Obligations have been paid in full.
B. MITIGATION. Each Lender agrees that, as promptly as practicable after the officer of such Lender responsible for administering the Loans of such Lender becomes aware of the occurrence of an event or the existence of a condition that would entitle such Lender to receive payments under subsection 2.6 (other than subsection 2.6B(ii)), it will use reasonable
efforts to make, issue, fund or maintain the Commitments of such Lender or the
Loans of such Lender through another lending office of such Lender, if (i) as a
result thereof the additional amounts which would otherwise be required to be
paid to such Lender pursuant to subsection 2.6 would be materially reduced and
(ii) as determined by such Lender in its sole discretion, such action would not
otherwise be disadvantageous to such Lender; provided that such Lender will not
be obligated to utilize such other lending office pursuant to this subsection
2.7B unless Borrowers agree to pay, on a joint and several basis, all
incremental expenses incurred by such Lender as a result of utilizing such other
lending office as described above.
2.8 JOINT AND SEVERAL LIABILITY; PAYMENT INDEMNIFICATIONS.
A. JOINT AND SEVERAL OBLIGATIONS. All Obligations of Borrowers under the Loan Documents shall be the joint and several Obligations of each Borrower.
B. NO IMPAIRMENT OR RELEASE. The Obligations of and the Liens granted by any Borrower under the Loan Documents shall not be impaired or released by any action or inaction on the part of Administrative Agent or any Lender with respect to any other Loan Party, including any action or inaction which would otherwise release a surety.
C. CONTRIBUTION RIGHTS. In order to provide for just and equitable contribution among Borrowers if any payment is made by a Borrower (a "FUNDING BORROWER") in discharging any of the Obligations, that Funding Borrower shall be entitled to a contribution from the other Borrowers for all payments, damages and expenses incurred by that Funding Borrower in discharging the Obligations, in the manner and to the extent required to allocate liabilities in an equitable manner among Borrowers on the basis of the relative benefits received by Borrowers. If and to the extent that a Funding Borrower makes any payment to any Lender or any other Person in respect of the Obligations, any claim which said Funding Borrower may have against the other Borrowers by reason thereof shall be subject and subordinate to the prior cash payment in full of the Obligations. The parties hereto acknowledge that the right to contribution hereunder shall constitute an asset of the party to which such contribution is owing and shall be subject to the Liens and security interests of Administrative Agent. Notwithstanding any of the foregoing to the contrary, such contribution arrangements shall not limit in any manner the joint and several nature of the Obligations, limit, release or otherwise impair any rights of Administrative Agent or any Lender under the Loan Documents, or alter, limit or impair the obligation of each Borrower, which is absolute and unconditional, to repay the Obligations.
2.9 RIGHTS OF SUBROGATION, CONTRIBUTION, ETC.
Except as prohibited under applicable law, Company hereby waives any claim, right or remedy, direct or indirect, that Company now has or may hereafter have against any other Borrower or any guarantor of the Obligations in connection with this Agreement or the performance by Company of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including (a) any right of subrogation, reimbursement or indemnification that Company now has or may hereafter have against any other Borrower or any guarantor of the Obligations, (b) any right to enforce, or to participate in, any claim, right or remedy that any Agent or Lender now has or may hereafter have against any other Borrower or any guarantor of the Obligations, and
(c) any benefit of, and any right to participate in, any collateral or security now or hereafter held by any Agent or Lender. In addition, until the Obligations shall have been indefeasibly paid in full, Company shall withhold exercise of any right of contribution Company may have against any other Borrower or Loan Party. Company further agrees that, to the extent the waiver or agreement to withhold the exercise of its rights of subrogation, reimbursement, indemnification and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification Company may have against any other Borrower or Loan Party or against any collateral or security shall be junior and subordinate to any rights any Agent or Lender may have against any other Borrower, to all right, title and interest any Agent or Lender may have in any such collateral or security, and to any right any Agent or Lender may have against such Loan Party. If any amount shall be paid to Company on account of any such subrogation, reimbursement, indemnification or contribution rights at any time when all Obligations shall not have been paid in full, such amount shall be held in trust for Administrative Agent on behalf of Agents and Lenders and shall forthwith be paid over to Administrative Agent for the benefit of Agents and Lenders to be credited and applied against the Obligations, whether matured or unmatured, in accordance with the terms hereof.
SECTION 3. CONDITIONS TO LOANS
The obligations of Lenders to make (or to be deemed to make) Loans hereunder are subject to the satisfaction of the following conditions.
3.1 CONDITIONS TO CLOSING DATE.
The obligations of Lenders with respect to their respective Commitments and to make any Loans to be made (or to be deemed made) on the Closing Date, are subject to prior or concurrent satisfaction of the following conditions:
A. LOAN PARTY DOCUMENTS. On or before the Closing Date, Borrowers shall, and shall cause each other Loan Party to, deliver to Lenders (or to Administrative Agent with sufficient originally executed copies, where appropriate, for each Lender) the following with respect to Borrowers or such Loan Party, as the case may be, each, unless otherwise noted, dated the Closing Date:
(i) Copies of the Organizational Documents of such Person, certified by the Secretary of State of its jurisdiction of organization or, if such document is of a type that may not be so certified, certified by the secretary or similar officer of the applicable Loan Party, together with a good standing certificate from the Secretary of State of its jurisdiction of organization and each other state in which such Person is qualified to do business and, to the extent generally available, a certificate or other evidence of good standing as to payment of any applicable franchise or similar taxes from the appropriate taxing authority of each of such jurisdictions, each dated a recent date prior to the Closing Date;
(ii) Resolutions of the Governing Body of such Person approving and authorizing the execution, delivery and performance of the Loan Documents to which it
is a party certified as of the Closing Date by the secretary or similar officer of such Person as being in full force and effect without modification or amendment;
(iii) Signature and incumbency certificates of the officers of such Person executing the Loan Documents to which it is a party;
(iv) Executed originals of the Loan Documents to which such Person is a party; and
(v) Such other documents as Administrative Agent may reasonably request.
B. FEES. Borrowers shall have paid out of Debtors' estates to Administrative Agent, (i) for distribution (as appropriate) to Agents, the fees payable on the Closing Date referred to in subsection 2.3 and all reasonable and documented costs and expenses (including legal fees, due diligence fees, recordation expenses, other out-of-pocket expenses and taxes) of Agents incurred in connection with the negotiation, preparation, recordation, execution and completion of the Loan Documents and the transactions contemplated thereby, including such fees and expenses of O'Melveny & Myers LLP, counsel to Agents, and Ernst & Young Corporate Finance LLC, and (ii) for distribution (as appropriate) to DIP Lenders and DIP Agents, all unpaid interest and fees accrued under the DIP Credit Agreement on or before the Closing Date, and all reasonable and documented costs and expenses of DIP Agents and DIP Lenders owed pursuant to subsection 10.2 of the DIP Credit Agreement. Borrowers shall have paid out of Debtors' estates to D.E. Shaw an arrangement fee of $450,000, unless Borrowers have previously paid out of Debtors' estates to D.E. Shaw the commitment fee required pursuant to the "Commitment Letter" (as defined in the Order Pursuant to Section 363 of the Bankruptcy Code Authorizing Debtors to Enter into Letter Agreement with D.E. Shaw Laminar Portfolios, L.L.C. as Additional New Lender and Make Certain Payments in Connection Therewith entered by the Bankruptcy Court on November 21, 2003).
C. CORPORATE AND CAPITAL STRUCTURE; MANAGEMENT; OWNERSHIP.
(i) Corporate Structure. DHC shall own all of the issued and outstanding Capital Stock of Covanta. CEA shall own all of the issued and outstanding common stock of Company. The corporate organizational structure of Company and its Subsidiaries on the Closing Date, after giving effect to the Approved Plan of Reorganization, shall be satisfactory to Requisite Lenders, shall be consistent in all material respects with the Approved Plan of Reorganization and the Disclosure Statement related thereto.
(ii) Capital Structure and Ownership. DHC shall have made a cash equity contribution to Covanta of not less than $30,000,000 (including cash equity contributed in connection with the "Lake Transaction" (as defined in the DIP Credit Agreement). The capital structure and ownership of Company and its Subsidiaries on the Closing Date, after giving effect to the Approved Plan of Reorganization, shall be satisfactory to Requisite Lenders, shall be consistent in all material respects with the Approved Plan of Reorganization and the Disclosure Statement related thereto.
(iii) Management. The Governing Bodies, officers and management structure of Covanta, Company and its Subsidiaries on the Closing Date, after giving effect to the Approved Plan of Reorganization, shall be satisfactory to Requisite Lenders, shall be consistent in all material respects with the Approved Plan of Reorganization and the Disclosure Statement related thereto and shall be as set forth on Schedule 3.1C annexed hereto. Lenders shall have received copies of, and Requisite Lenders shall be satisfied with the form and substance of, the Employment Agreements and any other employment agreements with and any incentive arrangements for senior management of Company and its Subsidiaries. One member of the Governing Body of Company on the Closing Date shall have been indicated as acceptable by Agents to Company.
D. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENTS. Company shall have delivered to Agents an Officer's Certificate, in form and substance satisfactory to Agents, to the effect that the representations and warranties in Section 4 are true, correct and complete in all material respects on and as of the Closing Date to the same extent as though made on and as of that date (or, to the extent such representations and warranties specifically relate to an earlier date, that such representations and warranties were true, correct and complete in all material respects on and as of such earlier date) and that Borrowers shall have performed in all material respects all agreements and satisfied all conditions which this Agreement provides shall be performed or satisfied by it on or before the Closing Date.
E. PLAN OF REORGANIZATION; CONFIRMATION ORDER; DISCHARGE OF
EXISTING CREDIT FACILITIES.
(i) Plan of Reorganization. The Plan of Reorganization and all amendments, modifications, revisions and restatements thereof, if any, shall have been approved by the creditors of Borrowers (including the DIP Lenders and the Prepetition Lenders) in requisite number and percentage, and confirmed by the Bankruptcy Court pursuant to the Confirmation Order and delivered to Agents (the "APPROVED PLAN OF Reorganization"). Except as set forth in modifications filed with the Bankruptcy Court and approved by Agents, there shall have been no modifications, amendments, revisions or restatements of the Approved Plan of Reorganization. Any representation and warranty made by Covanta or any of its Subsidiaries in the Approved Plan of Reorganization shall be accurate, true, correct and complete in all material respects as of the Closing Date. The Approved Plan of Reorganization (a) shall provide for the payments on the Closing Date described in subsection 3.1T, the corporate reorganization described in subsection 3.1S, the making of the Loans under this Agreement and the Indebtedness described in subsection 3.1F; and (b) upon satisfaction of all conditions to the effectiveness of this Agreement, shall become effective in accordance with its terms without waiver of any condition to such effectiveness that, in Agents' reasonable judgment, is material.
(ii) Confirmation Order. The Confirmation Order shall have been delivered to Lenders, shall address the matters set forth in subsections 3.1F, 3.1S and 3.1T, the making of the Loans and Commitments under this Agreement and the terms hereof and the granting of all Liens and consents required under this Agreement and the other Loan Documents and otherwise be in form and substance satisfactory to Requisite Lenders. The Confirmation Order shall be in full force and effect and no portion thereof shall have
been stayed pending any appeal or petition for review or for rehearing, and Agents shall have received evidence satisfactory to each demonstrating such facts. Debtors' Second Joint Plan of Liquidation under Chapter 11 of the Bankruptcy Code and the Liquidation Plan Supplement to Debtors' Second Joint Plan of Liquidation, as filed with the Bankruptcy Court on December 18, 2003 and February 18, 2004, respectively, and as amended, supplemented or otherwise modified from time to time thereafter to the extent permitted under the DIP Credit Agreement, shall have been confirmed by the Bankruptcy Court pursuant to an order in form and substance satisfactory to Requisite Lenders.
(iii) Approval of Fees Related to Exit Financing. The Bankruptcy Court order approving the fees payable to Agents and the Lenders described in subsection 3.1B shall be in full force and effect, without modification or amendment except to the extent approved by Agents.
(iv) Material Contracts. The terms and conditions of any Material Contracts to be entered into by the Borrowers or any of their Subsidiaries pursuant to the Approved Plan of Reorganization shall be in form and substance satisfactory to Requisite Lenders and Agents.
F. MATTERS RELATING TO EXISTING INDEBTEDNESS.
(i) Termination of DIP Credit Agreement and Related Liens. (a) Indebtedness consisting of funded amounts outstanding under the DIP Credit Agreement on the Closing Date shall have been repaid in full in cash, (b) all undrawn "Tranche A L/Cs" and "Tranche B L/Cs" under the DIP Credit Agreement (other than the Existing Detroit L/Cs) shall be replaced (or any further drawings thereunder shall be fully supported pursuant to arrangements satisfactory to DIP Lenders and the issuers thereof) with letters of credit issued under the New L/C Facility Agreement, (c) the Existing Detroit L/Cs shall be replaced with letters of credit issued under the Detroit L/C Credit Agreement as the Detroit L/Cs, (d) each letter of credit (if any) issued or deemed issued under the DIP Credit Agreement other than the "Tranche A L/Cs" and "Tranche B L/Cs" shall have been cash collateralized pursuant to arrangements reasonably satisfactory to the issuer of such letter of credit, or cancelled and returned undrawn, or reimbursed, (e) all commitments to lend or make other extensions of credit under the DIP Credit Agreement shall have terminated (except that the participations of DIP Lenders purchased in the letters of credit, if any, referred to in clause (d) above shall continue), and (f) all documents or instruments necessary to release all Liens securing Indebtedness or other obligations of Borrowers and their Subsidiaries under the DIP Credit Agreement shall have been delivered to Administrative Agent to the extent required by Administrative Agent.
(ii) Termination of Prepetition Credit Agreement, 9.25% Debentures and Related Liens. (a) Indebtedness consisting of the 9.25% Debentures and the Prepetition Obligations on the Closing Date shall be satisfied by application of the High Yield Notes and the Loans and by application of Cash On Hand of Borrowers (as described in subsection 3.1T), and (b) all documents or instruments necessary to release all Liens securing Indebtedness or other obligations of Borrowers and their Subsidiaries under the
Prepetition Credit Agreement and the 9.25% Debentures shall have been delivered to Administrative Agent to the extent required by Administrative Agent.
(iii) Domestic Facilities. Indebtedness under the Detroit L/C Credit Agreement, the New L/C Facility Agreement and the High Yield Notes shall be secured as set forth in the Domestic Loan Documents and High Yield Indenture and shall be non-recourse to the Borrowers or their assets. The Domestic Loan Documents, High Yield Notes and High Yield Indenture shall be in full force and effect, the "Closing Date" as defined in each of the Domestic Loan Documents, High Yield Notes, and High Yield Indenture shall have occurred, and the Domestic Loan Documents, High Yield Notes and High Yield Indenture shall be in form and substance satisfactory to Requisite Lenders.
(iv) Existing Indebtedness to Remain Outstanding. After giving effect to the Approved Plan of Reorganization, the Indebtedness of Domestic Borrowers and Borrowers (other than Indebtedness under the Loan Documents, the Domestic Loan Documents, and the CPIH Revolver Documents) shall consist of (a) $205,000,000 in aggregate initial principal amount of High Yield Notes, (b) a note issued by Covanta in a principal amount not to exceed $35,000,000 (the "TAX NOTE"), representing the back tax liability of Covanta and its Subsidiaries as of the Closing Date, which Tax Note shall be unsecured and unguarantied, shall have a final maturity date of 6 years from the Closing Date, shall bear interest payable in arrears at a rate no greater than 7.5% per annum, and shall amortize on a 30-year schedule for the first 5 years after the issuance thereof with the balance due at maturity, (c) "Class 6 Unsecured Notes" (as defined in the Approved Plan of Reorganization) in the aggregate principal amount of $4,000,000 and subordinated notes issued by Covanta (the "UNSECURED CREDITOR NOTES") in an aggregate principal amount equal to the amount of "Operating Company Unsecured Claims" that are "Allowed" (as such terms are defined in the Approved Plan of Reorganization), which Unsecured Creditor Notes shall be unsecured and unguarantied, shall have a final maturity date of 8 years from the Closing Date, shall bear interest payable in arrears at a rate no greater than 7.5% per annum, and shall amortize in an amount not to exceed $3,900,000 annually commencing on the second anniversary of the Closing Date with the remainder due at final maturity, (d) outstanding Indebtedness described in Schedule 6.1(v) annexed hereto, and (e) Indebtedness under the CEA Stock Pledge Agreement. The terms and conditions of all such Indebtedness (including payment terms, covenants, representations and warranties, defaults and, in the case of the Unsecured Creditor Notes, payment subordination provisions), and the definitive documentation therefor, shall be in form and in substance satisfactory to Requisite Lenders.
(v) Related Agreements in Full Force and Effect. Lenders shall have received a fully executed or conformed copy of the Domestic Loan Documents, CPIH Revolver Documents, the High Yield Indenture and the High Yield Notes, the Management Services and Reimbursement Agreement, the Corporate Services Reimbursement Agreement, the Tax Note, the Unsecured Creditor Notes, the Unsecured Creditor Notes Indenture, the Employment Agreements, the Intercreditor Agreement and any documents executed in connection therewith, each such Related Agreement, the Domestic Loan Documents, the High Yield Notes, the Unsecured Creditor Notes, the Employment
Agreements, the Intercreditor Agreement, the High Yield Indenture, the Management Services and Reimbursement Agreement, the Corporate Services Reimbursement Agreement and the Unsecured Creditor Notes Indenture shall be in full force and effect and no provision thereof shall have been modified or waived in any respect determined by either Agent to be material.
G. FINANCIAL STATEMENTS; PROJECTIONS. On or before the Closing Date, Lenders shall have received (i) the audited consolidated financial statements of Covanta and its Subsidiaries for the Fiscal Year ended December 31, 2002 delivered pursuant to clause (i) of subsection 4.1G of the Domestic Credit Agreement, (ii) the unaudited consolidated financial statements of Covanta and its Subsidiaries for the Fiscal Quarters ended March 31, 2003, June 30, 2003 and September 30, 2003 delivered pursuant to clause (ii) of subsection 4.1G of the Domestic Credit Agreement, and (iii) financial statements with respect to Company and its Subsidiaries derived from the financial statements described in clauses (i) and (ii) above in form satisfactory to Agents, all in reasonable detail and (in the case of the financial statements described in clause (iii)) certified by the chief executive officer or chief financial officer of Company that they fairly present, in all material respects, the financial condition of Company and its Subsidiaries as of the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments. Company shall have delivered to Agents and Lenders such projected financial statements as Agents may reasonably request for the period from the Closing Date through December 31, 2007, including the budget of monthly and quarterly cash receipts and expenditures for Fiscal Year 2004 and annual net cash flow for Fiscal Years 2005, 2006 and 2007 attached hereto as Schedule 1.1B, which budget and other projections shall be satisfactory to Agents and Requisite Lenders and shall be accompanied by a certificate from the chief executive officer or chief financial officer of Company certifying that they are based upon good faith estimates and assumptions believed by Company to be reasonable at the time made.
H. SOLVENCY ASSURANCES. On the Closing Date, Administrative Agent and Lenders shall have received an Officer's Certificate from Covanta dated the Closing Date, substantially in the form delivered under subsection 4.1H of the Domestic Credit Agreement and with appropriate attachments, demonstrating that, after giving effect to the consummation of the transactions contemplated by the Domestic Loan Documents, Domestic Borrowers, taken as a whole, and Covanta will be Solvent.
I. OPINIONS OF COUNSEL TO LOAN PARTIES. Lenders shall have
received originally executed copies of one or more favorable written opinions of
(a) Cleary, Gottlieb, Steen & Hamilton, (b) LeBoeuf, Lamb, Greene & McRae, (c)
Morris, James, Hitchens & Williams LLP and (d) Nixon Peabody, LLP, counsel for
Borrowers, in form and substance reasonably satisfactory to Agents and their
counsel, dated as of the Closing Date and setting forth substantially the
matters in the opinions designated in Exhibit VI annexed hereto and as to such
other matters as Agents acting on behalf of Lenders may reasonably request (this
Agreement constituting a written request by Borrowers to such counsel to deliver
such opinions to Agents and Lenders).
J. OPINIONS OF COUNSEL DELIVERED UNDER RELATED AGREEMENTS AND OTHER DOCUMENTS. Administrative Agent and its counsel shall have received copies of the opinions of
counsel delivered to the parties under the Related Agreements, the Domestic Loan Documents, the High Yield Note, the High Yield Indenture, the Unsecured Creditor Notes and the Unsecured Creditor Notes Indenture, and Borrowers shall have made reasonable efforts to obtain from each such counsel letters authorizing Lenders to rely on such opinions to the same extent as though such opinions were addressed to Lenders.
K. EVIDENCE OF INSURANCE. Administrative Agent shall have received a certificate from Covanta's insurance broker or other evidence satisfactory to it that all insurance required to be maintained pursuant to subsection 5.4 is in full force and effect and that Collateral Agent and/or Administrative Agent on behalf of Lenders has been named as additional insured and/or loss payee thereunder to the extent required under subsection 5.4.
L. NECESSARY GOVERNMENTAL AUTHORIZATIONS AND CONSENTS. Covanta and its Subsidiaries shall have obtained all Governmental Authorizations and all consents of other Persons, in each case that are necessary or advisable in connection with the transactions contemplated by the Loan Documents and the continued operation of the business conducted by Covanta, Company and its Subsidiaries in substantially the same manner as conducted prior to the Closing Date. Each such Governmental Authorization or consent shall be in full force and effect, except in a case where the failure to obtain or maintain a Governmental Authorization or consent, either individually or in the aggregate, should not reasonably be expected to have a Material Adverse Effect. Administrative Agent shall have received an Officer's Certificate of Company in form and substance reasonably satisfactory to Administrative Agent certifying as to the foregoing matters and any other evidence reasonably requested by Agents in support thereof. All applicable waiting periods shall have expired without any action being taken or threatened by any competent authority that would restrain, prevent or otherwise impose adverse conditions on the transactions contemplated by the Loan Documents or the financing thereof. No action, request for stay, petition for review or rehearing, reconsideration, or appeal with respect to any of the foregoing shall be pending, and the time for any applicable Government Authority to take action to set aside its consent on its own motion shall have expired.
M. SECURITY INTERESTS IN PERSONAL AND MIXED PROPERTY.
Administrative Agent shall have received evidence satisfactory to it that Loan
Parties shall have taken or caused to be taken all such actions, executed and
delivered or caused to be executed and delivered all such agreements, documents
and instruments, and made or caused to be made all such filings and recordings
(other than the filing or recording of items described in clauses (ii) and (iii)
below) that Administrative Agent may reasonably request in order to evidence, in
favor of Collateral Agent, for the benefit of Secured Parties, a valid and
perfected security interest in the entire personal and mixed property
Collateral, with the priority set forth in the Collateral Documents (it being
understood that such actions by CEA shall relate solely to its pledge of the
common stock of Company). Such actions shall include the following:
(i) Stock Certificates and Instruments. Delivery to Collateral Agent of (a) certificates (which certificates shall be accompanied by irrevocable undated stock powers, duly endorsed in blank and otherwise satisfactory in form and substance to Collateral Agent) representing all capital stock included in the Collateral and (b) all promissory notes or other instruments (duly endorsed, where appropriate, in a manner satisfactory to Collateral Agent) evidencing any Collateral;
(ii) Lien Searches and UCC Termination Statements. Delivery to Collateral Agent of (a) the results of a recent search, by a Person satisfactory to Collateral Agent, of all effective UCC financing statements and fixture filings and all judgment and tax lien filings which may have been made with respect to any personal or mixed property of any Borrower and of all effective UCC financing statements which may have been made with respect to Capital Stock of Company, in each case, together with copies of all such filings disclosed by such search, and (b) UCC termination statements duly executed by all applicable Persons for filing in all applicable jurisdictions as may be necessary to terminate any effective UCC financing statements or fixture filings disclosed in such search (other than any such financing statements or fixture filings in respect of Liens permitted to remain outstanding pursuant to the terms of this Agreement);
(iii) UCC Financing Statements and Fixture Filings. Delivery to Collateral Agent of UCC financing statements and, where appropriate, fixture filings, duly executed by each applicable Borrower with respect to all personal and mixed property Collateral of such Borrower and by CEA with respect to the common stock of Company, in each case, for filing in all jurisdictions as may be necessary or in the opinion of Collateral Agent desirable to perfect the security interests in favor of Collateral Agent created in such Collateral pursuant to the Collateral Documents;
(iv) PTO Cover Sheets, Etc. Delivery to Collateral Agent of all cover sheets or other documents or instruments Collateral Agent may reasonably request to be filed with the PTO in order to evidence Liens in favor of Collateral Agent in respect of any IP Collateral; and
(v) Control Agreements. Delivery to Collateral Agent of Control Agreements with financial institutions and other Persons in order to perfect Liens in respect of Deposit Accounts, Securities Accounts and other Collateral pursuant to the Collateral Documents;
N. [INTENTIONALLY OMITTED].
O. NO MATERIAL ADVERSE CHANGE. Agents (in their sole discretion) shall be satisfied that there has been no material adverse change (other than as disclosed in reports delivered pursuant to subsection 6.1(i) of the DIP Credit Agreement) since December 31, 2002 in the business, property, assets, operations, financial condition or prospects of Company and its Subsidiaries taken as a whole, and Company shall have delivered to Agents an Officer's Certificate to the foregoing effect.
P. CASH MANAGEMENT SYSTEM. The cash management system of Company and its Subsidiaries shall be as set forth on Schedule 3.1P annexed hereto.
Q. [INTENTIONALLY OMITTED].
R. GEOTHERMAL SALE. Covanta shall have consummated the Geothermal Sale on terms and conditions and pursuant to documentation in form and substance satisfactory to the Requisite DIP Lenders.
S. COMPANY REORGANIZATION. On the Closing Date, (i) Covanta
shall own, directly or indirectly, 100% of the outstanding Capital Stock of CEA,
(ii) CEA shall own 100% of the outstanding common stock of Company, which shall
own the Capital Stock of all Persons (including Persons holding the equity
interests in other Persons) holding the assets and operations of the IPP
International Business to the extent described in the Approved Plan of
Reorganization and the Disclosure Statement related thereto, (ii) all relevant
operating and administrative expenses associated with the IPP International
Business shall be transferred into Company in accordance with the Management
Services and Reimbursement Agreement, and (iii) not less than $5,000,000 of cash
for working capital shall have been transferred from Covanta and its
Subsidiaries (other than Borrowers) to the Borrowers as an equity contribution.
T. DISTRIBUTION. All unrestricted Cash On Hand (including, without limitation, net sale proceeds from the Geothermal Sale) of Covanta and its Subsidiaries remaining prior to the equity contribution referred to in subsection 3.1C(ii) but after (i) the transfer of working capital amounts to Company as described in subsection 3.1S, (ii) the payment of the fees referred to in subsection 3.1B, (iii) the disposition of those letters of credit referred to in subsection 3.1F(i)(c), (iv) the payment of allowed administrative expenses, (v) the reimbursement of reasonable accrued fees and expenses of DHC not to exceed $4,000,000 in the aggregate and reasonable accrued fees and expenses of D.E. Shaw not to exceed $350,000 in the aggregate, and (vi) payment of funded outstanding obligations under the DIP Credit Agreement (if any) and (without duplication of clauses (i) through (vi)) the payment of other "Exit Costs" (as defined in the Approved Reorganization Plan), subject to an amount of cash (which amount shall be determined in accordance with terms set forth in the draft Plan of Reorganization attached (on the date of execution thereof) to the Investment and Purchase Agreement dated as of December 2, 2003 between DHC and Covanta) (plus reserves required to address timing issues associated with the Geothermal Sale and emergence from the Chapter 11 Cases (in an aggregate amount satisfactory to the DIP Lenders)) to be retained in the Cash Management System in the United States by Covanta and its Subsidiaries (collectively, such Cash On Hand, net of such transferred amount, such payments and reimbursements, such retained amount and such reserves, is referred to herein as "DISTRIBUTABLE CASH"), shall have been distributed as follows: first, to the extent of the first $60,000,000 of such Distributable Cash, for the benefit of the holders of Prepetition Secured Claims that are Detroit L/C Lenders on the Closing Date, on account of their allowed pre-petition exposure, in accordance with the Approved Plan of Reorganization second, to the extent of the next $7,200,000 of such Distributable Cash, for the benefit of the holders of Prepetition Secured Claims, on account of any remaining allowed pre-Petition Date exposure, in accordance with the Approved Plan of Reorganization, and third, to the extent of 25% of any remaining Distributable Cash, to Covanta, and to the extent of the remaining 75%, for the benefit of the holders of Prepetition Secured Claims, on account of any remaining allowed pre-Petition Date exposure, in accordance with the Approved Plan of Reorganization.
U. NOL AVAILABILITY. Covanta, its independent advisers, Agents and Agents' counsel shall have determined to their respective sole satisfaction that the net operating losses disclosed to Agents and Lenders prior to the Closing Date as being held by DHC are available and accessible to Covanta and its Subsidiaries.
V. LITIGATION. On the Closing Date, there shall be no action, suit, investigation, litigation or proceeding pending or threatened in any court or before any arbitrator or governmental instrumentality that purports to affect the Approved Plan of Reorganization, any of
the Loan Documents, any of the Domestic Loan Documents, the High Yield Notes or the High Yield Indenture that could reasonably be expected to have a Material Adverse Effect or a material adverse effect on the Approved Plan of Reorganization, or any of the Loan Documents, or any of the Domestic Loan Documents.
W. COMPLETION OF PROCEEDINGS. All corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Agents, acting on behalf of Lenders, and their counsel shall be satisfactory in form and substance to Agents and such counsel, and Agents and such counsel shall have received all such counterpart originals or certified copies of such documents as Agents may reasonably request.
Each Lender, by delivering to Agents a signed counterpart to this Agreement, shall be deemed (unless such Lender indicates otherwise in writing to Agents and Company) to have acknowledged receipt of, and to have consented to, approved and be satisfied with, the documents, agreements, instruments or information which require approval, consent or satisfaction of the Lenders or Requisite Lenders, as applicable, in order for the conditions precedent contained in this subsection 3.1 to be satisfied.
Notwithstanding anything in this Section 3 to the contrary, it is understood and agreed that the conditions of subsection 3.1A(i) shall be deemed satisfied notwithstanding failure to deliver all of the certificates or other evidence of good standing described in subsection 3.1A(i), so long as (i) Administrative Agent is notified which certificates or other evidence shall not have been delivered and, in its sole discretion, agrees that such certificates or other evidence may be delivered with respect to the relevant Persons after the Closing Date, (ii) failure to deliver all of the certificates or other evidence of good standing described in subsection 3.1A(i) on or prior to the date which is 60 days after the Closing Date shall constitute an immediate Event of Default on such date.
SECTION 4. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to make the Loans, Borrowers represent and warrant to each Lender, on the date of this Agreement and on the Closing Date, that the following statements are true, correct and complete:
4.1 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS AND SUBSIDIARIES.
A. ORGANIZATION AND POWERS. Each Loan Party is a corporation, partnership, trust or limited liability company duly organized, validly existing and in good standing under the laws of its jurisdiction of organization as specified in Schedule 4.1 annexed hereto. Each Loan Party has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to enter into the Loan Documents to which it is a party and to carry out the transactions contemplated thereby. Each Loan Party is in compliance with all material terms of its Organizational Documents.
B. QUALIFICATION AND GOOD STANDING. Each Loan Party is qualified to do business and in good standing in every jurisdiction necessary to carry out its business and
operations, except in jurisdictions where the failure to be so qualified or in good standing has not had and could not reasonably be expected to have a Material Adverse Effect.
C. CONDUCT OF BUSINESS. Company and its Subsidiaries are engaged only in the businesses permitted to be engaged in pursuant to subsection 6.11.
D. SUBSIDIARIES. All of the Subsidiaries of Company as of the Closing Date and their jurisdictions of organization are identified in Schedule 4.1 annexed hereto. The Capital Stock of Company and each of its Subsidiaries identified in Schedule 4.1 annexed hereto is duly authorized, validly issued, fully paid and nonassessable and none of such Capital Stock constitutes Margin Stock. CEA, Company and each of its Subsidiaries identified in Schedule 4.1 annexed hereto is a corporation, partnership, trust or limited liability company duly organized, validly existing and in good standing under the laws of its respective jurisdiction of organization set forth therein, has all requisite power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted, and is qualified to do business and in good standing in every jurisdiction necessary to carry out its business and operations, in each case except where failure to be so qualified or in good standing or a lack of such power and authority has not had and could not reasonably be expected to have a Material Adverse Effect. Schedule 4.1 annexed hereto correctly sets forth, as of the Closing Date, the ownership interest of CEA, Company and each of its Subsidiaries in Company and each of its Subsidiaries identified therein.
4.2 AUTHORIZATION OF BORROWING, ETC.
A. AUTHORIZATION OF BORROWING. The execution, delivery and performance of the Loan Documents have been duly authorized by all necessary action on the part of each Loan Party that is a party thereto.
B. NO CONFLICT. The execution, delivery and performance by Loan Parties of the Loan Documents to which they are parties and the consummation of the transactions contemplated by the Loan Documents do not and will not (i) violate any provision of any law or any governmental rule or regulation applicable to CEA, Company or any of its Subsidiaries, the Organizational Documents of CEA, Company or any of its Subsidiaries or any order, judgment or decree of any court or other Government Authority binding on CEA, Company or any of its Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of CEA, Company or any of its Subsidiaries, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of Covanta or any of its Subsidiaries (other than any Liens created under any of the Loan Documents in favor of Collateral Agent on behalf of Secured Parties), or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Covanta or any of its Subsidiaries, except for (x) such approvals or consents which will be obtained on or before the Closing Date and disclosed in writing to Lenders.
C. GOVERNMENTAL CONSENTS. The execution, delivery and performance by Loan Parties of the Loan Documents to which they are parties and the consummation of the transactions contemplated by the Loan Documents do not and will not require any Governmental Authorization, except for the entry of the Confirmation Order and except for filings expressly
contemplated by the Loan Documents and those Governmental Authorizations which have been obtained.
D. BINDING OBLIGATION. Each of the Loan Documents has been duly executed and delivered by each Loan Party that is a party thereto and is the legally valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability.
E. RESTRICTIONS ON TRANSFER. There are no restrictions on Company or any of its Subsidiaries which prohibit or otherwise restrict the transfer of cash or other assets from one Borrower to another, other than (i) prohibitions or restrictions existing under or by reason of (a) this Agreement and the other Loan Documents, (b) applicable law, (c) customary non-assignment provisions entered into in the ordinary course of business and consistent with past practices, and (d) any documents or instruments governing the terms of any Indebtedness or other obligations secured by Liens permitted by subsection 6.2A, provided that such prohibitions or restrictions apply only to the assets subject to such Liens, and (ii) restrictions described in clauses (a) through (d) of subsection 6.2D.
4.3 FINANCIAL CONDITION.
Company has heretofore delivered to Lenders, pursuant to subsection 3.1G, (i) statements of income, balance sheets and statements of cash flows with respect to Company and its Subsidiaries for the Fiscal Year ended December 31, 2002 and (ii) statements of income, balance sheets and statements of cash flows with respect to Company and its Subsidiaries for the Fiscal Quarters ended March 31, 2003, June 30, 2003 and September 30, 2003. All such statements were prepared in conformity with GAAP and fairly present, in all material respects, the financial position (on a consolidated and, where applicable, consolidating basis) of the entities described in such financial statements as at the respective dates thereof and the results of operations and cash flows (on a consolidated and, where applicable, consolidating basis) of the entities described therein for each of the periods then ended, subject, in the case of any such unaudited financial statements, to changes resulting from audit and normal year-end adjustments. No Borrower has, as of the Closing Date, any Contingent Obligation, contingent liability or unusual long-term commitment that is not reflected in the foregoing financial statements or the notes thereto and, as of any date subsequent to the Closing Date, is not reflected in the most recent financial statements delivered to Lenders pursuant to subsection 5.1 or the notes thereto (other than (a) those liabilities reflected on the Schedules to this Agreement and (b) Performance Guaranties and Contingent Obligations that are permitted to be incurred under subsection 6.4) and that, in any such case, is material in relation to the business, operations, properties, assets or financial condition of Company or any of its Subsidiaries taken as a whole.
4.4 NO MATERIAL ADVERSE CHANGE; NO RESTRICTED PAYMENTS.
Since December 31, 2002, no event or change has occurred (other than as disclosed in reports delivered pursuant to subsection 6.1(i) of the DIP Credit Agreement) that has resulted in or evidences, either in any case or in the aggregate, a Material Adverse Effect. Since
the Petition Date, neither Company nor any of its Subsidiaries has directly or indirectly declared, ordered, paid or made, or set apart any sum or property for, any Restricted Payment or agreed to do so except (i) as permitted by subsection 6.5, and (ii) as was permitted by subsection 7.5 of the DIP Credit Agreement.
4.5 TITLE TO PROPERTIES; LIENS; REAL PROPERTY; INTELLECTUAL PROPERTY.
A. TITLE TO PROPERTIES; LIENS. Company and its Subsidiaries have (i) good, sufficient and legal title to (in the case of fee interests in real property), (ii) valid leasehold interests in (in the case of leasehold interests in real or personal property), or (iii) good title to (in the case of all other personal property), all of their respective material properties and assets reflected in the financial statements referred to in subsection 4.3 or in the most recent financial statements delivered pursuant to subsection 5.1, in each case except for assets disposed of since the date of such financial statements in the ordinary course of business or as otherwise permitted under subsection 6.7. Except as permitted by this Agreement, all such properties and assets are free and clear of Liens.
B. REAL PROPERTY. As of the Closing Date, Schedule 4.5B annexed hereto contains a true, accurate and complete list of (i) all fee interests in any Real Property Assets and (ii) all leases, subleases or assignments of leases (together with all amendments, modifications, supplements, renewals or extensions of any thereof) affecting each Real Property Asset, regardless of whether a Borrower is the landlord or tenant (whether directly or as an assignee or successor in interest) under such lease, sublease or assignment. Except as specified in Schedule 4.5B annexed hereto, each agreement listed in clause (ii) of the immediately preceding sentence is in full force and effect and no Borrower has knowledge of any material default that has occurred and is continuing thereunder, and each such agreement constitutes the legally valid and binding obligation of each applicable Borrower, enforceable against such Borrower in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles.
C. INTELLECTUAL PROPERTY. As of the Closing Date, Schedule 4.5C annexed hereto contains a true, accurate and complete list of all material Intellectual Property. Each of Company and its Subsidiaries owns or has the right to use all material Intellectual Property used in the conduct of its business, and none of such Intellectual Property conflicts with a right of any other Person to the extent such conflict could reasonably be expect to result in a Material Adverse Effect.
4.6 LITIGATION; ADVERSE FACTS.
Except as set forth in Schedule 4.6 annexed hereto, there are no Proceedings (whether or not purportedly on behalf of Company or any of its Subsidiaries) at law or in equity, or before or by any court or other Government Authority (including any Environmental Claims) that are pending or, to the knowledge of any Borrower, threatened against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries and that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. Neither Company nor any of its Subsidiaries (i) is in violation of any applicable laws
(including Environmental Laws) that, individually or in the aggregate (together with all such Proceedings with respect to substantially similar or related matters), would reasonably be expected to result in a Material Adverse Effect, or (ii) is subject to or in default with respect to any final judgments, writs, injunctions, decrees, rules or regulations of any court or other Government Authority that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.
4.7 PAYMENT OF TAXES.
Except to the extent permitted by subsection 5.3, all material tax returns and reports of Company and its Subsidiaries required to be filed by any of them have been timely filed, and all taxes shown on such tax returns to be due and payable (other than taxes represented by the Tax Note) and all assessments, fees and other governmental charges upon Company and its Subsidiaries and upon their respective properties, assets, income, businesses and franchises that are due and payable have been paid when due and payable. No Borrower knows of any proposed tax assessment against Company or any of its Subsidiaries, that Company or its Subsidiaries dispute or disagree with, that is not being actively contested by Company or such Subsidiary in good faith and by appropriate proceedings; provided that such reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made or provided therefor.
4.8 PERFORMANCE OF AGREEMENTS; MATERIAL CONTRACTS.
A. Except as set forth on Schedule 4.8A annexed hereto, after giving effect to the Approved Plan of Reorganization, neither Company nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any of its Contractual Obligations, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default except where the consequences, direct or indirect, of such default or defaults, if any, could not reasonably be expected to have a Material Adverse Effect.
B. Neither Company nor any of its Subsidiaries is a party to or is otherwise subject to (i) any agreements or instruments, the performance of which, in the ordinary course, would reasonably be expected to result in a Material Adverse Effect, or (ii) any charter or other internal restrictions which, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.
C. Schedule 4.8C contains a true, correct and complete list of all the Material Contracts in effect on the Closing Date after giving effect to the Approved Plan of Reorganization. Except as described on Schedule 4.8C, all such Material Contracts are in full force and effect and no material defaults currently exist thereunder.
4.9 GOVERNMENTAL REGULATION.
Neither Company nor any of its Subsidiaries is subject to regulation under (i) the Public Utility Holding Company Act of 1935 ("PUHCA") (other than as an "exempt wholesale generator" or as a "foreign utility company", as such terms are defined in PUHCA), (ii) the Federal Power Act (other than as a "qualifying small power production facility", as such term is
defined in PURPA), (iii) the Interstate Commerce Act, (iv) the Investment Company Act of 1940, or (v) any other federal or state statute or regulation which may limit its ability to incur Indebtedness or which may otherwise render all or any portion of the Obligations unenforceable.
4.10 SECURITIES ACTIVITIES.
A. Neither CEA nor Company nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock.
B. Following the making (or deemed making) of the Loans, not more than 25% of the value of the assets (either of Company only or of Company and its Subsidiaries on a consolidated basis) subject to the provisions of subsection 6.2 or 6.7 or subject to any restriction contained in any agreement or instrument, between Company and any Lender or any Affiliate of any Lender, relating to Indebtedness and within the scope of subsection 7.2, will be Margin Stock.
4.11 EMPLOYEE BENEFIT PLANS.
A. Company, each of its Subsidiaries and, with respect to Pension Plans and Multiemployer Plans, each of their respective ERISA Affiliates are in material compliance with all applicable provisions and requirements of ERISA, the regulations and published interpretations thereunder and other applicable law with respect to each Employee Benefit Plan, and have performed all of their material obligations under each Employee Benefit Plan. Company and each of its Subsidiaries are in material compliance with all applicable laws and orders of foreign Government Authorities with respect to each of its pension plans and employee benefit plans for foreign employees, and have performed all of their material obligations under each such pension plan and employee benefit plan. Each Employee Benefit Plan that is intended to qualify under Section 401(a) of the Internal Revenue Code has received, or has timely taken all action necessary to receive, a favorable determination letter from the Internal Revenue Service to such effect and no event has occurred (other than the enactment of legislation for which the remedial amendment period has not expired) that would reasonably be expected to affect adversely such Plan's qualification.
B. No ERISA Event has occurred or is reasonably expected to occur.
C. Except to the extent required under Section 4980B of the Internal Revenue Code or except as set forth in Schedule 4.11 annexed hereto or in the financial statements delivered to Lenders pursuant to subsection 3.1 or 5.1 hereof, as applicable, no Employee Benefit Plan provides health or welfare benefits (through the purchase of insurance or otherwise) for any retired or former employee of Company or any of its Subsidiaries.
D. As of January 1 of each year (based on, with respect to each Pension Plan, the actuarial valuation as of such January 1, or if no such valuation was performed as of such January 1 but was performed within the preceding 12 months, the date as of which the valuation was so performed), the amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA, but determined on the basis of the actuarial assumptions used for funding purposes with respect to a Pension Plan (as set forth in Section 412 of the Internal Revenue Code,
including where applicable, the interest rate assumptions set forth in Section 412(l) of the Internal Revenue Code)), in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities), does not exceed (i) $20,000,000, in the event the applicable law (including statutorily prescribed actuarial assumptions) used in determining such unfunded benefit liabilities (the "ASSUMPTIONS") is generally as favorable as the Assumptions used in the 2003 plan year valuations with respect to such Pension Plans, or (ii) $26,000,000 in the event the Assumptions are generally less favorable than the Assumptions used in the 2003 plan year valuations with respect to such Pension Plans.
E. To each Borrower's knowledge, as of the most recent valuation date for each Multiemployer Plan for which the actuarial report (or an estimate provided pursuant to Section 4221(e) of ERISA) is reasonably available to Company, the potential withdrawal liability of Company, its Subsidiaries and their respective ERISA Affiliates for a complete withdrawal from such Multiemployer Plan (within the meaning of Section 4203 of ERISA), when aggregated with the potential liability for a complete withdrawal from all other Multiemployer Plans for which such actuarial report (or an estimate provided pursuant to Section 4221(e) of ERISA) is reasonably available to Company, based on the information contained in such reports, would not reasonably be expected to exceed $7,500,000.
F. Neither Company nor any Subsidiary has incurred or is reasonably expected to incur any material liability pursuant to Title IV of ERISA with respect to any employee benefit plan of an entity that was formerly an ERISA Affiliate of Company or any of its Subsidiaries or with respect to any employee benefit plan that was previously maintained by Company or any of its Subsidiaries.
4.12 CERTAIN FEES.
No broker's or finder's fee or commission will be payable with respect to this Agreement or any of the transactions contemplated hereby, and each Borrower hereby indemnifies Lenders against, and agrees that it will hold Lenders harmless from, any claim, demand or liability for any such broker's or finder's fees alleged to have been incurred in connection herewith or therewith and any expenses (including reasonable fees, expenses and disbursements of counsel) arising in connection with any such claim, demand or liability.
4.13 ENVIRONMENTAL PROTECTION.
A. Except as set forth in Schedule 4.13 annexed hereto, neither Company nor any of its Subsidiaries nor any of their respective Facilities or operations are subject to any outstanding written order, consent decree or settlement agreement with any Person relating to (a) any Environmental Law, (b) any Environmental Claim, or (c) any Hazardous Materials Activity that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or impose liability on any Lender or Agent;
B. Except as set forth in Schedule 4.13 annexed hereto, neither Covanta nor any of its Subsidiaries has received any letter or request for information under Section 104 of CERCLA or any comparable state law regarding any condition, occurrence or activity that could reasonably be expected to form the basis of an Environmental Claim against Company or any of
its Subsidiaries that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or impose liability on any Lender or Agent;
C. Except as set forth in Schedule 4.13 annexed hereto, there are and, to Company's knowledge, have been no conditions, occurrences, or Hazardous Materials Activities that could reasonably be expected to form the basis of an Environmental Claim against Company or any of its Subsidiaries that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or impose liability on any Lender or Agent;
D. Except as set forth in Schedule 4.13 annexed hereto, (i) neither Covanta nor any of its Subsidiaries nor, to Company's knowledge, any predecessor of Covanta or any of its Subsidiaries has filed any notice under any Environmental Law indicating past or present treatment of Hazardous Materials at any Facility, (ii) none of Company's or any of its Subsidiaries' Facilities constitute facilities for the treatment, storage or disposal of Hazardous Materials under RCRA or any state equivalent, and (iii) none of Company's or any of its Subsidiaries' operations involves the generation, transportation, treatment, storage or disposal of hazardous waste in violation of RCRA or any state equivalent that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or impose liability on any Lender or Agent; and
E. Compliance with all current requirements pursuant to or under Environmental Laws would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect or impose liability on any Lender or Agent.
4.14 EMPLOYEE MATTERS.
Except as described in Schedule 4.14 annexed hereto with respect to the Bataan Project, there is no strike or work stoppage in existence or threatened involving Company or any of its Subsidiaries that would reasonably be expected to have a Material Adverse Effect.
4.15 MATTERS RELATING TO COLLATERAL.
A. CREATION, PERFECTION AND PRIORITY OF LIENS. The execution and delivery of the Collateral Documents by Loan Parties, together with (x) the actions taken on or prior to the date hereof pursuant to subsections 3.1M, 3.1N, 5.8, 5.9 and 5.11 and (y) the delivery to Collateral Agent of any Pledged Collateral of the Loan Parties not delivered to Collateral Agent at the time of execution and delivery of the applicable Collateral Document (all of which Pledged Collateral has been so delivered) are effective to create in favor of Collateral Agent, for the benefit of Secured Parties, a Lien on all of the Collateral of the Loan Parties (which Lien has priority over any other Lien on such Collateral, subject to Permitted Encumbrances and Liens permitted under subsection 6.2A), and all filings and other actions necessary or desirable to perfect and maintain the perfection and such priority of such Liens have been duly made or taken and remain in full force and effect, other than the filing of any UCC financing statements delivered to Collateral Agent for filing (but not yet filed) and the periodic filing of UCC continuation statements in respect of UCC financing statements filed by or on behalf of Collateral Agent.
B. GOVERNMENTAL AUTHORIZATIONS. No authorization, approval or
other action by, and no notice to or filing with, any Government Authority is
required for either (i) the pledge or grant by any Loan Party of the Liens
purported to be created in favor of Collateral Agent pursuant to any of the
Collateral Documents or (ii) the exercise by Collateral Agent of any rights or
remedies in respect of any Collateral (whether specifically granted or created
pursuant to any of the Collateral Documents or created or provided for by
applicable law), except (a) for filings or recordings contemplated by subsection
4.15A, (b) as may be required, in connection with the disposition of any Pledged
Collateral, by laws generally affecting the offering and sale of securities, and
(c) authorizations and approvals in respect of the exercise of rights or
remedies as to any collateral of any Loan Party which is subject to regulation
under the Federal Power Act pursuant to Section 210(e)(2) of PURPA.
C. ABSENCE OF THIRD-PARTY FILINGS. Except such as may have been filed in favor of Collateral Agent as contemplated by subsection 4.15A and to evidence Liens permitted pursuant to subsection 6.2, (i) no effective UCC financing statement, fixture filing or other instrument similar in effect covering all or any part of the Collateral is on file in any filing or recording office, and (ii) no effective filing covering all or any part of the IP Collateral is on file in the PTO.
D. MARGIN REGULATIONS. The pledge of the Pledged Collateral pursuant to the Collateral Documents does not violate Regulation T, U or X of the Board of Governors of the Federal Reserve System.
E. INFORMATION REGARDING COLLATERAL. All information supplied to Collateral Agent or Administrative Agent by any Loan Party (including its officers, employees, agents, advisors, representatives or counsel) with respect to any of the Collateral (in each case taken as a whole with respect to any particular Collateral) is accurate and complete in all material respects.
4.16 DISCLOSURE.
No representation or warranty of Company or any of its Subsidiaries contained in any Loan Document or in any other certificate or written statement (excluding the projections, pro forma financial statements and forward looking statements contained therein and the estimates contained in such projections, pro forma financial statements and forward looking statements) furnished to Lenders by Covanta or any of its Subsidiaries, including any such Person's officers, employees, agents, advisors, representatives or counsel, for use in connection with the transactions contemplated by this Agreement, contained as of the date such representation or warranty was made any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements contained herein or therein not misleading in any material respect in light of the circumstances in which the same were made and in light of such representations and warranties and all such prior representations and warranties, taken as a whole. Any projections and pro forma financial information contained in such materials are based upon good faith estimates and assumptions believed by each Borrower to be reasonable at the time made, it being recognized by Lenders that such projections as to future events are subject to significant business, economic, regulatory and competitive uncertainties and contingencies, and, accordingly, no assurances are given and no representations or warranties are made by Company or any of its Subsidiaries that any of the estimates and
assumptions are correct, that the projections will be achieved or that the forward looking statements expressed in such information will correspond to actual results.
4.17 CASH MANAGEMENT SYSTEM.
The summary of the Cash Management System attached hereto as Schedule 3.1P is accurate and complete in all material respects as of the Closing Date and does not omit to state any material fact necessary to make the statements set forth therein not misleading. No Borrower has any Deposit Account which is not described in Schedule 3.1P other than Deposit Accounts permitted to be owned after the Closing Date pursuant to subsection 5.10. There has been no change to the Cash Management System since the Closing Date except such changes as are permitted under subsection 5.10 and such other changes as have been disclosed to Lenders in writing and approved by Administrative Agent.
4.18 MATTERS RELATING TO LOAN PARTIES.
A. LOAN PARTIES. Neither Company nor any of its Subsidiaries owns any interest in any Domestic Subsidiary which is not a Borrower.
B. DOMESTIC SUBSIDIARY ASSETS. Each Domestic Subsidiary has granted a Lien in favor of Collateral Agent on substantially all of its property pursuant to the Collateral Documents.
C. DOMESTIC SUBSIDIARY CAPITAL STOCK. The Capital Stock of each Domestic Subsidiary which is directly owned by any Loan Party has been pledged to Collateral Agent pursuant to the Collateral Documents, except for the Capital Stock of those Domestic Subsidiaries (other than Borrowers) (i) which is subject to a Lien permitted under subsection 6.2A securing Indebtedness permitted under subsection 6.1, or (ii) the pledge of which would constitute a material violation of (a) a valid and enforceable Contractual Obligation in favor of or for the benefit of a Person other than Company or any of its Subsidiaries and their respective Affiliates for which the required consents have not been obtained or (b) applicable law affecting such Loan Party or such Domestic Subsidiary.
D. FOREIGN SUBSIDIARY CAPITAL STOCK. 65% of the Capital Stock of each Foreign Subsidiary which is a Material Subsidiary and is directly owned by Borrowers (or such lesser percentage as is owned by Borrowers ) has been pledged to Administrative Agent pursuant to the Collateral Documents except for the Capital Stock of those Foreign Subsidiaries the pledge of which would constitute a material violation of (a) a valid and enforceable Contractual Obligation in favor of or for the benefit of a Person other than Company or any of its Subsidiaries and their respective Affiliates for which the required consents have not been obtained or (b) applicable law affecting such Borrower or such Foreign Subsidiary.
E. COMPANY CAPITAL STOCK. The outstanding common stock of Company has been pledged to Collateral Agent pursuant to the CEA Stock Pledge Agreement. No Contractual Obligations are in effect which would be violated by a pledge of the common stock of Company pursuant to the CEA Stock Pledge Agreement.
Notwithstanding the foregoing, the failure to grant a Lien after the Closing Date on assets of Company and its Subsidiaries or to pledge Capital Stock of a Subsidiary shall not constitute a breach of the representations and warranties contained in subsections 4.18B, 4.18C and 4.18D above on any date after the Closing Date if, at the time of the making of such representation or warranty on any such date, Borrowers are not otherwise in default of their obligations under subsection 5.8 and have commenced and are diligently pursuing appropriate actions to create such Lien or pledge to the extent such Lien or pledge is required under such subsection; provided, however, that nothing in this sentence shall be construed as waiving any of the conditions contained in subsection 3.1.
4.19 INVESTIGATION.
All obligations in existence immediately after the Closing Date (other than obligations that do not, in the aggregate, exceed $2,000,000) to extend credit or credit support or obtain the extension of credit or credit support or to make investments or expenditures with respect to existing or future Projects of any Borrower or any Subsidiary of any Borrower that are contained in Contractual Obligations or of which Borrowers are otherwise aware have been disclosed to Agents and the DIP Lenders prior to the Closing Date. Borrowers have made such inquiry and investigation as is necessary to enable Borrowers to make the representation contained in the preceding sentence.
4.20 MATTERS RELATING TO BANKRUPTCY PROCEEDINGS.
A. PLAN OF REORGANIZATION. There have been no material modifications, amendments revisions or restatements of the Approved Plan of Reorganization. Any representation and warranty made by Covanta or any of its Subsidiaries in the Approved Plan of Reorganization is accurate, true and correct in all material respects as of the Closing Date (or, to the extent such representations and warranties specifically relate to an earlier date, that such representations and warranties were accurate, true and correct in all material respects as of such earlier date).
B. CONFIRMATION ORDER. The Confirmation Order has been entered by the Bankruptcy Court at least 11 days prior to the Closing Date. The Confirmation Order has not been stayed pending any appeal or petition for review or for rehearing.
4.21 SUBORDINATED INDEBTEDNESS.
The Obligations constitute senior indebtedness that is entitled to the benefits of the subordination provisions, if any, of all Indebtedness of Company and its Subsidiaries under the Unsecured Creditor Notes.
4.22 REPORTING TO IRS.
Company does not intend to treat the Loans and related transactions as being a "reportable transaction" (within the meaning of Treasury Regulation section 1.6011-4). In the event Company determines to take any action inconsistent with such intention, it will promptly notify Administrative Agent thereof. Company acknowledges that one or more Lenders may treat their Loans as part of a transaction that is subject to Treasury Regulation section 1.6011-4
or section 301.6112-1, and Administrative Agent and such Lender or Lenders, as applicable, may file such IRS forms or maintain such lists and other records as they may determine is required by such Treasury Regulations.
SECTION 5. COMPANY'S AFFIRMATIVE COVENANTS
Borrowers covenant and agree that, so long as any of the Commitments hereunder shall remain in effect and until payment in full of all Obligations, unless Requisite Lenders shall otherwise give prior written consent, Borrowers shall perform, and shall cause each of their Subsidiaries to perform, all covenants in this Section 5.
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS.
Borrowers will maintain, and cause each of their respective Subsidiaries to maintain, a system of accounting established and administered in accordance with sound business practices to permit preparation of financial statements in conformity with GAAP. Borrowers will deliver to Administrative Agent (and, except as expressly provided below, promptly after receipt thereof Administrative Agent will deliver a copy to each Lender):
(i) Budget Report; Budget and Asset Sale Update: as soon as available and in any event no later than the 15th Business Day of each month commencing with the 15th Business Day of April 2004, (a) for the month most recently ended, a report in form satisfactory to Administrative Agent reflecting the actual cash receipts and disbursements of Company and its Subsidiaries for the preceding month with respect to each line item described in the Budget for the current Fiscal Year and the percentage and dollar variance of such amounts from the projected amounts therefor set forth in (x) such Budget and (y) the Budget for the current Fiscal Year as delivered pursuant to subsection 5.1(xvi), accompanied by an Officer's Certificate from the chief financial officer of Company certifying that such report accurately presents, in all material respects, cash receipts and cash expenditures of Company and its Subsidiaries for the periods indicated, (b) a supplement to the Budget for the current Fiscal Year, in the form of such Budget, reflecting projected cash receipts and disbursements of Company and its Subsidiaries for each month and each Fiscal Quarter remaining in the current Fiscal Year with respect to each line item described in such Budget, which supplement shall be accompanied by an Officer's Certificate from the chief financial officer of Company certifying that the projections contained in such supplement are based upon good faith estimates and assumptions believed by Company to be reasonable at the time made, and (c) a report on all Asset Sales consummated prior to such date, describing in reasonable detail the properties sold, the consideration received and the expenses deducted from Gross Receipts therefor to calculate Net Asset Sale Proceeds, together with a progress report in reasonable detail describing efforts being made to sell additional assets of Company and its Subsidiaries (such progress report described in this clause (c) to be provided solely to Administrative Agent and Documentation Agent);
(ii) Events of Default, etc.: promptly upon any Officer of Company obtaining knowledge (a) of any condition or event that constitutes an Event of Default or Potential Event of Default, or becoming aware that any Lender has given any notice (other than to
Administrative Agent) or taken any other action with respect to a claimed Event of Default or Potential Event of Default, (b) that any Person has given any notice to Company or any of its Subsidiaries or taken any other action with respect to a claimed default or event or condition of the type referred to in subsection 7.2, (c) of any condition or event that would be required to be disclosed in a current report filed by Company with the Securities and Exchange Commission on Form 8-K if Company were required to file such reports under the Exchange Act, or (d) of the occurrence of any event or change that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect, an Officer's Certificate specifying the nature and period of existence of such condition, event or change, or specifying the notice given or action taken by any such Person and the nature of such claimed Event of Default, Potential Event of Default, default, event or condition, and what action Company has taken, is taking and proposes to take with respect thereto;
(iii) Quarterly Financials: as soon as available and in any event within 45 days after the end of each of the first three Fiscal Quarters of each Fiscal Year, the consolidated balance sheet of Company and its Subsidiaries as at the end of such Fiscal Quarter and the related consolidated statement of income of Company and its Subsidiaries for such Fiscal Quarter and the related consolidated statements of stockholders' equity and cash flows of Company and its Subsidiaries for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter, setting forth in each case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year, all in reasonable detail and certified by the chief financial officer of Company that they fairly present, in all material respects, the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments; provided, however, that so long as Covanta files a quarterly report on Form 10Q with the Securities and Exchange Commission for any Fiscal Quarter containing consolidating financial statements for Company and its Subsidiaries, Borrowers shall be required to deliver a copy of such quarterly report in lieu of the financial statements described in this subsection 5.1(iii);
(iv) Year-End Financials: as soon as available and in any event within 90 days after the end of each Fiscal Year, (a) the consolidated balance sheet of Company and its Subsidiaries as at the end of such Fiscal Year and the related consolidated and consolidating statements of income, stockholders' equity and cash flows of Company and its Subsidiaries for such Fiscal Year, setting forth in each case in comparative form the corresponding figures for the previous Fiscal Year, all in reasonable detail and certified by the chief financial officer of Company that they fairly present, in all material respects, the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, and (b) an audit report thereon of independent certified public accountants of recognized national standing selected by Company and satisfactory to Administrative Agent, which report shall (with respect to the audits for all Fiscal Years after 2003) be unqualified, shall express no doubts, assumptions or qualifications concerning the ability of Company and its Subsidiaries to continue as a going concern, and shall (with respect to the audits for all Fiscal Years including 2003) state that in the opinion of such certified public accountants
such consolidated financial statements fairly present, in all material respects, the consolidated financial position of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated in conformity with GAAP and that the audit by such accountants in connection with such consolidated financial statements has been made in accordance with auditing standards generally accepted in the United States; provided, however, that so long as Covanta files an annual report on Form 10K with the Securities and Exchange Commission containing consolidating financial statements for Company and its Subsidiaries, Borrowers shall be required to deliver a copy of such annual report in lieu of the financial statements described in clause (a);
(v) Compliance Certificates: together with each delivery
of financial statements of Company and its Subsidiaries pursuant to
subdivisions (iii) and (iv) above, (a) an Officer's Certificate of
Company stating that the signers have reviewed the terms of this
Agreement and have made, or caused to be made under their supervision,
a review in reasonable detail of the transactions and condition of
Company and its Subsidiaries during the accounting period covered by
such financial statements and that such review has not disclosed the
existence during or at the end of such accounting period, and that the
signers do not have knowledge of the existence as at the date of such
Officer's Certificate, of any condition or event that constitutes an
Event of Default or Potential Event of Default, or, if any such
condition or event existed or exists, specifying the nature and period
of existence thereof and what action Company has taken, is taking and
proposes to take with respect thereto; (b) a Compliance Certificate
demonstrating in reasonable detail compliance during and at the end of
the applicable accounting periods with the restrictions contained in
Section 6, in each case to the extent compliance with such restrictions
is required to be tested at the end of the applicable accounting
period; and (c) a certificate of the chief financial officer of Company
stating that Company and its Subsidiaries have transferred to Deposit
Accounts of Company located in the United States in the Cash Management
System all funds of Company and its Subsidiaries on deposit in accounts
located outside the United States that are required to be transferred
pursuant to subsection 5.10B;
(vi) Reconciliation Statements: other than the fresh start adjustments required under SOP 90-7, if, as a result of any change in accounting principles and policies from those used in the preparation of the audited financial statements referred to in subsection 4.3, the consolidated financial statements of Company and its Subsidiaries delivered pursuant to subdivisions (iii) or (iv) of this subsection 5.1 will differ in any material respect from the consolidated financial statements that would have been delivered pursuant to such subdivisions had no such change in accounting principles and policies been made, then (a) together with the first delivery of financial statements pursuant to subdivision (iii) or (iv) of this subsection 5.1 following such change, consolidated financial statements of Company and its Subsidiaries for (y) the current Fiscal Year to the effective date of such change and (z) the two full Fiscal Years immediately preceding the Fiscal Year in which such change is made, in each case prepared on a pro forma basis as if such change had been in effect during such periods, and (b) together with each delivery of financial statements pursuant to subdivision (iii) or (iv) of this subsection 5.1 following such change, if required pursuant to subsection 1.2, a
written statement of the chief accounting officer or chief financial officer of Company setting forth the differences (including any differences that would affect any calculations relating to the financial covenants set forth in subsection 6.6) which would have resulted if such financial statements had been prepared without giving effect to such change;
(vii) Accountants' Certification: together with each delivery of consolidated financial statements of Company and its Subsidiaries pursuant to subdivision (iv) above, a written statement by the independent certified public accountants giving the report thereon stating that in connection with their audit, nothing came to their attention that caused them to believe that Company failed to comply with the terms, provisions or conditions of subsection 6.6, insofar as they relate to financial and accounting matters, or, if such a failure to comply has come to their attention, specifying the nature and period of existence thereof (it being understood that their audit is not directed primarily toward obtaining knowledge of non-compliance and that such accountants shall not be liable by reason of any failure to obtain knowledge of any such non-compliance that would not be disclosed in the course of their audit);
(viii) Accountants' Reports: promptly upon request of an Agent (unless restricted by applicable professional standards), copies of all reports submitted to Company by independent certified public accountants in connection with each annual, interim or special audit of the financial statements of Company and its Subsidiaries made by such accountants, including any comment letter submitted by such accountants to management in connection with their annual audit;
(ix) SEC Filings and Press Releases: promptly upon their
becoming available, copies of (a) all financial statements, reports,
notices and proxy statements sent or made available generally by
Company to its security holders or by any Subsidiary of Company to its
security holders other than Company or another Subsidiary of Company,
(b) all regular and periodic reports and all registration statements
(other than on Form S-8 or a similar form) and prospectuses, if any,
filed by Covanta or any of its Subsidiaries with any securities
exchange or with the Securities and Exchange Commission or any
governmental or private regulatory authority, and (c) all press
releases and other statements made available generally by Covanta or
any of its Subsidiaries to the public concerning material developments
in the business of Company or any of its Subsidiaries;
(x) Litigation or Other Proceedings: (a) promptly upon any officer of Company obtaining knowledge of (1) the institution of, or non-frivolous threat of, any Proceeding against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries not previously disclosed in writing by Company to Lenders or (2) any material development in any Proceeding that, in the case of both clauses (1) and (2):
(I) if adversely determined, has a reasonable possibility after giving effect to the coverage and policy limits of insurance policies issued to Company and its Subsidiaries of giving rise to a Material Adverse Effect; or
(II) seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, or to contest or challenge the legality, validity or enforceability of, the transactions contemplated hereby;
written notice thereof together with such other information as may be reasonably available to Company to enable Lenders and their counsel to evaluate such matters; and (b) within twenty days after the end of each Fiscal Quarter, a schedule of all Proceedings involving an alleged liability of, or claims against or affecting, an Borrower equal to or greater than $1,000,000, and promptly after request by Administrative Agent such other information as may be reasonably requested by Administrative Agent to enable Administrative Agent and its counsel to evaluate any of such Proceedings;
(xi) ERISA Events: with reasonable promptness upon becoming aware of the occurrence of or forthcoming occurrence of (a) any ERISA Event or (b) any event that would constitute an ERISA Event but for the requirements (in order for such event to constitute an ERISA Event) that a Lien or liability imposed as a result thereof be material, that the error giving rise thereto be in bad faith, and/or that such event would reasonably be expected to result in a Material Adverse Effect, a written notice specifying the nature thereof, what action Company, any of its Subsidiaries or any of their respective ERISA Affiliates has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened in writing by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto;
(xii) ERISA Notices: with reasonable promptness, copies of
(a) all notices received by Company, any of its Subsidiaries or any of
their respective ERISA Affiliates from a Multiemployer Plan sponsor
concerning an ERISA Event; and (b) copies of such other documents or
governmental reports or filings relating to any Employee Benefit Plan
as Administrative Agent shall reasonably request (it being agreed that
commencing on the Closing Date, on an annual basis Borrowers shall
request information from each Multiemployer Plan in accordance with
section 4221 of ERISA to determine the potential withdrawal liability
of Company, its Subsidiaries and their respective ERISA Affiliates for
a complete withdrawal from such Multiemployer Plan);
(xiii) Insurance: as soon as practicable after any material change in insurance coverage maintained by Company and its Subsidiaries notice thereof to Administrative Agent specifying the changes and reasons therefor;
(xiv) Governing Body: with reasonable promptness, written notice of any change in the Governing Body of Company;
(xv) Material Contracts: promptly, and in any event within 10 Business Days after any Material Contract of Company or any of its Subsidiaries is terminated or amended in a manner that is materially adverse to Company or such Subsidiary, as the case may be, or any new Material Contract is entered into, a written statement describing such event with copies of such material amendments or new contracts, and an explanation of any actions being taken with respect thereto;
(xvi) Budget: no later than the 15th day of December of each year commencing with December 15, 2004, a budget for the next Fiscal Year, in the form of the Budget for the current Fiscal Year, reflecting (a) projected cash receipts and disbursements of Company and its Subsidiaries for each month and each Fiscal Quarter in the next Fiscal Year and (b) projected net cash flows of Company and its Subsidiaries for each Fiscal Year following the next Fiscal Year and ending with 2007, in each case with respect to each line item described in the Budget for the current Fiscal Year, which budget shall be accompanied by an Officer's Certificate from the chief financial officer of Company certifying that the projections contained in such budget are based upon good faith estimates and assumptions believed by Company to be reasonable at the time made;
(xvii) Other Information: with reasonable promptness, such other information and data with respect to Company or any of its Subsidiaries as from time to time may be reasonably requested by any Agent or Requisite Lenders (or by any Lender so long as such request is made through an Agent (and Agents shall be required to request from Borrowers any such information and data reasonably requested by a Lender)); and
(xviii) Notices from Holders of Subordinated Indebtedness:
promptly, upon receipt, copies of all notices from holders of
Subordinated Indebtedness or a trustee, agent or other representative
of such a holder.
5.2 EXISTENCE, ETC.
Except as permitted under subsection 6.7, Company will, and will cause each of its Subsidiaries to, at all times preserve and keep in full force and effect its existence and all rights and franchises material to its business; provided, however that neither Company nor any of its Subsidiaries shall be required to preserve the existence of any such Subsidiary or any such right or franchise if the management or Governing Body of Company or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of Company or such Subsidiary, as the case may be, and the loss thereof could not reasonably be expected to have a Material Adverse Effect.
5.3 PAYMENT OF TAXES AND CLAIMS; TAX.
A. Company will, and will cause each of its Subsidiaries to,
pay all taxes, assessments and other governmental charges imposed upon it or any
of its properties or assets or in respect of any of its income, businesses or
franchises before any material penalty accrues thereon, and all claims
(including claims for labor, services, materials and supplies) for material sums
that have become due and payable and that by law have or may become a Lien upon
any of its properties or assets, prior to the time when any penalty or fine
shall be incurred with respect thereto; provided that no such tax, assessment,
charge or claim need be paid if it is being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted, so long as
(i) such reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor and (ii) in the case of a
tax, assessment, charge or claim which has or may become a Lien against any of
the Collateral, such proceedings conclusively operate to stay the sale of any
portion of the Collateral to satisfy such charge or claim.
B. Borrowers will not file or consent to the filing of any consolidated income tax return with any Person (other than Company or any of its Subsidiaries).
5.4 MAINTENANCE OF PROPERTIES; INSURANCE; APPLICATION OF NET INSURANCE/ CONDEMNATION PROCEEDS.
A. MAINTENANCE OF PROPERTIES. Company will, and will cause each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition, ordinary wear and tear excepted, all material properties used or useful in the business of Company and its Subsidiaries (including all Intellectual Property) and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof, except that Company and its Subsidiaries shall not be required to perform the foregoing obligations (i) with respect to Subsidiaries or assets to which Persons other than Company and its Subsidiaries have recourse under Non Recourse Debt owed to such Persons or (ii) to the extent that failure to perform such obligations would not reasonably be expected to have a Material Adverse Effect.
B. INSURANCE. Company will maintain or cause to be maintained, with financially sound and reputable insurers, such public liability insurance, third party property damage insurance, business interruption insurance and casualty insurance with respect to liabilities, losses or damage in respect of the assets, properties and businesses of Company and its Subsidiaries as may customarily be carried or maintained under similar circumstances by corporations of established reputation engaged in similar businesses, in each case in such amounts (giving effect to self-insurance), with such deductibles, covering such risks and otherwise on such terms and conditions as shall be customary for corporations similarly situated in the industry. Without limiting the generality of the foregoing, Company will maintain or cause to be maintained (i) flood insurance with respect to each Flood Hazard Property that is located in a community that participates in the National Flood Insurance Program, in each case in compliance with any applicable regulations of the Board of Governors of the Federal Reserve System, and (ii) replacement value casualty insurance on the Collateral under such policies of insurance, with such insurance companies, in such amounts, with such deductibles, and covering such risks as are at all times satisfactory to Administrative Agent in its commercially reasonable judgment. Unless prohibited by contractual or other legal requirement, such policy of insurance shall (a) name Collateral Agent for the benefit of Secured Parties as an additional insured thereunder as its interests may appear and (b) in the case of each business interruption and casualty insurance policy, contain a loss payable clause or endorsement, satisfactory in form and substance to Administrative Agent, that names Collateral Agent for the benefit of Secured Parties as the loss payee thereunder for any covered loss in excess of $1,000,000 and provides for at least 30 days prior written notice to Collateral Agent of any modification or cancellation of such policy. As soon as practicable after the Closing Date, Company shall deliver to Administrative Agent a certificate from Borrowers' insurance broker(s) or other evidence satisfactory to it that all insurance required to be maintained pursuant to this subsection 5.4 is in full force and effect and that Collateral Agent on behalf of Secured Parties has been named as additional insured and/or loss payee thereunder to the extent required under this subsection 5.4.
C. APPLICATION OF NET INSURANCE/CONDEMNATION PROCEEDS.
(i) Business Interruption Insurance. Upon receipt by
Company or any of its Subsidiaries of any business interruption
insurance proceeds constituting Net Insurance/Condemnation Proceeds,
(a) so long as no Event of Default or Potential Event of Default shall
have occurred and be continuing, Company or such Subsidiary may retain
and apply such Net Insurance/Condemnation Proceeds for working capital
purposes or any other purposes not prohibited under this Agreement, and
(b) if an Event of Default or Potential Event of Default shall have
occurred and be continuing, Company shall apply an amount equal to such
Net Insurance/Condemnation Proceeds as provided in subsection 2.4A.
(ii) Net Insurance/Condemnation Proceeds Received by Company. Upon receipt by Company or any of its Subsidiaries of any Net Insurance/Condemnation Proceeds other than from business interruption insurance, (a) so long as no Event of Default or Potential Event of Default shall have occurred and be continuing, Company shall, or shall cause one or more of its Subsidiaries to, promptly and diligently apply such Net Insurance/Condemnation Proceeds to pay or reimburse the costs of repairing, restoring or replacing the assets in respect of which such Net Insurance/Condemnation Proceeds were received or, to the extent not so applied, as provided in subsection 2.4A, and (b) if an Event of Default or Potential Event of Default shall have occurred and be continuing (unless Company is otherwise required to use funds by law or contract), Company shall apply an amount equal to such Net Insurance/Condemnation Proceeds as provided in subsection 2.4A.
(iii) Net Insurance/Condemnation Proceeds Received by Administrative Agent or Collateral Agent. Upon receipt by Administrative Agent or Collateral Agent, as the case may be, of any Net Insurance/Condemnation Proceeds as loss payee, (a) if and to the extent Company would have been required to apply such Net Insurance/Condemnation Proceeds (if it had received them directly) Administrative Agent or Collateral Agent, as the case may be, shall, and Company hereby authorizes Administrative Agent or Collateral Agent, as the case may be, to, apply such Net Insurance/Condemnation Proceeds as provided in subsection 2.4A, and (b) to the extent the foregoing clause (a) does not apply Administrative Agent or Collateral Agent, as the case may be, shall deliver such Net Insurance/Condemnation Proceeds to Company, and (1) Company and its Subsidiaries may retain and apply any portion thereof that is business interruption insurance proceeds for working capital purposes or any other purposes not prohibited under this Agreement and (2) Company shall, or shall cause one or more of its Subsidiaries to, promptly apply such Net Insurance/Condemnation Proceeds that are not business interruption insurance proceeds to the costs of repairing, restoring, or replacing the assets in respect of which such Net Insurance/Condemnation Proceeds were received; provided, however that if at any time Administrative Agent reasonably determines (A) that Company or such Subsidiary is not proceeding diligently with such repair, restoration or replacement or that such repair, restoration or replacement cannot be completed within 180 days after the receipt by Administrative Agent or Collateral Agent, as the case may be, of such Net Insurance/Condemnation Proceeds, Administrative Agent or Collateral Agent, as the case may be, shall, and Company hereby authorizes
Administrative Agent or Collateral Agent, as the case may be, to, apply such Net Insurance/Condemnation Proceeds as provided in subsection 2.4A.
Notwithstanding the foregoing, no Net Insurance/Condemnation Proceeds shall be required to be applied as provided in subsection 2.4A to the extent such application would constitute a material violation of (1) a valid Contractual Obligation (in effect on the Closing Date or arising under the documentation for Non Recourse Debt permitted to be incurred under this Agreement) in favor of or for the benefit of a Person other than Company or any of its Subsidiaries or their respective Affiliates for which the required consents have not been obtained or (2) applicable law affecting Company and its Subsidiaries. Notwithstanding anything in this Agreement to the contrary, in the event of any conflict or inconsistency between subsection 5.4C and the terms of the Intercreditor Agreement, the terms of the Intercreditor Agreement shall prevail.
5.5 INSPECTION RIGHTS; LENDER MEETING.
A. INSPECTION RIGHTS. Borrowers shall, and shall cause each of their respective Subsidiaries to, permit any authorized representatives designated by any Lender, at such Lender's expense, to visit and inspect any of the properties of such Borrower or of any of its Subsidiaries, to inspect, copy and take extracts from its and their financial and accounting records, and to discuss its and their affairs, finances and accounts with its and their officers and independent public accountants (provided that Company may, if it so chooses, be present at or participate in any such discussion), all upon reasonable notice and at such reasonable times during normal business hours and as often as may reasonably be requested; provided that, at any time after the occurrence and during the continuance of an Event of Default, Borrowers shall, and shall cause each of their respective Subsidiaries to, permit such additional visits, inspections, and audits as Administrative Agent or Requisite Lenders may deem necessary or advisable, at any time from time to time, all at Borrowers' expense.
B. LENDER MEETING. Company will, upon the request of Administrative Agent or Requisite Lenders, participate in a meeting of Agents and Lenders once during each Fiscal Year to be held at Company's corporate offices (or at such other location as may be agreed to by Company and Administrative Agent) at such time as may be agreed to by Company and Administrative Agent.
5.6 COMPLIANCE WITH LAWS, ETC.
Borrowers shall comply, and shall cause each of their Subsidiaries to comply, with the requirements of all applicable laws, rules, regulations and orders of any Government Authority (including all Environmental Laws), noncompliance with which could reasonably be expected to cause, individually or in the aggregate, a Material Adverse Effect.
5.7 ENVIRONMENTAL MATTERS.
A. ENVIRONMENTAL DISCLOSURE. Company will deliver to Administrative Agent:
(i) Environmental Audits and Reports. As soon as practicable following receipt thereof, copies of all environmental audits, investigations, analyses and reports of
any kind or character (excluding writings which are protected by attorney-client privilege or the work-product doctrine or confidential self-evaluative writings), whether prepared by personnel of Company or any of its Subsidiaries or by independent consultants, governmental authorities or any other Persons, with respect to significant environmental matters at any Facility that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect or impose liability on any Lender or Agent or with respect to any Environmental Claims that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect or impose liability on any Lender or Agent;
(ii) Notice of Certain Releases, Remedial Actions, Etc.
Promptly upon the occurrence thereof, written notice describing in
reasonable detail (a) any Release required to be reported to any
federal, state or local governmental or regulatory agency under any
applicable Environmental Laws that could reasonably be expected to have
a Material Adverse Effect or impose liability on any Lender or Agent,
(b) any remedial action taken by Company or any other Person in
response to (1) any Hazardous Materials Activities the existence of
which could reasonably be expected to result in one or more
Environmental Claims having, individually or in the aggregate, a
Material Adverse Effect or imposing liability on any Lender or Agent,
or (2) any Environmental Claims that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect or
impose liability on any Lender or Agent;
(iii) Written Communications Regarding Environmental Claims, Releases, Etc. As soon as practicable following the sending or receipt thereof by Company or any of its Subsidiaries, a copy of any and all written communications (excluding writings which are protected by attorney-client privilege or the work-product doctrine or confidential self-evaluative writings), with respect to (a) the commencement or the threat to commence a proceeding regarding any Environmental Claims that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect or impose liability on any Lender or Agent, (b) any Release required to be reported to any federal, state or local governmental or regulatory agency that could reasonably be expected to have a Material Adverse Effect or impose liability on any Lender or Agent, and (c) any request for information from any governmental agency that suggests such agency is investigating whether Company or any of its Subsidiaries may be potentially responsible for any Hazardous Materials Activity that could reasonably be expected to have a Material Adverse Effect or impose liability on any Lender or Agent;
(iv) Notice of Certain Proposed Actions Having
Environmental Impact. Prompt written notice describing in reasonable
detail (a) any proposed acquisition of stock, assets, or property by
Company or any of its Subsidiaries that could reasonably be expected to
(1) expose Company or any of its Subsidiaries to, or result in,
Environmental Claims that could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect or impose
liability on any Lender or Agent or (2) affect the ability of Company
or any of its Subsidiaries to maintain in full force and effect all
Governmental Authorizations required under any Environmental Laws for
their respective operations except to the extent the failure to
maintain such Governmental Authorizations could not reasonably be
expected to have a Material Adverse Effect or
impose liability on any Lender or Agent and (b) any proposed action to be taken by Company or any of its Subsidiaries to commence manufacturing or other industrial operations or to modify current operations in a manner that could reasonably be expected to subject Company or any of its Subsidiaries to any additional obligations or requirements under any Environmental Laws that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or impose liability on any Lender or Agent; and
(v) Certain Communications. With respect to documents
which would have been required to be provided to Administrative Agent
pursuant to paragraph (i) or (iii) but for the parenthetical in those
paragraphs, Company shall promptly upon receiving such documents
provide a list identifying generally the documents not disclosed and
summarizing the information contained in such documents to the extent
consistent with not waiving any privilege with respect thereto. If the
privilege prevents Company from summarizing the information contained
in such documents Company (a) shall nevertheless advise Administrative
Agent that a matter, the nature of which cannot be disclosed without
waiving the applicable privilege, exists with respect to a specified
Facility or Environmental Claim that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect and
(b) shall provide such other information to Administrative Agent,
consistent with not waving the privilege, that Administrative Agent may
reasonably request.
B. COMPANY'S ACTIONS REGARDING ENVIRONMENTAL CLAIMS AND VIOLATIONS OF ENVIRONMENTAL LAWS. Company shall promptly take, and shall cause each of its Subsidiaries promptly to take, any and all actions necessary to (i) cure any violation of applicable Environmental Laws by Company or its Subsidiaries that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and (ii) make an appropriate response to any Environmental Claim against Company or any of its Subsidiaries and discharge any obligations it may have to any Person thereunder where failure to do so could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect (except if Company and its Subsidiaries do not have standing to contest or respond to such Environmental Claim); provided, however, that Company may, without breaching the requirements of this subsection 5.7B, contest an alleged violation of Environmental Laws or an Environmental Claim in good faith by appropriate proceedings promptly instituted and diligently conducted so long as during such contest the failure to cure such violation or to respond to such Environmental Claim or discharge the obligations thereunder could not reasonably be expected to result in a Material Adverse Effect.
5.8 EXECUTION OF THE PERSONAL PROPERTY COLLATERAL DOCUMENTS AFTER THE CLOSING DATE.
A. FOREIGN PLEDGE AGREEMENTS. As soon as practicable (but not more than 90 days, unless rendered impracticable by events or by action or inaction of foreign Governmental Authorities in each case beyond the control of Borrowers (as determined in the reasonable judgment of Administrative Agent)) after the Closing Date (to the extent not completed on or prior to the Closing Date), Borrowers shall cause Foreign Pledge Agreements to be executed and delivered to Administrative Agent with respect to 65% of the Capital Stock of
all Foreign Subsidiaries which are Material Subsidiaries and are directly owned by any Borrower (other than to the extent a pledge of such Capital Stock under the Collateral Documents would constitute a material violation of (1) a valid Contractual Obligation in favor of or for the benefit of a Person other than Company or any of its Subsidiaries for which the required consents have not been obtained or (2) applicable law affecting such Borrower or such Foreign Subsidiary), shall take all such other actions under the laws of such jurisdictions as Administrative Agent may deem necessary or advisable to perfect or otherwise protect the Liens purported to be created in such Capital Stock under the Collateral Documents, and shall deliver to Administrative Agent an opinion of counsel (which counsel shall be reasonably satisfactory to Administrative Agent) under the laws of each jurisdiction in which (i) any Borrower holding stock of the relevant Foreign Subsidiary is organized with respect to the due authorization, execution and delivery of such Foreign Pledge Agreement by such Borrower, and (ii) such Foreign Subsidiary is organized with respect to customary matters regarding enforceability, validity and perfection of such pledge.
B. RELEASE OF RESTRICTIONS. Borrowers shall use their good faith, commercially reasonable efforts to obtain all necessary consents from all Persons in whose favor or for whose benefit Contractual Obligations are in effect which would be violated by a pledge of the Capital Stock of any Subsidiary of a Borrower. The foregoing efforts shall be exercised so as to obtain such consents as soon as practicable but no later than 90 days after the Closing Date.
5.9 MATTERS RELATING TO REAL PROPERTY COLLATERAL.
From and after the Closing Date, in the event that any Borrower acquires any fee interest in real property or any Material Leasehold Property, such Borrower shall, as soon as practicable after such Person acquires such real property or Material Leasehold Property, execute, acknowledge, file, record, do and deliver all and any further acts, deeds, conveyances, mortgages, hypothecations, pledges, charges, assignments, financing statements and continuations thereof, notices of assignment, transfers, certificates, assurances and other instruments, opinions, appraisals, title insurance and environmental reports as Administrative Agent may reasonably request to perfect and maintain the Liens created by the Collateral Documents, including, without limitation, deliver to Collateral Agent in proper form for recording in all appropriate places in all applicable jurisdictions, encumbering the interest of such Borrower in such mortgaged property; and such opinions, appraisal, documents, title insurance, environmental reports and other documents as Administrative Agent may reasonably request, in each case in form and substance reasonably satisfactory to Administrative Agent, and to assure, convey, assign, transfer and confirm unto Collateral Agent, for the benefit of the Secured Parties, the property and rights thereby conveyed and assigned or intended to now or hereafter be conveyed or assigned or that any Borrower may be or may hereafter become bound to convey or to assign to Administrative Agent.
5.10 DEPOSIT ACCOUNTS; REPATRIATION OF FOREIGN CASH.
A. DOMESTIC DEPOSIT ACCOUNTS. Borrowers shall, and shall cause each of their Subsidiaries to, maintain the Cash Management System as described in Schedule 3.1P, as said Schedule 3.1P may be supplemented from time to time pursuant to clause (c) below, and Company and its Subsidiaries shall not open or close Deposit Accounts in the United States or
make other changes to the Cash Management System in the United States without the written consent of Administrative Agent, except that Company and its Subsidiaries may open and maintain funds in Deposit Accounts with Collateral Agent or other depository institutions after the Closing Date so long as (a) concurrently with the opening of any such account with a depository institution other than Collateral Agent, Borrowers shall deliver to Administrative Agent a Control Agreement with respect to such account (unless after giving effect to such opening Borrowers would not be in breach of the requirement set forth in clause (b)), (b) the aggregate amount on deposit at any time in all Deposit Accounts in the United States maintained with depository institutions other than Collateral Agent for which Control Agreements have not been delivered to Administrative Agent shall not exceed $50,000, and (c) concurrently with the opening of any such account, Borrowers shall deliver to Administrative Agent a written notice setting forth the account number and the name of the relevant depository institution (it being understood that such written notice shall be deemed to supplement Schedule 3.1P annexed hereto for all purposes of this Agreement) and, if applicable, the Project to which such account relates and the primary purpose of such account.
B. REPATRIATION OF FOREIGN CASH. At all times Company shall, and shall cause each of its Subsidiaries to, transfer to Deposit Accounts of Company located in the United States in the Cash Management System all funds of Company and its Subsidiaries on deposit in accounts located outside the United States that can be so transferred, to the extent such transfer (i) would not constitute a violation of (a) a valid Contractual Obligation in favor of or for the benefit of a Person other than Company or any of its Subsidiaries for which the required consents have not been obtained or (b) applicable law affecting the relevant Foreign Subsidiary or Project, and (ii) would not result in material adverse tax liabilities for Company and its Subsidiaries; provided, however, that Company and its Subsidiaries may maintain funds that would otherwise be required to be transferred pursuant to the foregoing provision so long as (1) such funds so maintained are applied to working capital, capital expenditure, maintenance, operation, payroll and other liquidity requirements in the ordinary course of business and (2) the aggregate amount of such funds so maintained at any time does not exceed $2,000,000 in the aggregate.
5.11 FURTHER ASSURANCES.
A. ASSURANCES. Without expense or cost to Agents or Lenders, each Borrower shall from time to time hereafter execute, acknowledge, file, record, do and deliver all and any further acts, deeds, conveyances, mortgages, deeds of trust, deeds to secure debt, security agreements, hypothecations, pledges, charges, assignments, financing statements and continuations thereof, notices of assignment, transfers, certificates, assurances and other instruments as Administrative Agent may from time to time reasonably request and that do not involve a material expansion of Borrowers' obligations or liabilities hereunder in order to carry out more effectively the purposes of this Agreement, the other Loan Documents and the Confirmation Order, including to subject any Collateral, intended to now or hereafter be covered, to the Liens created by the Collateral Documents and the Confirmation Order, to perfect and maintain such Liens, and to assure, convey, assign, transfer and confirm unto Collateral Agent the property and rights thereby conveyed and assigned or intended to now or hereafter be conveyed or assigned or that any Borrower may be or may hereafter become bound to convey or to assign to Collateral Agent or for carrying out the intention of or facilitating the performance of the terms of this Agreement, any other Loan Documents or the Confirmation Order, registering
or recording this Agreement or any other Loan Document. Without limiting the generality of the foregoing, Borrowers shall deliver to Collateral Agent, promptly upon receipt thereof, all instruments received by Borrowers after the Closing Date and take all actions and execute all documents necessary or reasonably requested by Collateral Agent to perfect Collateral Agent's Liens in any such instrument or any other Investment acquired by any Borrower.
B. FILING AND RECORDING OBLIGATIONS. Each Borrower shall jointly and severally pay all filing, registration and recording fees and all expenses incident to the execution and acknowledgement of any Mortgage or other Loan Document, including any instrument of further assurance described in subsection 5.11A, and shall pay all mortgage recording taxes, transfer taxes, general intangibles taxes and governmental stamp and other taxes, duties, imposts, assessments and charges arising out of or in connection with the execution, delivery, filing, recording or registration of any Mortgage or other Loan Document, including any instrument of further assurance described in subsection 5.11A, or by reason of its interest in, or measured by amounts payable under, the Notes, the Mortgages or any other Loan Document, including any instrument of further assurance described in subsection 5.11A, (excluding income, franchise and doing business Taxes), and shall pay all stamp Taxes and other Taxes required to be paid on the Notes or any other Loan Document; provided, however, that such Borrower may contest in good faith and through appropriate proceedings, any such Taxes, duties, imposts, assessments and charges; provided further, however, that such Borrower shall pay all such Taxes, duties, imposts and charges when due to the appropriate taxing authority during the pendency of any such proceedings if required to do so to stay enforcement thereof. If any Borrower fails to make any of the payments described in the preceding sentence within 10 days after notice thereof from Administrative Agent (or such shorter period as is necessary to protect the loss of or diminution in value of any Collateral by reason of tax foreclosure or otherwise, as determined by Administrative Agent) accompanied by documentation verifying the nature and amount of such payments, Administrative Agent may (but shall not be obligated to) pay the amount due and Borrowers shall jointly and severally reimburse all amounts in accordance with the terms hereof.
C. COSTS OF DEFENDING AND UPHOLDING THE LIEN. Administrative Agent may, upon at least five days' prior notice to Borrowers, (i) appear in and defend any action or proceeding, in the name and on behalf of any Agent, Lenders or any Borrower, in which any Agent or any Lender is named or which Administrative Agent in its sole discretion determines is reasonably likely to materially adversely affect any Mortgaged Property, any other Collateral, any Mortgage, the Lien thereof or any other Loan Document and (ii) institute any action or proceeding which Administrative Agent reasonably determines should be instituted to protect the interest or rights of Agents and Lenders in any Mortgaged Property or other Collateral or under this Agreement or any other Loan Document. Borrowers, jointly and severally, agree that all reasonable costs and expenses expended or otherwise incurred pursuant to this subsection (including reasonable attorneys' fees and disbursements) by Administrative Agent shall be paid pursuant to subsection 9.2 hereof.
5.12 MOST FAVORED NATIONS PAYMENTS.
Company shall, and shall cause each of its Subsidiaries to, extend any fees or pricing increases, to the extent such fees or pricing increases are the direct obligation of Company or its Subsidiaries, resulting from the amendment, waiver or modification, after the Closing Date, of
the CPIH Revolver Documents, on an equivalent basis (based in the case of fees on the respective amounts of Loan Exposure outstanding (on one hand) and the credit exposure under the CPIH Revolver Documents (on the other hand)) to the Lenders regardless of whether a particular Lender has participated in or consented to a corresponding amendment, waiver or modification (if any) of the Loan Documents, and any such payment of equivalent fees shall be paid in cash concurrently with the fees giving rise to such equivalent fees.
SECTION 6. BORROWERS' NEGATIVE COVENANTS
Borrowers covenant and agree that, so long as any of the Commitments hereunder shall remain in effect and until payment in full of all Obligations unless Requisite Lenders shall otherwise give prior written consent, Borrowers shall perform, and shall cause each of their Subsidiaries to perform, all covenants in this Section 6.
6.1 INDEBTEDNESS.
Borrowers shall not, and shall not permit their respective Subsidiaries to, directly or indirectly, create, incur or assume, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except:
(i) Borrowers may become and remain liable with respect to the Obligations and obligations under the CPIH Revolver Credit Agreement;
(ii) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations and Performance Guaranties permitted by subsection 6.4 and, upon any matured obligations actually arising pursuant thereto, any Indebtedness created as a result thereof;
(iii) Borrowers may become and remain liable with respect to Indebtedness to any other Borrowers; provided that all such intercompany Indebtedness shall be evidenced by the Intercompany Master Note;
(iv) Subsidiaries of Company may, after the Closing Date, become and remain liable with respect to Indebtedness to Company or any Subsidiary of Company so long as the proceeds of such Indebtedness are applied to Investments permitted under subsection 6.3(vi) to be made by Company or any of its Subsidiaries in the Subsidiaries incurring such Indebtedness; provided that (a) no such Indebtedness may be incurred to make capital expenditures if after giving effect to such expenditures Borrowers would not be in pro forma compliance with subsection 6.6D, and (b) any such Indebtedness to any Borrower shall be evidenced by the Intercompany Master Note;
(v) Company and its Subsidiaries, as applicable, may remain liable with respect to Indebtedness outstanding on the Closing Date and described in Schedule 6.1(v);
(vi) Subsidiaries of Company may become and remain liable with respect to Indebtedness consisting of a converted equity Investment by Company or another
Subsidiary of Company in such Subsidiaries, provided that the underlying equity Investment was permitted under this Agreement at the time of such conversion;
(vii) Any Subsidiary of Company may become and remain liable with respect to Indebtedness incurred to refinance, replace, renew or extend, in whole or in part, Indebtedness of such Subsidiary permitted to remain outstanding under subsection 6.1(v); provided, that in each case (a) the terms (excluding the interest rate and fees payable with respect thereto, so long as such interest and fees on such Indebtedness are not borne directly or indirectly by Company or any of its Subsidiaries, whether through an offset to or deduction against service or operating agreement fees to Company or its Subsidiaries or otherwise) of such Indebtedness as refinanced, replaced, renewed or extended, taken as a whole (considering the economic benefits and disadvantages to Company and its Subsidiaries from such refinancing, replacement, renewal or extension, as well as the economic benefits and disadvantages to Company and its Subsidiaries of the Project to which such Indebtedness relates), shall not be more disadvantageous in any material respect to Company and its Subsidiaries and the Lenders than the Indebtedness so refinanced, replaced, renewed or extended, (b) the principal amount of the Indebtedness as refinanced, replaced, renewed or extended shall not exceed 110% of the principal amount of the Indebtedness so refinanced, replaced, renewed or extended (provided that such limitation shall not apply with respect to Indebtedness that an existing client (if such client is a Government Authority) of a Project undertakes to service through the principal lease, service or operating agreement of the applicable Project), (c) no obligee or beneficiary of such Indebtedness after such refinancing, replacement, renewal or extension shall have greater recourse to Persons for the payment or collection of such Indebtedness than the obligee or beneficiary of the Indebtedness so refinanced, replaced, renewed or extended had immediately prior to such transaction, and (d) Company shall provide to Agents reasonable prior advance written notice of such proposed refinancing, replacement, renewal or extension and copies of all material contracts or other agreements being entered into in connection therewith;
(viii) Company may become and remain liable with respect to Indebtedness consisting solely of its obligations under Insurance Premium Financing Arrangements, which obligations shall not exceed at any time $5,000,000 in the aggregate;
(ix) Borrowers may become and remain liable with respect their obligations to pay for services rendered to them and certain payments made by Covanta and its Subsidiaries (other than Company and its Subsidiaries), in each case under and in accordance with the Management Services and Reimbursement Agreement; and
(x) Company and its Subsidiaries may, after the Closing Date, become and remain liable with respect to Indebtedness to any Subsidiary so long as the proceeds of such Indebtedness are applied to make Investments permitted under subsection 6.3(ix); provided that all such intercompany Indebtedness shall be evidenced by the Intercompany Master Note.
6.2 LIENS AND RELATED MATTERS.
A. PROHIBITION ON LIENS. Borrowers shall not, and shall not permit their respective Subsidiaries to, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset of any kind (including any document or instrument in respect of goods or accounts receivable) of Borrowers or any of their respective Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom, or file or authorize the filing of, or permit to remain in effect, any effective financing statement or other similar notice of any Lien with respect to any such property, asset, income or profits under the UCC or under any similar recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) subject to the provisions of the Intercreditor Agreement, Liens granted pursuant to the Collateral Documents to secure the Obligations, the obligations of Borrowers under the CPIH Revolver Credit Agreement and the obligations to the cash management bank with respect to the Cash Management System;
(iii) Liens existing on the Closing Date and described in Schedule 6.2 annexed hereto;
(iv) Liens on assets of Company or any Subsidiary of Company securing refinancing Indebtedness permitted by subsection 6.1(vii), provided that in each case the Liens securing such refinancing Indebtedness shall attach only to the assets that were subject to Liens securing the Indebtedness so refinanced and, if applicable, assets the acquisition of which was financed with the proceeds of such refinancing Indebtedness permitted by subsection 6.1(vii);
(v) Liens on cash collateral of Subsidiaries of Company securing Contingent Obligations permitted under subsection 6.4(v), so long as such cash is provided from funds that would not otherwise be available (due to prohibitions in the underlying agreements relating to Projects) for making dividends and distributions to Company and its other Subsidiaries;
(vi) Liens on cash collateral of Company securing insurance deductibles or self-insurance retentions required by third party insurers in connection with insurance arrangements entered into by Company and its Subsidiaries with such insurers in compliance with subsection 5.4B;
(vii) Liens securing debt service reserve funds, completion obligations and similar accounts and obligations (other than Indebtedness) of Subsidiaries of Company to Persons other than Company and its Subsidiaries and their respective Affiliates, so long as (a) each such obligation is associated with a Project, (b) such Lien is limited to (1) assets associated with such Project (which in any event shall not include assets held by any Borrower other than a Borrower whose sole business is the ownership and/or operation of such Project and substantially all of whose assets are associated with such Project) and/or (2) the equity interests in such Subsidiary, but in the case of clause (2) only if such Subsidiary's sole business is the ownership and/or operation of such Project
and substantially all of such Subsidiary's assets are associated with such Project, and (c) such obligation is otherwise permitted under this Agreement;
(viii) Liens created pursuant to Insurance Premium Financing Arrangements otherwise permitted under this Agreement, so long as such Liens attach only to gross unearned premiums for the insurance policies;
(ix) Liens on cash collateral of Subsidiaries of Company securing Contingent Obligations permitted under subsection 6.4(iv), so long as such cash is provided from funds that would not otherwise be available (due to prohibitions in the underlying agreements relating to Projects) for making dividends and distributions to Company and its other Subsidiaries; and
(x) Other Liens on assets of any Subsidiary of Company securing Indebtedness in an aggregate amount not exceeding $1,000,000.
B. EQUITABLE LIEN IN FAVOR OF LENDERS. If any Borrowers or any of its Subsidiaries shall create or assume any Lien upon any of its properties or assets, whether now owned or hereafter acquired, other than Liens excepted by the provisions of subsection 6.2A and Liens created or assumed on properties or assets on which First Priority Liens created under the Collateral Documents are attached and perfected at the time of such creation or assumption, the Borrowers hereby agree that (i) they will be deemed to have automatically and without further action secured the Obligations with such Lien equally and ratably with any and all other Indebtedness, Contingent Obligations or any other obligations or debt (as defined in the Bankruptcy Code) secured thereby, and (ii) they shall take or cause to be taken such actions as Agents or Requisite Lenders deem necessary or advisable to evidence such equal and ratable Lien; provided that, notwithstanding the foregoing, this covenant shall not be construed as a consent by Requisite Lenders to the creation or assumption of any such Lien not permitted by the provisions of subsection 6.2A, and the creation or assumption of any such Lien not permitted by the provisions of subsection 6.2A shall constitute an Event of Default.
C. NO FURTHER NEGATIVE PLEDGES. Neither Company nor any of its Subsidiaries shall enter into any agreement (other than this Agreement, the Loan Documents and the CPIH Revolver Documents) on or after the Closing Date prohibiting the creation or assumption of any Lien upon any of its properties or assets, whether now owned or hereafter acquired, except with respect to (i) specific property encumbered by a Lien permitted hereunder to secure payment of particular Indebtedness permitted to be incurred under subsection 6.1(vii) (but only to the extent that the Indebtedness being refinanced was subject to a negative pledge on the same assets), or by a Lien permitted under subsection 6.2A(v), 6.2A(vi), 6.2A(vii) or 6.2A(ix), or by a Lien permitted under subsection 6.2A(x) to the extent such Lien secures obligations incurred to finance the acquisition of such specific property, (ii) specific property to be sold pursuant to an executed agreement with respect to an Asset Sale which is permitted hereunder, (iii) specific property that is leased pursuant to a lease permitted hereunder, and (iv) provisions in the principal lease, service and operating agreements pertaining to Projects, or the partnership and financing agreements relating to Projects, so long as in each case such lease, service, operating, partnership or financing agreement is an extension, renewal or replacement of such agreement in effect as of the Closing Date, is otherwise permitted to be entered into hereunder and contains no
more restrictive provisions relating to prohibiting the creation or assumption of any Lien upon the properties or assets of the relevant Subsidiary than the lease, service, operating, partnership or financing agreement so extended, renewed or replaced.
D. NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO COMPANY OR OTHER SUBSIDIARIES. Company will not, and will not permit any of its Subsidiaries to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any such Subsidiary to (i) pay dividends or make any other distributions on any of such Subsidiary's capital stock owned by Company or any other Subsidiary of Company, (ii) repay or prepay any Indebtedness owed by such Subsidiary to Company or any other Subsidiary of Company, (iii) make loans or advances to Company or any other Subsidiary of Company, or (iv) transfer any of its property or assets to Company or any other Subsidiary of Company, except (a) as provided in this Agreement or the other Loan Documents, (b) those encumbrances or restrictions applicable to Subsidiaries of Company to the extent created under documentation in existence on the Closing Date or under the CPIH Revolver Documents, (c) as may be provided in an executed agreement with respect to an Asset Sale which is permitted hereunder, and (d) provisions in the principal lease, service or operating agreements, partnership agreements and financing agreements pertaining to Projects, so long as such lease, service or operating agreements, partnership agreements and financing agreements are extensions, renewals or replacements of such agreements in effect as of the Closing Date, are otherwise permitted to be entered into hereunder and in each case contain no more restrictive provisions relating to the ability of the relevant Subsidiary to take the actions described in clauses (i) through (iv) than the agreement so extended, renewed or replaced.
6.3 INVESTMENTS; ACQUISITIONS.
Borrowers shall not, and shall not permit their respective Subsidiaries to, directly or indirectly, make or own any Investment in any Person, including any Joint Venture, or acquire, by purchase or otherwise, all or substantially all the business, property or fixed assets of, or capital stock or other ownership interest of any Person, or any division or line of business of any Person except:
(i) Company and its Domestic Subsidiaries may make and own Investments in Domestic Cash Equivalents and in such investments as are permitted or imposed under the terms of any cash collateral or debt service reserve agreement (including pursuant to the terms of any Project bond indenture) permitted hereunder; and Company's Foreign Subsidiaries may make and own Investments in Foreign Cash Equivalents to the extent permitted under subsection 5.10;
(ii) Borrowers may make and own additional equity Investments in other Borrowers, so long as no such Investment shall be made by one Borrower in another Borrower if (a) the latter is subject to restrictions of the type described in subsection 6.2D more adverse than restrictions of such type that are applicable to the Borrower making such Investment, or (b) such Investment shall result in the obligee or beneficiary of any Indebtedness or Contingent Obligation (other than the Obligations) having greater recourse to assets for the payment or collection of such Indebtedness or Contingent Obligation than such obligee or beneficiary had immediately prior to such Investment;
(iii) Company and its Subsidiaries may make intercompany loans to the extent permitted under subsection 6.1(iii);
(iv) Company and its Subsidiaries may make Consolidated Facilities Capital Expenditures permitted by subsection 6.6D;
(v) Company and its Subsidiaries may continue to own the Investments owned by them on the Closing Date and described in Schedule 6.3(v) annexed hereto;
(vi) (a) Company may make and own Investments consisting of intercompany loans to its Subsidiaries (to the extent such Subsidiaries are in existence on the Closing Date) in an aggregate amount not in excess of $1,000,000 outstanding at any time and (b) Subsidiaries may make and own Investments consisting of intercompany loans to other Subsidiaries (in each case to the extent such Subsidiaries are in existence on the Closing Date), so long as the proceeds of such loans are applied to working capital, capital expenditure, maintenance and payroll requirements in the ordinary course of business of such Subsidiaries (provided that the aggregate amount of loans outstanding pursuant to this clause (b) shall not at any time exceed $2,000,000);
(vii) Borrowers and their Subsidiaries may own Investments in the form of non-cash consideration received in connection with (a) Asset Sales permitted under subsection 6.7(iii) or 6.7(iv) or (b) settlements of disputes, to the extent such settlements occur in the ordinary course of business;
(viii) Subject to the Intercreditor Agreement, Borrowers may make payments under the Management Services and Reimbursement Agreement to the extent contractually obligated pursuant to the terms thereof; and
(ix) Company and its Subsidiaries may make and own Investments consisting of cash equity contributions made after the Closing Date (a) in the aggregate amount of approximately $360,000 (it being understood that such amount is the approximate Dollar equivalent of an estimate as of November 15, 2003 of the required foreign currency contribution, and thus may change based on fluctuations in currency exchange rates) in the Madurai Project (b) in an aggregate amount not to exceed $130,000 in the Samalpatti Project, and (c) in an aggregate amount not to exceed $1,600,000 in the Trezzo waste-to-energy Project, in each case so long as (1) such contributions are required to be made pursuant to the terms of a binding Contractual Obligation of Company and its Subsidiaries in effect on the Closing Date, and (2) any Capital Stock resulting from such contributions and held directly by any Borrower shall be pledged as Collateral under the Collateral Documents.
6.4 CONTINGENT OBLIGATIONS; PERFORMANCE GUARANTIES.
Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create or become or remain liable with respect to any Contingent Obligation or Performance Guaranty, and shall not create or become or remain liable with respect to any obligation to incur a subsequent Contingent Obligation or to post cash collateral to secure any obligation, except:
(i) Borrowers may become and remain liable (a) with
respect to Contingent Obligations in respect of the Obligations, and
(b) with respect to Contingent Obligations under the Management
Services and Reimbursement Agreement;
(ii) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations in respect of customary and appropriate indemnification and purchase price adjustment obligations incurred in connection with Asset Sales or other sales of assets to the extent such Asset Sales and sales are permitted under this Agreement;
(iii) Company and its Subsidiaries, as applicable, may become and remain liable with respect to (a) Contingent Obligations in existence on the Closing Date and described in Schedule 6.4(iii) annexed hereto, and (b) Contingent Obligations replacing, renewing or extending Contingent Obligations described in clause (a); provided that no such replacement, renewed or extended Contingent Obligation, taken as a whole, shall be more disadvantageous in any material respect to Company and its Subsidiaries than the Contingent Obligations so replaced, renewed or extended;
(iv) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations consisting of long-term or forward purchase contracts and option contracts to buy, sell or exchange commodities and similar agreements or arrangements, so long as such contracts, agreements or arrangements do not constitute Commodities Agreements;
(v) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations constituting Hedge Agreements;
(vi) Company and its Subsidiaries may become and remain liable with respect to usual and customary Contingent Obligations incurred in connection with insurance deductibles or self-insurance retentions required by third party insurers in connection with insurance arrangements entered into by Company and its Subsidiaries with such insurers in compliance with subsection 5.4B; and
(vii) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations under the Management Services and Reimbursement Agreement.
6.5 RESTRICTED PAYMENTS.
Borrowers shall not, and shall not permit their respective Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum for any Restricted Payment; provided, however, that (i) Subsidiaries of Company may make payments of principal, interest and other amounts in respect of Indebtedness permitted under subsections 6.1(v) and 6.1(vii) related to Projects, in accordance with the terms of, and only to the extent required by, the indentures or other agreements pursuant to which such Indebtedness was issued, as such indentures or other agreements may be amended from time to time to the extent permitted hereunder, provided, however, that during the continuance of an Event of Default, notwithstanding anything to the contrary in this Agreement, neither Company nor any Subsidiary
shall fund, contribute or otherwise advance amounts for payment of Indebtedness permitted under subsections 6.1(v) and 6.1(vii) related to Projects unless it has an irrevocable Contractual Obligation to make such payments; (ii) so long as no Event of Default shall have occurred and be continuing, Subsidiaries of Company may, at the time Indebtedness is refinanced or replaced as permitted under subsection 6.1 by other Indebtedness permitted under such subsection, pay principal, accrued interest and other amounts owing on such refinanced Indebtedness at such time, provided that such payments may be made with respect to Non Recourse Debt during the continuance of an Event of Default so long as such payments are from the proceeds of Non Recourse Debt permitted to be incurred hereunder and such proceeds are required to be applied to make such payments under a binding Contractual Obligation to a third party; (iii) Company and its Subsidiaries may pay any fees required to be paid to the Agents and Lenders hereunder; and (iv) Company and its Subsidiaries may make payments under and in accordance with the terms of, and only to the extent required by, the Management Services and Reimbursement Agreement and the Tax Sharing Agreement.
In addition, in any case where a Borrower or Subsidiary is a Joint Venture, Borrowers shall not, and shall not permit their respective Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum for (a) any dividend or other distribution, direct or indirect, on account of any shares of Capital Stock of such Joint Venture held by Persons other than Borrowers or any Subsidiaries of Borrowers, except a dividend payable solely in shares of that class of stock to the holders of that class, (b) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of Capital Stock of such Joint Venture held by Persons other than Borrowers or any Subsidiaries of Borrowers, or (c) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of Capital Stock of such Joint Venture held by Persons other than Borrowers or any Subsidiaries of Borrowers, except in each case to the extent the relevant action described in clause (a), (b) or (c) is required pursuant to a binding Contractual Obligation in effect as of the Closing Date or pursuant to an extension, renewal or replacement of such a Contractual Obligation so long as such extension, renewal or replacement is otherwise permitted to be entered into hereunder and contains provisions no less favorable to Company and its Subsidiaries than the relevant Contractual Obligations so extended, renewed or replaced.
6.6 FINANCIAL COVENANTS.
A. MINIMUM INTEREST COVERAGE RATIO. Company shall not permit the ratio of (i) Adjusted EBITDA to (ii) Consolidated Cash Interest Expense, in each case for any four-Fiscal Quarter period ending at the end of any Fiscal Quarter commencing after March 31, 2004 to be less than 3.00:1.00.
B. MAXIMUM CONSOLIDATED LEVERAGE RATIO. Company shall not permit the Consolidated Leverage Ratio as at any date on or after June 30, 2004 to exceed 5.00:1.00.
C. [INTENTIONALLY OMITTED].
D. CONSOLIDATED FACILITIES CAPITAL EXPENDITURES. Borrowers shall not, and shall not permit their respective Subsidiaries to, make or incur Consolidated Facilities Capital
Expenditures after the Closing Date if the aggregate amount of such expenditures financed by contributions, loans or advances from Company would exceed $1,000,000 in the aggregate.
E. CERTAIN CALCULATIONS. Notwithstanding any provision of this
Agreement to the contrary, (i) for purposes of calculating Adjusted EBITDA for
any four-Fiscal Quarter period ending prior to the first Fiscal Quarter of 2005,
Adjusted EBITDA for the third and fourth Fiscal Quarters of 2003 and the first
Fiscal Quarter of 2004 shall be deemed to be equal to the correlative amounts
set forth opposite such Fiscal Quarters on Schedule 6.6E annexed hereto; and
(ii) for purposes of determining compliance with subsection 6.6A for any
four-Fiscal Quarter period ending prior to the last Fiscal Quarter of 2004,
Consolidated Cash Interest Expense shall equal the product of (a) actual
Consolidated Cash Interest Expense during the period from the Closing Date to
the end of such four-Fiscal Quarter period multiplied by (b) the ratio of (1)
365 divided by (2) the number of days in such period.
6.7 RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES.
Borrowers shall not, and shall not permit their respective Subsidiaries to, alter the legal form of organization of Company or any of its Subsidiaries, or enter into any transaction of merger or consolidation, or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor or sublessor), transfer or otherwise dispose of (including by discount or compromise), in one transaction or a series of transactions, all or any part of its business, property or assets (including its notes or receivables and Capital Stock of a Subsidiary, whether newly issued or outstanding) or its interests in or claims against any Project, in each case whether now owned or hereafter acquired, except:
(i) any Borrower may be merged with or into a Borrower, or be liquidated, wound up or dissolved, or all or any part of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of, in one transaction or a series of transactions, to a Borrower; provided that, no such transaction shall result in the obligee or beneficiary of any Indebtedness or Contingent Obligation (other than the Obligations) having greater recourse to assets or Persons for the payment or collection of such Indebtedness or Contingent Obligation than such obligee or beneficiary had immediately prior to such transaction;
(ii) any Subsidiary of Company that is not a Borrower may be merged with or into any other Subsidiary of Company that is not a Borrower, or be liquidated, wound up or dissolved, or all or any part of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of, in one transaction or a series of transactions, to another Subsidiary that is not a Borrower; provided further, that, no such transaction shall result in the obligee or beneficiary of any Indebtedness or Contingent Obligation (other than the Obligations) having greater recourse to assets or Persons for the payment or collection of such Indebtedness or Contingent Obligation than such obligee or beneficiary had immediately prior to such transaction;
(iii) Company and its Subsidiaries may sell or otherwise dispose of assets in transactions that do not constitute Asset Sales; provided that the consideration received for such assets shall be in an amount at least equal to the fair market value thereof;
(iv) Company and its Subsidiaries may make Asset Sales,
provided that (a) the consideration received for such assets shall be
in an amount at least equal to the fair market value thereof; (b) not
less than 90% of the consideration received (other than any
consideration consisting of the assumption of liabilities related to
such assets) in any such Asset Sale shall be cash (it being agreed that
cash the receipt of which may by the relevant terms of such Asset Sale
be deferred more than six months after the date of consummation of such
Asset Sale shall not be considered cash for purposes of this clause
(b)); (c) not more than 10% of the cash consideration received by
Company and its Subsidiaries in any such Asset Sale shall be received
after the date of consummation of such Asset Sale; (d) any non-cash
consideration received shall be reasonably satisfactory to Agents; (e)
the principal documentation for each such Asset Sale shall have been
delivered in advance to Agents; (f) upon consummation of each such
Asset Sale, neither Company nor any of its Subsidiaries shall have any
debts or obligations, contingent or otherwise, relating to the sold
entities or assets (other than customary indemnification obligations
and purchase price adjustment obligations incurred in connection with
such Asset Sale); (g) any Indebtedness in relation to such assets shall
be repaid and the related letters of credit shall be cancelled and
returned to the issuers thereof; (h) any Asset Sale or series of
related Asset Sales (1) in which the consideration to be received
(other than the assumption of liabilities related to such assets)
exceeds $15,000,0000 shall require the prior written consent of the
Requisite Lenders, (2) of the Quezon Project or involving any assets or
property comprising the Quezon Project shall require the prior written
consent of Requisite Lenders and (3) in which the consideration to be
received (other than the assumption of liabilities related to such
assets) exceeds $5,000,000 shall require the delivery no later than 30
days prior to the consummation of such Asset Sale or Asset Sales of an
independent appraisal of the fair market value of such assets subject
thereto which appraisal shall be performed by an appraiser satisfactory
to Agents and shall be in form and substance satisfactory in all
respects to Agents and (i) the Net Asset Sale Proceeds of such Asset
Sales shall be applied as Mandatory Payments to the extent required
under subsection 2.4A;
(v) Any Subsidiary of Company may, if its Board of Directors determines that doing so is in the best interests of such Subsidiary, change its legal form of organization to a limited liability company, a corporation or a limited partnership; provided that (a) (1) if such Subsidiary is a Borrower, such Subsidiary shall have executed such documents as Administrative Agent reasonably deems necessary to ensure that such Subsidiary continues to be bound as a Borrower under the Loan Documents after such change and (2) if all or any portion of the equity interests of such Subsidiary are subject to Liens created under the Collateral Documents prior to such change, the same percentage of the equity interests of such Subsidiary shall continue to be subject to Liens under the Collateral Documents after such change, with such Liens being of equal or higher priority than before such change and, if perfected prior to such change, perfected, and (b) Company and its Subsidiaries shall have complied with the provisions of the Collateral Documents applicable to such change of legal form; and
(vi) Covanta Energy India (Balaji) Ltd. may sell approximately 372,860 shares held by it on the Closing Date in the Madurai Project entity, Madurai Power Corp. Pvt. Ltd. (the "MADURAI PROJECT ENTITY"), to the Indian local partner with respect to the
Madurai Project for approximately $575,000 (it being understood that such amount is the approximate Dollar equivalent of an estimate as of November 15, 2003 of the proceeds from such sale, and thus may change based on fluctuations in currency exchange rates), to the extent such local partner requires such sale so that such local partner will hold, after giving effect to such sale, up to 25.2% of the issued and outstanding Capital Stock of the Madurai Project Entity.
6.8 TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES.
Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any holder of 5% or more of any class of
equity Securities of Company or with any Affiliate of Company or of any such
holder, on terms that are less favorable to Company or that Subsidiary, as the
case may be, than those that might be obtained at the time from Persons who are
not such a holder or Affiliate; provided that the foregoing restriction shall
not apply to (i) any Indebtedness permitted under subsection 6.1 among Company
and its Subsidiaries or among Subsidiaries of Company, (ii) reasonable and
customary salaries and fees paid to current officers and members of the
Governing Bodies of Company and its Subsidiaries, provided that such salary and
fee arrangements are entered into at arms' length and on terms that are no less
favorable to Company or that Subsidiary, as the case may be, than those that
would have been obtained at the relevant time from Persons who are not such a
holder or Affiliate, (iii) reasonable and customary indemnifications and
insurance arrangements for the benefit of Persons that are officers or members
of the Governing Bodies of Company and its Subsidiaries on or after the Closing
Date, whether such Persons are current or former officers or members at the time
such indemnifications or arrangements are entered into, provided that such
indemnifications and arrangements are entered into at arms' length and on terms
that are no less favorable to Company or that Subsidiary, as the case may be,
than those that would have been obtained at the relevant time from Persons who
are not such a holder or Affiliate, (iv) the Employment Agreements in effect on
the Closing Date, and any other employment agreements or benefits arrangements
entered into on or after the Closing Date by Company and its Subsidiaries with
employees at arms' length and on terms that are no less favorable to Company or
that Subsidiary, as the case may be, than those that would have been obtained at
the relevant time from Persons who are not such a holder or Affiliate, (v)
payments (and other transactions) made in accordance with the terms of the
Management Services and Reimbursement Agreement, the Tax Sharing Agreement and
the other Related Agreements, (vi) transactions occurring on the Closing Date
and described on Schedule 6.8 annexed hereto, (vii) services rendered by certain
Subsidiaries for the benefit of other Subsidiaries pursuant to the terms of the
intercompany service agreements described on Schedule 6.8 annexed hereto, and
(viii) the payment of reasonable legal fees and expenses incurred by law firms
in which Directors of Company are affiliated for services rendered to Company
and its Subsidiaries.
6.9 RESTRICTION ON LEASES.
Borrowers shall not, and shall not permit any of their Subsidiaries to, become liable in any way, whether directly by assignment or as a guarantor or other surety, for the obligations of the lessee under any lease for equipment (other than intercompany leases between
Borrowers), unless, immediately after giving effect to the incurrence of liability with respect to such lease, the aggregate amount of all rents paid or payable by Company and its Subsidiaries on a consolidated basis under all such leases entered into after the Closing Date at the time in effect during the then current Fiscal Year or any future period of 12 consecutive calendar months shall not exceed $1,000,000; provided, however, that this subsection 6.9 shall not prohibit Company or its Subsidiaries from incurring obligations pursuant to the renewal, extension or replacement of leases in effect at the Closing Date so long as such leases as renewed, extended or replaced are not more disadvantageous in any material respect to Company and its Subsidiaries and the Lenders than the leases so renewed, extended or replaced.
6.10 [INTENTIONALLY OMITTED].
6.11 CONDUCT OF BUSINESS.
From and after the Closing Date, Company shall not, and shall not permit any of its Subsidiaries, to engage in any business other than the energy and waste management businesses of the type in which they are engaged on the Closing Date and other activities to the extent incidental or reasonably related to such businesses.
6.12 AMENDMENTS TO RELATED AGREEMENTS, DEBT DOCUMENTATION AND ORGANIZATIONAL DOCUMENTS.
Company shall not, and shall not permit any of its
Subsidiaries to, amend, restate, modify or waive (or make any payment consistent
with an amendment, restatement, modification or waiver of) any material
provision of any of (i) the Management Services and Reimbursement Agreement or
the other Related Agreements (other than the CPIH Revolver Documents), in each
case if the effect of such amendment, restatement, modification or waiver,
together with all other amendments, restatements, modifications or waivers made,
(a) is to impose additional material obligations on, or confer additional
material rights to the holders thereof (or to other obligees with respect
thereto) against, Company or any of its Subsidiaries, or (b) is otherwise
adverse to the interests of the Lenders in a manner deemed material in the
judgment of Agents or Requisite Lenders so notifying Agents or Company; (ii) the
Organizational Documents of Company and its Subsidiaries, if the effect of such
amendment, restatement, modification or waiver, together with all other
amendments, restatements, modifications or waivers made, is adverse to the
interests of the Lenders in a manner deemed material in the judgment of Agents
or Requisite Lenders; (iii) the Subordinated Indebtedness, if the effect thereof
would be to (a) change to earlier dates the dates on which any payments of
principal or interest are due thereon, (b) increase the interest rate, or the
portion thereof payable on a current basis in cash, applicable thereto, (c)
change any event of default with respect thereto in any manner adverse to the
interests of the Lenders, (d) change the redemption, prepayment or defeasance
provisions thereof, (e) change the subordination provisions thereof (or of any
guaranty thereof or intercreditor arrangement with respect thereto), (f) change
any collateral therefor (other than to release such collateral), or (g) change
any other term or provision thereof, if the effect of such change, together with
all other changes made, is to increase materially the obligations of the obligor
thereunder or to confer any additional rights on the holders of such
Indebtedness that would be materially adverse (in the judgment of Agents or
Requisite Lenders so notifying Agents or Company) to Company, Agents or the
Lenders, without the prior written consent of Requisite Lenders; (iv) the
principal
documents relating to Non Recourse Debt with respect to a Project if such amendment, restatement, modification or waiver, together with all other amendments, restatements, modifications and waivers made, would reasonably be expected to have a Material Adverse Effect; or (v) the CPIH Revolver Documents, unless (a) the terms of the CPIH Revolver Documents as so amended, restated, modified or waived are not more disadvantageous to Company and its Subsidiaries and the Lenders (in a manner deemed material by Agents or Requisite Lenders so notifying Agents or Company) than the CPIH Revolver Documents in effect on the Closing Date (it being understood and agreed that any amendment, restatement, modification or waiver having the effect of increasing the amount of, or reducing, delaying or waiving any otherwise required reduction in the amount of, any commitment to extend loans under the CPIH Revolver Documents shall be deemed to be more disadvantageous for purposes of this clause (a) without further notice or other action by Agents or Requisite Lenders), (b) the aggregate amount of Indebtedness outstanding, and additional commitments to extend credit, if any, under the CPIH Revolver Documents as so amended, restated, modified or waived, do not exceed the aggregate amount of the commitments to extend credit in effect under the CPIH Revolver Documents on the Closing Date, (c) the obligations under (and the Liens securing) such CPIH Revolver Documents as so amended, restated, modified or waived are subject to the Intercreditor Agreement on terms substantively identical to the terms applicable to the obligations in effect under the CPIH Revolver Documents on the Closing Date, and (d) Company provides to Agents reasonable prior advance written notice of such proposed amendment, restatement, modification or waiver and copies of all material contracts or other agreements being entered into in connection therewith).
6.13 END OF FISCAL YEARS; FISCAL QUARTERS.
Company shall not, and shall not permit any of its Subsidiaries to change the end of the Fiscal Year of Company or any of its Subsidiaries from December 31st.
6.14 AMENDMENT TO PENSION PLANS.
Borrowers shall not amend or modify any Pension Plan after the Closing Date in any manner that results in or would reasonably be expected to result in an increase in the amount of unfunded benefit liabilities (as such unfunded benefit liabilities are determined in accordance with subsection 4.11D hereof), unless such amendment or modification is required under applicable law.
SECTION 7. EVENTS OF DEFAULT
If any of the following conditions or events ("EVENT OF DEFAULT") shall occur:
7.1 FAILURE TO MAKE PAYMENTS WHEN DUE.
Failure by Borrowers to pay any installment of principal of any Loan when due, whether at stated maturity, by acceleration, by notice of voluntary prepayment, by mandatory prepayment or otherwise; failure by Borrowers to pay any Mandatory Payment when due; or
failure by Borrowers to pay any interest or any fee or any other amount due under this Agreement within five days after the date due; or
7.2 DEFAULT IN OTHER AGREEMENTS.
(i) Failure of Company or any of its Subsidiaries (other than the Magellan Subsidiary) to pay when due any principal of or interest on or any other amount payable in respect of (a) the CPIH Revolver Documents, (b) the Management Services and Reimbursement Agreement, (c) any one or more items of Indebtedness (other than Indebtedness referred to in subsection 7.1 or in clause (a) above or clause (d) below) or Contingent Obligations or Performance Guaranties, in each case in the principal amount of $2,000,000 or more, individually or in the aggregate, or (d) Non Recourse Debt of Subsidiaries of Company in the principal amount of $6,000,000 or more, individually or in the aggregate (provided that Non Recourse Debt incurred in connection with one or more Projects to which less than $2,000,000 in the aggregate of the operating income of Company and its Subsidiaries (on a consolidated basis) is attributable for the 12-month period immediately preceding the failure to pay such interest, principal or other amounts shall not be considered Indebtedness or Non Recourse Debt solely for purposes of this clause (d)), in each case beyond the end of any grace period provided therefor; or
(ii) breach or default by Company or any of its Subsidiaries with respect to any other material term of (a) the CPIH Revolving Documents or the Management Services and Reimbursement Agreement, (b) one or more items of Indebtedness (other than Non Recourse Debt) or Contingent Obligations in the individual or aggregate principal amounts referred to in clause (i) above or (c) any loan agreement, mortgage, indenture or other agreement relating to such item(s) of Indebtedness or Contingent Obligation(s), if the effect of such breach or default is to cause, or to permit the holder or holders of that Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such holder or holders) to cause, that Indebtedness or Contingent Obligation(s) to become or be declared due and payable prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be (upon the giving or receiving of notice, lapse of time, both, or otherwise), or
7.3 BREACH OF CERTAIN COVENANTS.
Failure of any Borrower to perform or comply with any term or condition contained in subsection 2.5 or 5.2 or Section 6 of this Agreement; or
7.4 BREACH OF WARRANTY.
Any representation, warranty, certification or other statement made by CEA or Company or any of its Subsidiaries in any Loan Document or in any statement or certificate at any time given by CEA or Company or any of its Subsidiaries in writing pursuant hereto or thereto or in connection herewith or therewith shall be false in any material respect on the date as of which made; or
7.5 OTHER DEFAULTS UNDER LOAN DOCUMENTS.
Any Loan Party shall default in the performance of or
compliance with any term contained in this Agreement or any of the other Loan
Documents, other than any such term referred to in any other subsection of this
Section 7, and such default shall not have been remedied or waived within 30
days after the earlier of (i) an Officer of Company or such Loan Party becoming
aware of such default or (ii) receipt by Company or such Loan Party of notice
from Administrative Agent or any Lender of such default; or
7.6 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) A court having jurisdiction in the premises shall enter a decree or order for relief in respect of CEA or Company or any of its Subsidiaries (other than the Magellan Subsidiary) in an involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, which decree or order is not stayed; or any other similar relief shall be granted under any applicable federal or state law; or
(ii) an involuntary case shall be commenced against CEA or Company or any of its Subsidiaries (other than the Magellan Subsidiary) under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over CEA or Company or any of its Subsidiaries (other than the Magellan Subsidiary), or over all or a substantial part of its property, shall have been entered; or there shall have occurred the involuntary appointment of an interim receiver, trustee or other custodian of CEA or Company or any of its Subsidiaries (other than the Magellan Subsidiary) for all or a substantial part of its property; or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of CEA or Company or any of its Subsidiaries (other than the Magellan Subsidiary), and any such event described in this clause (ii) shall continue for 60 days unless dismissed, bonded or discharged; or
7.7 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) CEA or Company or any of its Subsidiaries (other than the Magellan Subsidiary) shall have an order for relief entered with respect to it or commence a voluntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or CEA or Company or any of its Subsidiaries (other than the Magellan Subsidiary) shall make any assignment for the benefit of creditors; or
(ii) CEA or Company or any of its Subsidiaries (other than the Magellan Subsidiary) shall be unable, or shall fail generally, or shall admit in writing its inability,
to pay its debts as such debts become due; or the Governing Body of Company or any of its Subsidiaries (other than the Magellan Subsidiary) (or any committee thereof) shall adopt any resolution or otherwise authorize any action to approve any of the actions referred to in clause (i) above or this clause (ii); or
7.8 JUDGMENTS AND ATTACHMENTS.
Any money judgment, writ or warrant of attachment or similar process involving (a) in any individual case an amount in excess of $2,000,000 or (b) in the aggregate at any time an amount in excess of $2,000,000 (in either case not adequately covered by insurance as to which a solvent and unaffiliated insurance company has acknowledged coverage) shall be entered or filed against Company or any of its Subsidiaries (other than the Magellan Subsidiary) or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of 60 days (or in any event later than five days prior to the date of any proposed sale thereunder); or
7.9 DISSOLUTION.
Any order, judgment or decree shall be entered against CEA or Company or any of its Material Subsidiaries decreeing the dissolution or split up of CEA or Company or that Subsidiary and such order shall remain undischarged or unstayed for a period in excess of 30 days; or
7.10 EMPLOYEE BENEFIT PLANS.
There shall occur one or more ERISA Events that individually or in the aggregate result in or are reasonably be expected to result in liability of Company, any of its Subsidiaries or any of their respective ERISA Affiliates in excess of $5,000,000 during the term of this Agreement; or there shall exist as of January 1 of any year (based on, with respect to each Pension Plan, the actuarial valuation as of such January 1, or if no such valuation was performed as of such January 1 but was performed within the preceding 12 months, the date as of which the valuation was so performed), unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA, but determined on the basis of the actuarial assumptions used for funding purposes with respect to a Pension Plan (as set forth in Section 412 of the Internal Revenue Code, including where applicable, the interest rate assumptions set forth in Section 412(l) of the Internal Revenue Code)), in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities), in excess of (i) $20,000,000 in the event the Assumptions are generally as favorable as the Assumptions used in the 2003 plan year valuations with respect to such Pension Plans, or (ii) $26,000,000 in the event the Assumptions are generally less favorable than the Assumptions used in the 2003 plan year valuations with respect to such Pension Plans; or
7.11 MATERIAL ADVERSE EFFECT.
Any event or change shall occur after the date of this Agreement that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect; or
7.12 CHANGE IN CONTROL.
A Change in Control shall have occurred; or
7.13 INVALIDITY OF INTERCREDITOR AGREEMENT; FAILURE OF SECURITY; REPUDIATION OF OBLIGATIONS.
At any time after the execution and delivery thereof, (i) the Intercreditor Agreement for any reason, other than the satisfaction in full of all Obligations, shall cease to be in full force and effect (other than in accordance with its terms) or shall be declared to be null and void, (ii) any Collateral Document (with respect to the obligations thereunder of CEA, Company or any Material Subsidiary of Company) shall cease to be in full force and effect (other than by reason of a release of Collateral thereunder in accordance with the terms hereof or thereof, the satisfaction in full of the Secured Obligations or any other termination of such Collateral Document in accordance with the terms hereof or thereof) or shall be declared null and void, or Collateral Agent shall not have or shall cease to have a valid and perfected Lien (with the priority set forth in subsection 4.15A) in any Collateral purported to be covered thereby, in each case for any reason other than the failure of Collateral Agent or any Lender to take any action within its control, or (iii) any Loan Party shall contest the validity or enforceability of any Loan Document in writing or deny in writing that it has any further liability, including with respect to future advances by Lenders, under any Loan Document to which it is a party; or
7.14 TERMINATION OF MATERIAL CONTRACTS.
Any Material Contract of the type described in clause (i) of the definition of Material Contract, or any power purchase agreement to which Company or any of its Subsidiaries is a party relating to a Project (other than the power purchase agreement relating to the Magellan Project unless the termination of such agreement would result in a Material Adverse Effect), shall be terminated by Company or any of its Subsidiaries or by the counterparty or counterparties thereto, if such termination is enforceable by Company, such Subsidiary, or such counterparty or counterparties, unless such Material Contract is replaced within ten (10) days after such termination with a contract that is reasonably acceptable to the Requisite Lenders and on substantially the same economic terms as the relevant Material Contract being terminated; or
7.15 DEFAULT UNDER EXISTING IPP INTERNATIONAL PROJECT GUARANTIES.
Failure by Covanta or any of its Subsidiaries to pay when due any principal of, interest on or any other amount payable in respect of any Existing IPP International Project Guaranty (other than the failure to pay amounts that are being actively contested by such Person in good faith by appropriate proceedings, so long as the beneficiary of such Existing IPP International Project Guaranty has not exercised any remedy against Company or any of its Subsidiaries thereunder, under applicable law or otherwise as a result of such failure):
THEN (i) upon the occurrence of any Event of Default described in subsection 7.6 or 7.7, each of (a) the unpaid principal amount of and accrued interest on the Loans, and (b) all other Obligations shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by
each Borrower, and the obligation of each Lender to make any Loan shall thereupon terminate, and (ii) upon the occurrence and during the continuation of any other Event of Default, Administrative Agent shall, upon the written request or with the written consent of Requisite Lenders, by written notice to Borrowers, declare all or any portion of the amounts described in clauses (a) through (c) above to be, and the same shall forthwith become, immediately due and payable, and the obligation of each Lender to make any Loan hereunder shall thereupon terminate.
Any amounts described in clause (b) above, when received by Collateral Agent, shall be held by Collateral Agent pursuant to the terms of the Security Agreement and shall be applied as therein provided (subject to the terms of the Intercreditor Agreement).
Further upon the occurrence and during the continuance of any Event of Default, subject to the Intercreditor Agreement, Administrative Agent and Collateral Agent may, and upon the written request of Requisite Lenders shall, (i) exercise all rights and remedies of Administrative Agent or Collateral Agent set forth in any of the Collateral Documents, in addition to all rights and remedies allowed by, the United States and of any state thereof, including but not limited to the UCC, and (ii) revoke Borrowers' rights to use cash collateral in which Administrative Agent or Collateral Agent has an interest. The enumeration of the foregoing rights and remedies is not intended to be exhaustive and the exercise of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative and not alternative.
SECTION 8. ADMINISTRATIVE AGENT
8.1 APPOINTMENT.
A. APPOINTMENT OF ADMINISTRATIVE AGENT. Bank of America is hereby appointed Administrative Agent hereunder and under the other Loan Documents and Deutsche Bank is hereby appointed Documentation Agent hereunder. Each Lender hereby authorizes each Agent to act as its agent in accordance with the terms of this Agreement and the other Loan Documents. Each Agent agrees to act upon the express conditions contained in this Agreement and the other Loan Documents, as applicable. The provisions of this Section 8 are solely for the benefit of Agents and Lenders and no Loan Party shall have rights as a third party beneficiary of any of the provisions thereof. In performing its functions and duties under this Agreement, Administrative Agent (other than as provided in subsection 2.1C) shall act solely as an agent of Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for any Borrower or any other Loan Party.
B. CONTROL. Each Lender and Administrative Agent hereby appoint each other Lender as agent for the purpose of perfecting Collateral Agent's security interest in assets that, in accordance with the UCC, can be perfected by possession or control.
8.2 POWERS AND DUTIES; GENERAL IMMUNITY.
A. POWERS; DUTIES SPECIFIED. Each Lender irrevocably authorizes each Agent to take such action on such Lender's behalf and to exercise such powers, rights and remedies hereunder and under the other Loan Documents as are specifically delegated or granted to such
Agent by the terms hereof and thereof, together with such powers, rights and remedies as are reasonably incidental thereto. An Agent shall have only those duties and responsibilities that are expressly specified in this Agreement and the other Loan Documents. Each Agent may exercise such powers, rights and remedies and perform such duties by or through its Affiliates, agents or employees. No Agent shall have, by reason of this Agreement or any of the other Loan Documents, a fiduciary relationship in respect of any Lender or any Borrower; and nothing in this Agreement or any of the other Loan Documents, expressed or implied, is intended to or shall be so construed as to impose upon an Agent any obligations in respect of this Agreement or any of the other Loan Documents except as expressly set forth herein or therein.
B. NO RESPONSIBILITY FOR CERTAIN MATTERS. No Agent shall be responsible to any Lender for the execution, effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement or any other Loan Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by such Agent to Lenders or by or on behalf of any Borrower to such Agent or any Lender in connection with the Loan Documents and the transactions contemplated thereby or for the financial condition or business affairs of Borrowers or any other Person liable for the payment of any Obligations, nor shall such Agent be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Loan Documents or as to the use of the proceeds of the Loans or as to the existence or possible existence of any Event of Default or Potential Event of Default. Anything contained in this Agreement to the contrary notwithstanding, Administrative Agent shall not have any liability arising from confirmations of the amount of outstanding Loans or the component amounts thereof.
C. EXCULPATORY PROVISIONS. No Agent or any of its officers, directors, employees or agents shall be liable to Lenders for any action taken or omitted by such Agent under or in connection with any of the Loan Documents except to the extent caused by such Agent's gross negligence or willful misconduct. An Agent shall be entitled to refrain from any act or the taking of any action (including the failure to take an action) in connection with this Agreement or any of the other Loan Documents or from the exercise of any power, discretion or authority vested in it hereunder or thereunder unless and until such Agent shall have received instructions in respect thereof from Requisite Lenders (or such other Lenders as may be required to give such instructions under subsection 9.6) and, upon receipt of such instructions from Requisite Lenders (or such other Lenders, as the case may be), such Agent shall be entitled to act or (where so instructed) refrain from acting, or to exercise such power, discretion or authority, in accordance with such instructions. Without prejudice to the generality of the foregoing, (i) each Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for Company and its Subsidiaries), accountants, experts and other professional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever against an Agent as a result of such Agent acting or (where so instructed) refraining from acting under this Agreement or any of the other Loan Documents in accordance with the instructions of Requisite Lenders (or such other Lenders as may be required to give such instructions under subsection 9.6).
D. AGENTS ENTITLED TO ACT AS LENDER. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, an Agent in its individual capacity as a Lender hereunder. With respect to its participation in the Loans, an Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not performing the duties and functions delegated to it hereunder, and the term "Lender" or "Lenders" or any similar term shall, unless the context clearly otherwise indicates, include each Agent in its individual capacity. An Agent and its Affiliates may accept deposits from, lend money to, acquire equity interests in and generally engage in any kind of commercial banking, investment banking, trust, financial advisory or other business with Company or any of its Affiliates as if it were not performing the duties specified herein, and may accept fees and other consideration from any Borrower for services in connection with this Agreement and otherwise without having to account for the same to Lenders. The Lenders acknowledge that, pursuant to such activities, Deutsche Bank or Bank of America or their respective Affiliates may receive information regarding a Borrower or its Affiliates (including information that may be subject to confidentiality obligations in favor of such Borrower or such Affiliate) and acknowledge that the relevant Agent shall be under no obligation to provide such information to them.
8.3 INDEPENDENT INVESTIGATION BY LENDERS; NO RESPONSIBILITY FOR APPRAISAL OF CREDITWORTHINESS.
Each Lender agrees that it has made its own independent investigation of the financial condition and affairs of Company and its Subsidiaries in connection with the making of the Loans hereunder and that it has made and shall continue to make its own appraisal of the creditworthiness of Company and its Subsidiaries. No Agent shall have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of Lenders or to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter, and no Agent shall have any responsibility with respect to the accuracy of or the completeness of any information provided to Lenders.
8.4 RIGHT TO INDEMNITY.
Each Lender, in proportion to its Pro Rata Share, severally agrees to indemnify Agents and the officers, directors, employees, agents, attorneys, professional advisors and affiliates of each of them to the extent that any such Person shall not have been reimbursed by Borrowers, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements and fees and disbursements of any financial advisor engaged by Agents) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against an Agent or and other such Persons in exercising the powers, rights and remedies of an Agent or performing duties of an Agent hereunder or under the other Loan Documents or otherwise in its capacity as Agent in any way relating to or arising out of this Agreement or the other Loan Documents; provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of an Agent resulting from such Agent's gross negligence or willful misconduct. If any indemnity furnished to an Agent or any other such Person for any purpose shall, in the opinion of such Agent, be
insufficient or become impaired, such Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished.
8.5 SUCCESSOR AGENTS.
Any Agent may resign at any time by giving 30 days' prior
written notice thereof to Lenders and Borrowers, and an Agent may be removed at
any time with or without cause by an instrument or concurrent instruments in
writing delivered to Borrowers and Administrative Agent and signed by Requisite
Lenders. Upon any such notice of resignation or any such removal, Requisite
Lenders shall have the right, upon five Business Days' notice to Borrowers, to
appoint a successor Agent. If, within 30 days after the date of an Agent's
notice of its intention to resign, no successor to such Agent shall have been so
appointed by Requisite Lenders, then such Agent's resignation shall become
effective on such date without the need for any further action and the Lenders
shall be deemed to have been appointed as successor to such Agent hereunder and
shall thereafter perform all the duties of such Agent hereunder and/or under any
other Loan Document until the appointment by Requisite Lenders of some other
successor to such Agent. Upon the acceptance of any appointment as an Agent
hereunder by a successor to an Agent, including, the Lenders as successor to an
Agent (who shall be deemed to have accepted such appointment pursuant to this
subsection 8.5), such successor to such Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the retiring
or removed Agent and the retiring or removed Agent shall be discharged from its
duties and obligations under this Agreement. After any retiring or removed
Agent's resignation or removal hereunder as an Agent, the provisions of this
Section 8 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was an Agent under this Agreement and the other Loan
Documents.
8.6 COLLATERAL DOCUMENTS AND INTERCREDITOR AGREEMENT.
Each Lender hereby further authorizes Administrative Agent, on behalf of and for the benefit of Lenders, to enter into and to be the agent for and representative of Lenders under the Intercreditor Agreement, and each Lender agrees to be bound by the terms of the Intercreditor Agreement; provided that Administrative Agent shall not (i) enter into or consent to any material amendment, modification, termination or waiver of any provision contained in the Intercreditor Agreement or (ii) release any Collateral (except as otherwise expressly permitted or required pursuant to the terms of this Agreement or the applicable Collateral Document), in each case without the prior consent of Requisite Lenders (or, if required pursuant to subsection 9.6, all Lenders). Anything contained in any of the Loan Documents to the contrary notwithstanding, each Borrower, Administrative Agent and each Lender hereby agree that (1) no Lender shall have any right individually to realize upon any of the Collateral under any Collateral Document, it being understood and agreed that all powers, rights and remedies under the Collateral Documents may be exercised solely by Collateral Agent for the benefit of Lenders in accordance with the terms thereof and of the Intercreditor Agreement, and (2) in the event of a foreclosure by Collateral Agent on any of the Collateral pursuant to a public or private sale, Administrative Agent or any Lender may be the purchaser of any or all of such Collateral at any such sale and Administrative Agent, as agent for and representative of Lenders (but not any Lender or Lenders in its or their respective individual capacities unless Requisite Lenders shall otherwise agree in writing) shall be entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Obligations as a credit on account of the purchase price for any Collateral payable by Administrative Agent at such sale.
8.7 ADMINISTRATIVE AGENT MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to Company or any of the Subsidiaries of Company, Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether Administrative Agent shall have made any demand on Borrowers) shall be entitled and empowered, by intervention in such proceeding or otherwise
(i) to file and prove a claim for the whole amount of principal and interest owing and unpaid in respect of the Loans and any other Obligations that are owing and unpaid and to file such other papers or documents as may be necessary or advisable in order to have the claims of Lenders and Agents (including any claim for the reasonable compensation, expenses, disbursements and advances of Lenders and Agents and their agents and counsel and all other amounts due Lenders and Agents under subsections 2.3 and 9.2) allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to Administrative Agent and, in the event that Administrative Agent shall consent to the making of such payments directly to Lenders, to pay to Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of Agents and their agents and counsel, and any other amounts due Agents under subsections 2.3 and 9.2.
Nothing herein contained shall be deemed to authorize Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lenders or to authorize Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.
SECTION 9. MISCELLANEOUS
9.1 SUCCESSORS AND ASSIGNS; ASSIGNMENTS AND PARTICIPATIONS IN LOANS.
A. GENERAL. This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of Lenders (it being understood that Lenders' rights of assignment are subject to the further provisions of this subsection 9.1). Neither any Borrower's rights or obligations hereunder nor any interest therein may be assigned or delegated by any Borrower without the prior written consent of all Lenders (and any attempted assignment or transfer by any Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Affiliates of each of Agents and Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. No Lender shall be permitted to assign any portion of its rights or obligations hereunder to any other Person if, upon giving effect to such assignment, Borrowers would be obligated to pay such assignee amounts greater than the amounts, if any, which Borrowers would have been required to pay such assigning Lender under subsection 2.6 or 2.7 if such assignment did not occur.
B. ASSIGNMENTS.
(i) Amounts and Terms of Assignments. Any Lender may
assign to one or more Eligible Assignees all or any portion of its
rights and obligations under this Agreement; provided that (a) except
(1) in the case of an assignment of the entire remaining amount of the
assigning Lender's rights and obligations under this Agreement or (2)
in the case of an assignment to a Lender or an Affiliate of a Lender or
an Approved Fund of a Lender, the aggregate amount of the Loan Exposure
of the assigning Lender and the assignee subject to each such
assignment shall not be less than $2,500,000, determined as of the date
the Assignment Agreement with respect to such assignment is delivered
to Administrative Agent or, if a trade date is specified in the
Assignment Agreement, as of such trade date, unless Administrative
Agent otherwise consents, such consent not to be unreasonably withheld
or delayed, (b) the parties to each assignment shall execute and
deliver to Administrative Agent an Assignment Agreement, together with
a processing and recordation fee of $5,000, and the Eligible Assignee,
if it shall not be a Lender prior to such assignment, shall deliver to
Administrative Agent a counterpart to the Intercreditor Agreement and
such documents and information reasonably requested by Administrative
Agent, including such forms, certificates or other evidence, if any,
with respect to United States federal income tax withholding matters as
the assignee under such Assignment Agreement may be required to deliver
to Administrative Agent pursuant to subsection 2.6B(iii), and no such
assignment shall be effective unless and until such Assignment
Agreement is accepted by Administrative Agent and recorded in the
Register as provided in subsection 9.1B(ii), (c) except in the case of
an assignment to another Lender, Administrative Agent shall have
consented thereto (which consent shall not be unreasonably withheld or
delayed (it being understood that nothing in this clause (c) shall
affect the requirement that the relevant assignee meet the requirements
in the definition of Eligible Assignee and any other applicable
requirements of this Agreement)), and (d) any assignment of Loan
Exposure of the assigning Lender shall also constitute and be deemed to
be an assignment of a ratable portion of the assigning Lender's right
after such assignment is consummated to have a portion of its
outstanding Prepetition Secured Claims equal to its Pro Rata Share of
any Permitted Supplemental Loan Amount converted to (and deemed to be a
loan made by such assigning Lender as) a Loan pursuant to subsection
2.1A(ii). Upon such execution, delivery and consent, from and after the
effective date specified in such Assignment Agreement, (x) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such
Assignment Agreement, shall have the rights and obligations of a Lender
hereunder, (y) the assignee shall be a party to the Intercreditor
Agreement and, to the extent that rights and obligations have been
assigned
to it pursuant to such Assignment Agreement, shall have the rights and obligations of a "Creditor Party" thereunder (as such term is defined in the Intercreditor Agreement) and (z) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment Agreement, relinquish its rights (other than any rights which survive the termination of this Agreement under subsection 9.9B) and be released from its obligations under this Agreement and the Intercreditor Agreement (and, in the case of an Assignment Agreement covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of subsection 9.9). The assigning Lender of any Commitments and/or Loans shall, upon the effectiveness of such assignment or as promptly thereafter as practicable, surrender its Notes, if any, to Administrative Agent for cancellation, and thereupon new Notes shall, if so requested by the assignee and/or the assigning Lender in accordance with subsection 2.1D, be issued to the assignee and/or to the assigning Lender, substantially in the form of Exhibit I annexed hereto, as the case may be, with appropriate insertions, to reflect the new outstanding Loans, as the case may be, of the assignee and/or the assigning Lender. Other than as provided in subsection 9.5, any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection 9.1B shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection 9.1C. Except as otherwise provided in this subsection 9.1, no Lender shall, as between Borrowers and such Lender, or as between Agents and such Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment or transfer of, or any granting of participations in, all or any part of its Commitments or Loans, or the other Obligations owed to such Lender.
(ii) Acceptance by Administrative Agent; Recordation in Register. Upon its receipt of an Assignment Agreement executed by an assigning Lender and an assignee representing that it is an Eligible Assignee and the processing and recordation fee referred to in subsection 9.1B(i) and any forms, certificates or other evidence with respect to United States federal income tax withholding matters that such assignee may be required to deliver to Administrative Agent pursuant to subsection 2.6B(iii), Administrative Agent shall, if Administrative Agent has consented to the assignment evidenced thereby (to the extent such consent is required pursuant to subsection 9.1B(i)), (a) accept such Assignment Agreement by executing a counterpart thereof as provided therein (which acceptance shall evidence any required consent of Administrative Agent to such assignment), (b) record the information contained therein in the Register, and (c) give prompt notice thereof to Company. Administrative Agent shall maintain a copy of each Assignment Agreement delivered to and accepted by it as provided in this subsection 9.1B(ii).
C. PARTICIPATIONS. Any Lender may, without the consent of, or notice to, any Borrower or Administrative Agent, sell participations to one or more Persons (other than a natural Person or any Borrower or any of its Affiliates) in all or a portion of such Lender's rights and/or obligations under this Agreement; provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) Borrowers, Agents and Lenders
shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver directly affecting (i) the extension of the Maturity Date or (ii) a reduction of the principal amount of or the rate of interest payable on any Loan allocated to such participation. Subject to the further provisions of this subsection 9.1C, each Borrower agrees that each Participant shall be entitled to the benefits of subsection 2.6 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection 9.1B. To the extent permitted by law, each Participant also shall be entitled to the benefits of subsection 9.4 as though it were a Lender; provided that such Participant agrees to be subject to subsection 9.5 as though it were a Lender. A Participant shall not be entitled to receive any greater payment under subsection 2.6 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant unless the sale of the participation to such Participant is made with Borrowers' prior written consent. A Participant that would be a Non-US Lender if it were a Lender shall not be entitled to the benefits of subsection 2.6.
D. PLEDGES AND ASSIGNMENTS. Any Lender may at any time pledge or assign a security interest in all or any portion of its Loans, and the other Obligations owed to such Lender, to secure obligations of such Lender, including any pledge or assignment to secure obligations to any Federal Reserve Bank; provided that (i) no Lender shall be relieved of any of its obligations hereunder as a result of any such assignment or pledge and (ii) in no event shall any assignee or pledgee be considered to be a "Lender" or be entitled to require the assigning Lender to take or omit to take any action hereunder.
E. INFORMATION. Each Lender may furnish any information concerning Company and its Subsidiaries in the possession of that Lender from time to time to assignees and participants (including prospective assignees and participants), subject to subsection 9.20.
F. AGREEMENTS OF LENDERS. Each Lender listed on the signature pages hereof hereby agrees, and each Lender that becomes a party hereto pursuant to an Assignment Agreement shall be deemed to agree, (i) that it is an Eligible Assignee described in clause (i) of the definition thereof; (ii) that it has experience and expertise in the making of or purchasing loans such as the Loans; and (iii) that it will make or purchase Loans for its own account in the ordinary course of its business and without a view to distribution of such Loans within the meaning of the Securities Act or the Exchange Act or other federal securities laws (it being understood that, subject to the provisions of this subsection 9.1, the disposition of such Loans or any interests therein shall at all times remain within its exclusive control).
G. ASSIGNMENTS TO FEDERAL RESERVE BANKS. In addition to the assignments and participations permitted under the foregoing provisions of this subsection 9.1, any Lender may assign and pledge all or any portion of the Loans or any other Obligations owed to such Lender hereunder, and its one or more Notes to any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any operating circular issued by such Federal Reserve Bank; provided that (i) no Lender shall, as between
Company and such Lender, be relieved of any of its obligations hereunder as a result of any such assignment and pledge and (ii) in no event shall such Federal Reserve Bank be considered to be a "Lender" or be entitled to require the assigning Lender to take or omit to take any action hereunder.
9.2 EXPENSES.
Whether or not the transactions contemplated hereby shall be
consummated, Borrowers agree, jointly and severally, to pay promptly (i) all the
actual and reasonable costs and expenses of negotiation, preparation and
execution of the Loan Documents and any consents, amendments, waivers or other
modifications thereto; (ii) all the costs of furnishing all opinions by counsel
for Loan Parties (including any opinions requested by Agents or Lenders as to
any legal matters arising hereunder) and of Borrowers' performance of and
compliance with all agreements and conditions on their part to be performed or
complied with under this Agreement and the other Loan Documents including with
respect to confirming compliance with environmental and insurance requirements;
(iii) the reasonable fees, expenses and disbursements of advisors and counsel to
Agents (including O'Melveny & Myers LLP, counsel to Agents, and Ernst & Young
Corporate Finance LLC) in connection with the negotiation, preparation,
execution, interpretation or administration of the Loan Documents and any
proposed consents, amendments, waivers or other modifications thereto and any
other documents or matters requested by any Borrower; (iv) all the actual costs
and reasonable expenses of creating and perfecting Liens in favor of Collateral
Agent on behalf of Secured Parties pursuant to any Collateral Document,
including filing and recording fees, expenses and taxes, stamp or documentary
taxes, search fees, title insurance premiums, and reasonable fees, expenses and
disbursements of counsel to Administrative Agent and Collateral Agent and of
counsel providing any opinions that Agents or Requisite Lenders may request in
respect of the Collateral Documents or the Liens created pursuant thereto; (v)
all the actual costs and reasonable fees, expenses and disbursements of any
auditors, accountants or appraisers and any environmental or other consultants,
advisors and agents (including Ernst & Young Corporate Finance LLC) employed or
retained by Agents or their counsel; (vi) all the actual costs and reasonable
expenses incurred in connection with the custody or preservation of any of the
Collateral; (vii) all other actual and reasonable costs and expenses incurred by
Agents in connection with the syndication of the Commitments; and (viii) all the
actual costs and reasonable expenses, including reasonable attorneys' fees and
costs of settlement, incurred by Agents and Lenders in enforcing any Obligations
of or in collecting any payments due from any Loan Party hereunder or under the
other Loan Documents (including in connection with the sale of, collection from,
or other realization upon any of the Collateral) or in connection with any
refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a "work-out" or pursuant to the Chapter 11 Cases or
any other insolvency or bankruptcy proceedings.
9.3 INDEMNITY.
In addition to the payment of expenses pursuant to subsection 9.2, whether or not the transactions contemplated hereby shall be consummated, Borrowers jointly and severally agree to defend (subject to Indemnitees' selection of counsel), indemnify, pay and hold harmless Agents and Lenders, and the officers, directors, employees, agents and affiliates of Agents and Lenders (collectively called the "INDEMNITEES"), from and against any and all Indemnified
Liabilities (as hereinafter defined); provided that Borrowers shall not have any obligation to any Indemnitee hereunder with respect to any Indemnified Liabilities to the extent such Indemnified Liabilities arise solely from the gross negligence or willful misconduct of that Indemnitee as determined by a final judgment of a court of competent jurisdiction.
As used herein, "INDEMNIFIED LIABILITIES" means, collectively, any and all liabilities, obligations, losses, damages (including natural resource damages), penalties, actions, judgments, suits, claims (including Environmental Claims), costs (including the costs of any investigation, study, sampling, testing, abatement, cleanup, removal, remediation or other response action necessary to remove, remediate, clean up or abate any Hazardous Materials Activity), expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened by any Person, whether or not any such Indemnitee shall be designated as a party or a potential party thereto, and any fees or expenses incurred by Indemnitees in enforcing this indemnity), whether direct, indirect or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or regulations and Environmental Laws), on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of (i) this Agreement or the other Loan Documents and the Chapter 11 Cases (it being understood that such Indemnified Liabilities arising out of the Chapter 11 Cases shall apply solely to Indemnitees in their capacities as Agents and Lenders or officers, directors, employees, agents and affiliates of Agents or Lenders, and not in any other capacities) or the transactions contemplated hereby or thereby (including Lenders' agreement to make the Loans hereunder or the use or intended use of the proceeds thereof, or any enforcement of any of the Loan Documents (including any sale of, collection from, or other realization upon any of the Collateral), (ii) the statements contained in the commitment letter delivered by any Lender with respect thereto, or (iii) any Environmental Claim or any Hazardous Materials Activity relating to or arising from, directly or indirectly, any past or present activity, operation, land ownership, or practice of Company or any of its Subsidiaries.
To the extent that the undertakings to defend, indemnify, pay and hold harmless set forth in this subsection 9.3 may be unenforceable in whole or in part because they are violative of any law or public policy, Borrowers shall contribute the maximum portion that they are permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of them.
9.4 SET-OFF.
In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence and during the continuance of any Event of Default each Lender is hereby authorized by each Borrower at any time or from time to time, without notice to any Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, including Indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts) and any other Indebtedness at any time held or owing by that Lender or any Affiliate of such Lender to or for the credit or the account of any
Borrower or any other Loan Party against and on account of the obligations and liabilities of any Borrower or any other Loan Party to that Lender (or any Affiliate of such Lender) or to any other Lender (or any Affiliate of any other Lender) under this Agreement, and the other Loan Documents, including all claims of any nature or description arising out of or connected with this Agreement, or any other Loan Document, irrespective of whether or not (i) any Agent or any Lender shall have made any demand hereunder or (ii) the principal of or the interest on the Loans or any other amounts due hereunder shall have become due and payable pursuant to Section 7 and although said obligations and liabilities, or any of them, may be contingent or unmatured. Each Borrower hereby further grants to Administrative Agent and each Lender a security interest in all deposits and accounts maintained with Administrative Agent or such Lender as security for the Obligations.
9.5 RATABLE SHARING.
A. Subject at all times to their obligations under the Intercreditor Agreement, Lenders hereby agree among themselves that if any of them shall, whether by voluntary or involuntary payment or mandatory payment (other than a payment or prepayment of Loans made and applied in accordance with the terms of this Agreement), by realization upon security, through the exercise of any right of set-off or banker's lien, by counterclaim or cross action or by the enforcement of any right under the Loan Documents or otherwise, or as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code, receive payment or reduction of a proportion of the aggregate amount of principal, interest, amounts payable in respect of Loans, fees and other amounts then due and owing to that Lender hereunder or under the other Loan Documents with respect to Obligations (collectively, the "AGGREGATE AMOUNTS DUE" to such Lender) that is greater than the proportion received by any other Lender in respect of the Aggregate Amounts Due to such other Lender, then the Lender receiving such proportionately greater payment shall, unless such proportionately greater payment is required by the terms of this Agreement (i) notify Administrative Agent and each other Lender of the receipt of such payment and (ii) apply a portion of such payment to purchase assignments (which it shall be deemed to have purchased from each seller of an assignment simultaneously upon the receipt by such seller of its portion of such payment) of the Aggregate Amounts Due to the other Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by all Lenders in proportion to the Aggregate Amounts Due to them; provided that if all or part of such proportionately greater payment received by such purchasing Lender is thereafter recovered from such Lender, those purchases shall be rescinded and the purchase prices paid for such assignments shall be returned to such purchasing Lender ratably to the extent of such recovery, but without interest. Each Borrower expressly consents to the foregoing arrangement and agrees that any purchaser of an assignment so purchased may exercise any and all rights of a Lender as to such assignment as fully as if that Lender had complied with the provisions of subsection 9.1B with respect to such assignment. In order to further evidence such assignment (and without prejudice to the effectiveness of the assignment provisions set forth above), each purchasing Lender and each selling Lender agree to enter into an assignment agreement at the request of a selling Lender or a purchasing Lender, as the case may be, in form and substance reasonably satisfactory to each such Lender and to Administrative Agent.
B. COSTS OF COLLECTION. Notwithstanding anything in this subsection 9.5 to the contrary, in the event any one or more Lenders (for purposes of this subsection 9.5B, "ENFORCING
LENDERS") receives any amounts that are subject to the sharing provisions of
subsection 9.5A as a result of such Enforcing Lender or Enforcing Lenders, but
not any Agents or all Lenders, commencing Proceedings to recover such amounts,
no Lender that is not an Enforcing Lender shall be entitled to the benefits of
subsection 9.5A with respect to the amounts received by such Enforcing Lenders
(i) unless and until such Lender has paid its Pro Rata Share of the
out-of-pocket costs and expenses (including legal fees and expenses of counsel
to such Enforcing Lenders) incurred by such Enforcing Lenders in connection with
such Proceedings or (ii) in any greater amount at any time than such Lender
would be entitled to receive under such subsections if all Lenders paid their
Pro Rata Shares of such costs and expenses.
9.6 AMENDMENTS AND WAIVERS.
No amendment, modification, termination or waiver of any provision of this Agreement or of the Notes or the Loan Documents, and no consent to any departure by any Borrower therefrom, shall in any event be effective without the written concurrence of Requisite Lenders; provided that no such amendment, modification, termination, waiver or consent shall, without the consent of: (a) each Lender with Obligations directly affected (whose consent shall be required for any such amendment, modification, termination or waiver in addition to that of Requisite Lenders) (1) reduce the principal amount of any Loan, (2) increase the maximum aggregate amount of such Lender's Commitment, (3) postpone the scheduled final maturity date of the Loans, (4) postpone the date on which any interest or any fees are payable, (5) decrease the interest rate borne by any Loan (other than any waiver of any increase in the interest rate applicable to any of the Loans pursuant to subsection 2.2C) or the amount of any fees payable hereunder, or (6) change in any manner or waive the provisions contained in subsection 7.1; (b) each Lender, (1) change in any manner the definition of "Pro Rata Share" or the definition of "Requisite Lenders" (except for any changes resulting solely from an increase in Commitments approved by Requisite Lenders), (2) change in any manner any provision of this Agreement that, by its terms, expressly requires the approval or concurrence of all Lenders, (3) release any Lien granted in favor of Administrative Agent or Collateral Agent with respect to all or substantially all of the Collateral (except that such Lien may be released on all or substantially all Collateral to the extent such release is required in connection with an Asset Sale or Asset Sales permitted under this Agreement), or release any substantial portion of Borrowers from their obligations under this Agreement (except that all or any number of Borrowers may be released from such obligations to the extent such release is required in connection with an Asset Sale or Asset Sales permitted under this Agreement), or (4) change in any manner or waive the provisions contained in subsection 9.6; (c) Administrative Agent and Documentation Agent, change in any manner the definition of "Eligible Assignee"; and (d) the relevant Agent, affect the rights or duties of such Agent (in its capacity as such Agent) under this Agreement or any other Loan Document; and provided, however, that no concurrence of any Lender or Lenders shall be required (I) for any amendment, modification, termination or waiver of any provision of subsection 9.25 that only affects the rights and obligations of Debenture Disbursing Agent under this Agreement and the Loan Documents, so long as Agents and Borrowers (and, after execution hereof, the Debenture Disbursing Agent) approve such amendment, modification, termination or waiver; and (II) for any amendment, modification, termination or waiver of any provision of subsection 9.25 that only affects the rights and obligations of Allowed Class 6 Disbursing Agent under this Agreement and the Loan Documents, so long as Agents and Borrowers (and, after execution
hereof, the Allowed Class 6 Disbursing Agent) approve such amendment, modification, termination or waiver.
In addition, (i) no amendment, modification, termination or waiver of any provision of any Note shall be effective without the written concurrence of the Lender which is the holder of that Note; and (ii) no amendment, modification, termination or waiver of any provision of Section 9 or of any other provision of this Agreement which, by its terms, expressly requires the approval or concurrence of Administrative Agent or Documentation Agent shall be effective without the written concurrence of Administrative Agent or Documentation Agent, as the case may be. Administrative Agent may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of that Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on any Borrower or Borrowers in any case shall entitle any Borrower or Borrowers to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this subsection 9.6 shall be binding upon each Lender at the time outstanding, each future Lender and, if signed by Borrowers, on Borrowers. Administrative Agent agrees that promptly after the effectiveness of any amendment, termination, supplement, waiver or other modification of this Agreement it shall provide, or cause to be provided, to each Lender a copy thereof to the extent such a copy is available to Administrative Agent.
9.7 INDEPENDENCE OF COVENANTS.
All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of an Event of Default or Potential Event of Default if such action is taken or condition exists.
9.8 NOTICES; EFFECTIVENESS OF SIGNATURES.
Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served, or sent by telefacsimile or United States mail or courier service or (subject to the following paragraphs in this subsection 9.8) electronic mail and shall be deemed to have been given (a) when delivered in person or by courier service, (b) upon receipt of telefacsimile in complete and legible form, (c) three Business Days after depositing it in the United States mail with postage prepaid and properly addressed, or (d) in the case of communications delivered by electronic mail to the extent provided in the following paragraph, as provided pursuant to such paragraph; provided that notices to Administrative Agent shall not be effective until received. For the purposes hereof, the address of each party hereto shall be as set forth under such party's name on the signature pages hereof or (i) as to Company and Administrative Agent, such other address as shall be designated by such Person in a written notice delivered to the other parties hereto and (ii) as to each other party, such other address as shall be designated by such party in a written notice delivered to Administrative Agent.
Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by Administrative Agent, provided that the foregoing shall not apply to notices to any Lender pursuant to Section 2 hereof if such Lender has notified Administrative Agent that it is incapable of receiving notices under such Section by electronic communication. Administrative Agent or any Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.
Loan Documents and notices under the Loan Documents may be transmitted and/or signed by telefacsimile. The effectiveness of any such documents and signatures shall, subject to applicable law, have the same force and effect as an original copy with manual signatures and shall be binding on all Loan Parties, Agents and Lenders. Administrative Agent may also require that any such documents and signature be confirmed by a manually-signed copy thereof; provided, however, that the failure to request or deliver any such manually-signed copy shall not affect the effectiveness of any facsimile document or signature.
9.9 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
A. All representations, warranties and agreements made herein or in any other Loan Document shall survive the execution and delivery of this Agreement and the making of the Loans hereunder.
B. Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of Borrowers set forth in subsections 2.6, 9.2, 9.3, 9.4, 9.19 and 9.20 and the agreements of Lenders set forth in subsections 8.2C, 8.4, 9.5, 9.19 and 9.20 shall survive the payment of the Loans, and the termination of this Agreement (and the benefits to a Lender of such agreements of Borrowers shall survive such Lender's ceasing to be a party hereto pursuant to subsection 9.1B).
9.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of an Agent or any Lender in the exercise of any power, right or privilege hereunder or under any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement and the other Loan Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available.
9.11 MARSHALLING; PAYMENTS SET ASIDE.
Neither any Agent nor any Lender shall be under any obligation to marshal any assets in favor of Company or any other party or against or in payment of any or all of the Obligations. To the extent that Company makes a payment or payments to Administrative Agent or Lenders (or to Administrative Agent for the benefit of Lenders), or Agents or Lenders enforce any security interests or exercise their rights of setoff, and such payment or payments or the
proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, any other state or federal law, common law or any equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor or related thereto, shall be revived and continued in full force and effect as if such payment or payments had not been made or such enforcement or setoff had not occurred.
9.12 SEVERABILITY.
In case any provision in or obligation under this Agreement or the Notes shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
9.13 OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS; DAMAGE WAIVER.
The obligations of Lenders hereunder are several and no Lender shall be responsible for the obligations or Commitments of any other Lender hereunder. Nothing contained herein or in any other Loan Document, and no action taken by Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders, or Lenders and Company, as a partnership, an association, a Joint Venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out of this Agreement and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose.
To the extent permitted by law, each Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with or as a result of this Agreement, any other Loan Document, any transaction contemplated by the Loan Documents, any Loan or the use of proceeds thereof.
9.14 RELEASE OF SECURITY INTEREST .
Upon the proposed sale or other disposition of any Collateral that is permitted by this Agreement and the Intercreditor Agreement or, subject to the Intercreditor Agreement, to which Requisite Lenders have otherwise consented, for which a Loan Party desires to obtain a security interest release from Collateral Agent, such Loan Party shall deliver to Administrative Agent and Collateral Agent an Officer's Certificate (i) stating that the Collateral subject to such disposition is being sold or otherwise disposed of in compliance with the terms hereof and of the Loan Documents and (ii) specifying the Collateral being sold or otherwise disposed of in the proposed transaction. Upon the receipt of such Officer's Certificate, Collateral Agent shall, at such Loan Party's expense, so long as Collateral Agent (a) believes in good faith that the facts stated in such Officer's Certificate are true and correct and (b), if the sale or other disposition of such item of Collateral constitutes an Asset Sale, shall have received evidence satisfactory to it
that arrangements satisfactory to it have been made for delivery of the Net Asset Sale Proceeds if and as required by subsection 2.4, execute and deliver such releases of its security interest in such Collateral, as may be reasonably requested by such Loan Party. In the event of any conflict or inconsistency between this subsection 9.14 and the terms of the Intercreditor Agreement, the terms of the Intercreditor Agreement shall prevail.
9.15 HEADINGS.
Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect.
9.16 APPLICABLE LAW.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER OR ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THAT WOULD REQUIRE APPLICATION OF ANOTHER LAW.
9.17 CONSTRUCTION OF AGREEMENT.
Each of the parties hereto acknowledges that it has been represented by counsel in the negotiation and documentation of the terms of this Agreement, that it has had full and fair opportunity to review and revise the terms of this Agreement, and that this Agreement has been drafted jointly by all of the parties hereto. Accordingly, each of the parties hereto acknowledges and agrees that the terms of this Agreement shall not be construed against or in favor of another party.
9.18 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK (AS ANY AGENT, AGENTS, LENDER OR LENDERS BRINGING SUCH ACTION MAY ELECT IN ITS OR THEIR SOLE DISCRETION). BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH BORROWER, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS (AND SUBMITS TO) GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO SUCH BORROWER AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SUBSECTION 9.8;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH BORROWER IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST SUCH BORROWER IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 9.18
RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO
THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW
SECTION 5-1402 OR OTHERWISE.
9.19 WAIVER OF JURY TRIAL.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR
THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this
waiver is intended to be all-encompassing of any and all disputes that may be
filed in any court and that relate to the subject matter of this transaction,
including contract claims, tort claims, breach of duty claims and all other
common law and statutory claims. Each party hereto acknowledges that this waiver
is a material inducement to enter into a business relationship, that each has
already relied on this waiver in entering into this Agreement, and that each
will continue to rely on this waiver in their related future dealings. Each
party hereto further warrants and represents that it has reviewed this waiver
with its legal counsel and that it knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING
(OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION
9.19 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the event of litigation,
this Agreement may be filed as a written consent to a trial by the court.
9.20 CONFIDENTIALITY.
Each Lender shall hold all non-public information obtained pursuant to the requirements of this Agreement that has been identified as confidential by Company in accordance with such Lender's customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices, it being understood and agreed by Borrowers that in any event a Lender may make (a) disclosures to Affiliates and professional advisors of such Lender, (b) disclosures reasonably required by (i) any bona fide assignee, transferee or participant in connection with the contemplated assignment or transfer by such Lender of any Loans or any participations therein, or (ii) any direct or indirect contractual counterparties in swap agreements or such contractual counterparties' professional advisors provided that such assignee, transferee, participant, contractual counterparty or professional advisor agrees to keep such information confidential to the same extent required of Lenders hereunder, (c) disclosures to any court or tribunal (whether or not pursuant to subpoena) in connection with any action arising out of or related to this Agreement, or (d) disclosures required or requested by any Government Authority or representative thereof or pursuant to legal process; provided that, unless specifically prohibited by applicable law or court order, each Lender shall notify Company of any request by any Government Authority or representative thereof (other than any such request in connection with any examination of such Lender by such Government Authority) for disclosure of any such non-public information prior to disclosure of such information; and provided, further that in no event shall any Lender be obligated or required to return any materials furnished by Company or any of its Subsidiaries.
Notwithstanding anything herein to the contrary, information required to be treated as confidential by reason of the foregoing shall not include, and Administrative Agent, each Lender and the respective Affiliates of each of the foregoing (and the respective partners, directors, officers, employees, agents, advisors and other representatives of each of the foregoing and their respective Affiliates) (collectively, the "LENDER PARTIES") may disclose to any and all Persons, without limitation of any kind, (x) any information with respect to United States federal and state income tax treatment and United States federal income tax structure of the transactions contemplated hereby and any facts that may be relevant to understanding such tax treatment, which facts shall not include for this purpose the names of the parties or any other Person named herein, or information that would permit identification of the parties or such other Persons, or any pricing terms or other non-public business or financial information that is unrelated to such tax treatment or facts, and (y) all materials of any kind (including opinions or other tax analyses) relating to such tax treatment or facts that are provided to any of the Lender Parties.
9.21 RELEASE OF PARTIES; WAIVERS.
A. Each Borrower, on behalf of itself and each of its Subsidiaries (collectively, the "RELEASORS"), hereby releases, remises, acquits and forever discharges each Agent, each Lender (in its capacity as a Lender hereunder and as a lender, collateral agent or depository and in any other capacity under or in connection with the Prepetition Credit Documents or the DIP Credit Documents), each other Prepetition Lender and DIP Lender (in its capacity as a lender, collateral agent or depository and in any other capacity under or in connection with the Prepetition Credit Documents or the DIP Credit Documents), and each of their respective employees, agents, representatives, consultants, attorneys, fiduciaries, servants, officers,
directors, partners, predecessors, successors and assigns, subsidiary corporations, parent corporations, related corporate divisions, participants and assigns (all of the foregoing hereinafter called the "RELEASED PARTIES"), from any and all actions and causes of action, judgments, executions, suits, debts, claims, demands, liabilities, obligations, setoffs, recoupments, counterclaims, defenses, damages and expenses of any and every character, known or unknown, suspected or unsuspected, direct and/or indirect, at law or in equity, of whatsoever kind or nature, whether heretofore or hereafter arising, for or because of any matter or things done, omitted or suffered to be done by any of the Released Parties prior to and including the date of execution hereof, and in any way directly or indirectly arising out of or in any way connected to this Agreement, any of the other Loan Documents, the Prepetition Credit Documents, and DIP Credit Documents or the administration or enforcement of any of such documents (all of the foregoing hereinafter called the "RELEASED MATTERS"). Each Releasor acknowledges that the agreements in this subsection are intended to be in full satisfaction of all or any alleged injuries or damages suffered or incurred by such Releasor arising in connection with the Released Matters and constitute a complete waiver of any right of setoff or recoupment, counterclaim or defense of any nature whatsoever which arose prior to the Closing Date to payment or performance of the Obligations. Each Releasor represents and warrants that it has no knowledge of any claim by it against the Released Parties or of any facts, or acts or omissions of the Released Parties which on the date hereof would be the basis of a claim by the Releasors against the Released Parties which is not released hereby. Each Releasor represents and warrants that it has not purported to transfer, assign, pledge or otherwise convey any of its right, title or interest in any Released Matter to any other person or entity and that the foregoing constitutes a full and complete release of all Released Matters. Releasors have granted this release freely, and voluntarily and without duress.
9.22 NO FIDUCIARY DUTY.
No Agent nor any Lender has or shall have, by reason of this Agreement or any of the Loan Documents, a fiduciary relationship in respect of, or a fiduciary duty to, any Borrower, Borrowers, any other Loan Party or Loan Parties, and the relationship between Administrative Agent, the other Agents and Lenders, on one hand, and each Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor.
9.23 COUNTERPARTS; EFFECTIVENESS.
This Agreement and any amendments, waivers, consents or supplements hereto or in connection herewith may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto; provided, however, that notwithstanding a failure by one or more Lenders to execute a counterpart hereof, this Agreement shall become effective on the Closing Date so long as all Agents and Borrowers shall have executed and delivered a counterpart hereof and all conditions described in subsection 4.1 have been satisfied or waived in accordance with the terms hereof. Notwithstanding anything to the contrary contained herein, but subject to the
provisions of subsection 9.25, the Loan of any Lender that fails to execute a counterpart hereof on the Closing Date shall not be distributed to such Lender until such Lender executes a counterpart of this Agreement and of the Intercreditor Agreement.
9.24 NO THIRD PARTY BENEFICIARIES.
Nothing in this Agreement, express or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Indemnitees and Released Parties related to Agents, and Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
9.25 DISBURSING AGENTS; NON-CONFIRMING HOLDERS.
A. PROVISIONS APPLICABLE TO NON-CONFIRMING HOLDERS AND DISBURSING AGENTS. Anything contained in this Agreement or the other Loan Documents to the contrary notwithstanding, the provisions of this subsection 9.25 shall apply with respect to (I) each Non-Confirming Holder (this and other capitalized terms used in this subsection 9.25 and not otherwise defined in this Agreement are used as defined in subsection 9.25B), (II) each of the Disbursing Agents, and (III) each Loan that would, but for this subsection 9.25, be held by each Non-Confirming Holder on the Closing Date.
(i) Notwithstanding anything in subsection 2.1A to the contrary, on the Closing Date and the Determination Date, a portion of the Loans equal to the percentage of all Loans reflected on Schedule 2.1 opposite the name of the Allowed Class 6 Disbursing Agent shall be allocable to the Allowed Class 6 Disbursing Agent subject the terms and conditions set forth in this subsection 9.25, and a portion of the Loans equal to the percentage of all Loans reflected on Schedule 2.1 opposite the name of the Debenture Disbursing Agent shall be allocable to the Debenture Disbursing Agent subject to the terms and conditions set forth in this subsection 9.25 (including any adjustments as a result of any deemed assignments of such Loans by the Debenture Disbursing Agent pursuant to this subsection 9.25). Notwithstanding that the Loans referenced in the preceding sentence are reflected on Schedule 2.1 as being allocable to Debenture Disbursing Agent or Allowed Class 6 Disbursing Agent, as the case may be, none of the Debenture Disbursing Agent, the Allowed Class 6 Disbursing Agent nor any of the Non-Confirming Holders shall receive any Loans (and each of such Loans and the status (and rights and obligations) of any such Persons as a Lender or as a holder of Debenture Interests or Allowed Class 6 Interests shall be suspended) until (a) in the case of the Debenture Disbursing Agent and the Non-Confirming Holders with respect to Debenture Interests, the Debenture Closing Date, or (b) in the case of the Allowed Class 6 Disbursing Agent and the Non-Confirming Holders with respect to Allowed Class 6 Interests, the Allowed Class 6 Closing Date; provided, however, that the foregoing provisions of this sentence shall cease to apply with respect to any Non-Confirming Holder that becomes a Lender in accordance with clause (iii) of this subsection 9.25A. On the Debenture Closing Date and the Determination Date (if the Debenture Closing Date shall have occurred prior to the Determination Date), the portion of the Loan allocable to the Debenture Disbursing Agent as aforesaid, the delivery of which at such
time remains suspended pursuant to the preceding sentence, shall be distributed to the Debenture Disbursing Agent; and on the Allowed Class 6 Closing Date and the Determination Date (if the Allowed Class 6 Closing Date shall have occurred prior to the Determination Date), the portion of the Loan allocable to the Allowed Class 6 Disbursing Agent as aforesaid, the delivery of which at such time remains suspended pursuant to the preceding sentence, shall be distributed to the Allowed Class 6 Disbursing Agent. All Loans that would otherwise be distributed on the Allowed Class 6 Closing Date or the Determination Date (if the Allowed Class 6 Closing Date shall have occurred prior to the Determination Date) on account of Allowed Class 6 Interests shall be held on such date by the Allowed Class 6 Disbursing Agent; and all Loans that would otherwise be distributed on the Debenture Closing Date or the Determination Date (if the Debenture Closing Date shall have occurred prior to the Determination Date) on account of 9.25% Debentures shall be held on such date by the Debenture Disbursing Agent.
(ii) For so long as Debenture Disbursing Agent or Allowed Class 6 Disbursing Agent holds Loans that would otherwise have been Loans deemed made directly by or distributed directly to Non-Confirming Holders, such Disbursing Agent shall be the Lender of record with respect to such Loans held by it (and the corresponding Commitments and Loan Exposure), except that no Disbursing Agent shall be deemed a "Lender" for purposes of voting on any matters (including the granting of any approvals, consents or waivers) with respect to any of the Loan Documents; provided, however, that this clause (ii) shall not be construed as permitting, without the prior written consent of the relevant Non-Confirming Holder, (a) modification of the rights, duties or obligations under the Loan Documents (other than with respect to voting on any matters) of any Disbursing Agent or of the Non-Confirming Holders for whom such Disbursing Agent serves as record Lender, without concurrent and corresponding modification of the rights, duties and obligations of Lenders other than such Disbursing Agent, (b) the Loan Documents to be modified to require that any Disbursing Agent or Non-Confirming Holder make any loan, advance or other extension of credit to, or incur any additional obligation to, any Borrower or any other Person on or after the Closing Date, other than the Loans and monetary obligations pursuant to the provisions of the Credit Documents in effect on the Closing Date, or (c) modification of the provisions of this subsection 9.25 in a manner that is adverse in any material respect to the Disbursing Agents or the Non-Confirming Holders. For the avoidance of any doubt, the Loans, Commitments and Loan Exposure of each Disbursing Agent shall be excluded in calculating the number or percentage of Loans, Commitments, Loan Exposure and/or Lenders whose votes are required and obtained (or not obtained, as the case may be) for purposes of voting on any matters with respect to any of the Loan Documents.
(iii) Each Non-Confirming Holder shall hold a Debenture Interest or an Allowed Class 6 Interest, as applicable, and shall not be deemed a Lender for any purpose under this Agreement, except that a Non-Confirming Holder may elect to become a Lender solely with respect to its Debenture Interest by executing and delivering to Administrative Agent and Disbursing Agent a Lender Acknowledgement and satisfying the other applicable requirements for becoming a Lender set forth in this subsection 9.25; provided, that a Non-Confirming Holder shall not be permitted at any time to become a Lender with respect to its Allowed Class 6 Interest, and a Non-
Confirming Holder may not execute and deliver to Administrative Agent a Lender Acknowledgement with respect to the Debenture Interest held by it except during the following periods: (a) the 45-day period commencing with the Closing Date, (b) the 30-day period after the date of delivery to the Debenture Disbursing Agent of any notice described in clause (v) of this subsection 9.25A, and (c) solely in the case of a Non-Confirming Holder who is not a Non-Confirming Holder as of the Debenture Closing Date, the 30-day period after such Non-Confirming Holder validly receives a Debenture Interest by assignment or purchase from another Non-Confirming Holder. Each Lender Acknowledgement shall apply with respect to all Debenture Interests of such Non-Confirming Holder, and upon receipt by Administrative Agent of such executed Lender Acknowledgement (together with, if such Non-Confirming Holder was not a Non-Confirming Holder on the Debenture Closing Date, a representation that such Non-Confirming Holder is an Eligible Assignee and payment of a processing and recordation fee to Administrative Agent of $5,000 (in addition to any fee payable to the Debenture Disbursing Agent)), any forms, certificates or other evidence with respect to United States federal income tax withholding matters that an assignee of Loans would be required to deliver to Administrative Agent pursuant to subsection 9.1B(i), and the ratable portion of the Agent Indemnification Amount (if any) owed with respect to the Loans to be deemed assigned by the Debenture Disbursing Agent to such Non-Confirming Holder, Administrative Agent shall accept such Lender Acknowledgment, the Debenture Disbursing Agent shall confirm to Administrative Agent the amount of the Debenture Interest held by such Non-Confirming Holder, such Non-Confirming Holder shall cease to be a Non-Confirming Holder and shall thereupon become a Lender for all purposes under the Loan Documents holding a Loan and Commitment in amounts equal to the amounts so confirmed by the Debenture Disbursing Agent, the Debenture Disbursing Agent shall be deemed to have assigned such Loan and Commitment to such Lender on such date for all purposes of this Agreement, and Administrative Agent shall record such assignment information in the Register.
(iv) The disbursing agreement entered into by the Debenture Disbursing Agent shall establish the procedures and conditions regarding the sale, assignment or transfer by Non-Confirming Holders of the Debenture Interests, and the Debenture Disbursing Agent shall not amend, modify or waive such procedures and conditions and shall not permit Non-Confirming Holders to sell, assign or transfer such interests without complying with such procedures and conditions, and shall not recognize any purported sale, assignment or transfer that fails to so comply.
(v) Borrowers shall notify Administrative Agent and the Debenture Disbursing Agent in writing not less than 30 days prior to seeking any amendment, waiver or other modification to the Loan Documents that would require the approval or concurrence of all Lenders. Any notice provided pursuant to this clause (v) shall be provided by facsimile transmission and shall be deemed to have been given upon receipt of such facsimile by Administrative Agent and the Debenture Disbursing Agent in complete and legible form. Promptly after receipt of such notice, the Debenture Disbursing Agent shall notify the relevant Non-Confirming Holders promptly in accordance with its procedures established for such purposes. No such amendment,
waiver or modification shall be deemed to be effective prior to the expiration of such 30-day period.
(vi) Until such time as the Indemnity Shortfall (as defined below), if any, of a Disbursing Agent shall have been reduced to zero, any payment of amounts with respect to the Loan of such Disbursing Agent shall be applied first to pay such Disbursing Agent's unpaid portion of the Agent Indemnification Amount (as defined below), so as to reduce the Indemnity Shortfall of such Disbursing Agent, and Administrative Agent shall make such application prior to paying any amounts with respect to the Loans of such Disbursing Agent.
(vii) No Disbursing Agent shall be entitled after the Closing Date to receive any non-public information obtained pursuant to the requirements of this Agreement that has been identified by Company as confidential, no Agent shall be required to provide any such information to any of the Disbursing Agents. Nothing in this Agreement, express or implied, shall be construed to confer upon any Non-Confirming Holder that does not become a Lender any legal or equitable right, remedy or claim under or by reason of this Agreement; no Agent shall have, by reason of this Agreement or any of the other Loan Documents, a fiduciary relationship in respect of any Disbursing Agent or any Non-Confirming Holder; and nothing in this Agreement or any of the other Loan Documents, expressed or implied, is intended to or shall be so construed as to impose upon an Agent any obligations to any Disbursing Agent or any Non-Confirming Holder in respect of this Agreement or any of the other Loan Documents except as expressly set forth herein or therein.
(viii) All payments required to be made pursuant to any provision of the Loan Documents on account of the Loans held by a Disbursing Agent shall be made to such Disbursing Agent (a) in the case of payments to the Debenture Disbursing Agent, for distribution by the Debenture Disbursing Agent to Non-Confirming Holders on account of Debenture Interests, and (b) in the case of payments to the Allowed Class 6 Disbursing Agent, for distribution by the Allowed Class 6 Disbursing Agent to Non-Confirming Holders on account of Allowed Class 6 Interests.
(ix) No recourse shall be had for the payment of any of the Agent Indemnification Obligations against any Disbursing Agent or any Non-Confirming Holder individually or personally, or any successor or Affiliate of such Disbursing Agent or such Non-Confirming Holder, or any of the assets of any of the aforesaid Persons, it being understood that the sole remedy available to Agents pursuant to the Loan Documents with respect to the Agent Indemnification Amount owed by Non-Confirming Holders shall be deduction of the amount of the Indemnity Shortfall from payments otherwise required to be made to such Disbursing Agents pursuant to the Loan Documents, as set forth in clause (vi) above and in the Intercreditor Agreement.
(x) Each Disbursing Agent shall maintain (and make available for inspection by Administrative Agent upon reasonable prior notice at reasonable times) a register for the recordation of, and shall record, the names and addresses of each Non-Confirming Holder and the Debenture Interest or Allowed Class 6 Interest (to the extent
determinable), as the case may be, of such Non-Confirming Holder from time to time. Administrative Agent and Disbursing Agent shall deem and treat the Persons listed as Non-Confirming Holders in such register as the holders and owners of the corresponding Debenture Interests or Allowed Class 6 Interests listed therein for all purposes hereof, and any such recordation shall be conclusive and binding on Agents and Borrowers, and each Agent shall be entitled to rely, and shall be fully protected in relying, upon such register. Failure to make any such recordation, or any error in such recordation, shall not affect any Debenture Interest or Allowed Class 6 Interest.
B. DEFINITIONS. As used in this subsection 9.25, the following terms have the following meanings:
"AGENT INDEMNIFICATION AMOUNT" means, as of any date, the aggregate cumulative amount for which Agents and/or Collateral Agent have requested compensation, reimbursement or indemnification from Lenders under the Loan Documents.
"ALLOWED CLASS 6 CLAIMS" has the meaning assigned to that term in the Approved Plan of Reorganization.
"ALLOWED CLASS 6 CLOSING DATE" means the date on which the Bankruptcy Court shall have entered the Allowed Class 6 Disbursing Agent Authorization Order.
"ALLOWED CLASS 6 DISBURSING AGENT" means U.S. Bank National Association, in its capacity as disbursing agent for the holders of the Allowed Class 6 Claims under the Approved Plan of Reorganization, the Confirmation Order, the Allowed Class 6 Disbursing Agent Authorization Order and the agency agreement relating thereto to be entered into on or after the Closing Date.
"ALLOWED CLASS 6 DISBURSING AGENT AUTHORIZATION ORDER" means an order or orders of the Bankruptcy Court authorizing U.S. Bank National Association to enter into this Agreement as a Lender and to serve as the Allowed Class 6 Disbursing Agent with respect to Loans allocable to the Allowed Class 6 Disbursing Agent as described in the first sentence of subsection 9.25A(i) above.
"ALLOWED CLASS 6 INTEREST" means, with respect to any Non-Confirming Holder, (i) prior to the Closing Date, an Allowed Class 6 Claim of such Non-Confirming Holder, and (ii) on and after the Closing Date, the interest held by such Non-Confirming Holder in any Loan distributed on the Allowed 6 Closing Date or the Determination Date to the Allowed Class 6 Disbursing Agent.
"DEBENTURE DISBURSING AGENT AUTHORIZATION ORDER" means an order or orders of the Bankruptcy Court authorizing Wells Fargo Bank, N.A. to enter into this Agreement as a Lender and to serve as the Debenture Disbursing Agent with respect to Loans allocable to the Debenture Disbursing Agent as described in the first sentence of subsection 9.25A(i) above.
"DEBENTURE DISBURSING AGENT" means Wells Fargo Bank, N.A., in its capacity as disbursing agent for the holders of the 9.25% Debentures under the Approved Plan of Reorganization, the Confirmation Order, the Debenture Disbursing Agent Authorization Order and the disbursing agreement relating thereto to be entered into on or after the Closing Date.
"DEBENTURE INTEREST" means, with respect to any Non-Confirming Holder, (i) prior to the Debenture Closing Date, the claim in respect of the 9.25% Debentures held by such Non-Confirming Holder, and (ii) on and after the Debenture Closing Date, the interest held by such Non-Confirming Holder in any Loan distributed on the Debenture Closing Date or the Determination Date to the Debenture Disbursing Agent; provided, however, that any Debenture Interest shall cease to be a Debenture Interest at such time that the Non-Confirming Holder with respect thereto shall become a Lender in accordance with subsection 9.25.
"DETERMINATION DATE" has the meaning assigned to that term in the Approved Plan of Reorganization.
"DISBURSING AGENT" means either Debenture Holder Disbursing Agent or Allowed Class 6 Disbursing Agent, and "DISBURSING AGENTS" means each of them.
"INDEMNITY SHORTFALL" means, at any date, with respect to any Disbursing Agent, the excess, if any, of (i) the lesser of (x) such Disbursing Agent's applicable Pro Rata Share of the Agent Indemnification Amount (calculated as if no Lender had funded its Pro Rata Share of such amount) and (y) the principal amount of the Loan(s) of such Disbursing Agent, over (ii) the aggregate of all amounts paid (whether through direct payment or through deduction by Administrative Agent as described in subsection 9.25A(vi)) by such Disbursing Agent, in respect of the Loan of such Disbursing Agent, on account of amounts for which Agents and/or Collateral Agent have requested compensation, reimbursement or indemnification from Lenders under the Loan Documents.
"LENDER ACKNOWLEDGMENT" means an acknowledgement and counterpart to this Agreement and to the Intercreditor Agreement in substantially the form of Exhibit XI annexed hereto.
"NON-CONFIRMING HOLDER" means, on any date of determination, a Person that holds on such date a Debenture Interest or an Allowed Class 6 Interest in Loans initially allocable in accordance with subsection 9.25A(i) to the Debenture Disbursing Agent or the Allowed Class 6 Disbursing Agent, respectively.
"DEBENTURE CLOSING DATE" means the date on which the Bankruptcy Court shall have entered the Debenture Disbursing Agent Authorization Order.
"SETTLEMENT DISTRIBUTION" has the meaning assigned to that term in the Approved Plan of Reorganization.
C. EXECUTION AND DELIVERY; AUTHORITY. The Debenture Holder Disbursing Agent is executing and delivering this Agreement and the Intercreditor Agreement as the agent for the Non-Confirming Holders on account of the 9.25% Debentures under the Approved Plan of Reorganization, the Confirmation Order and pursuant the Authorization Order. The Allowed Class 6 Disbursing Agent is executing and delivering this Agreement and the Intercreditor Agreement as the agent for the Non-Confirming Holders holding Loans originally representing Allowed Class 6 Claims under the Approved Plan of Reorganization and the Confirmation Order.
D. OTHER PROVISIONS UNAFFECTED. Except as expressly set forth in this subsection 9.25, the terms, provisions and conditions of this Agreement and the other Loan Documents applicable to Lenders and the Loans are applicable to the Disbursing Agents and their respective Loans.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.
BORROWERS:
COVANTA POWER INTERNATIONAL
HOLDINGS, INC., as Borrower
By: ______________________________________
Name: Ashish Sarkar
Title: Authorized Officer
Notice Address for Borrower:
c/o Covanta Energy Corporation
40 Lane Road
Fairfield, NJ 07007
Attn: Timothy J. Simpson
COVANTA POWER DEVELOPMENT, INC.
COVANTA POWER DEVELOPMENT OF BOLIVIA, INC.
COVANTA WASTE TO ENERGY OF ITALY, INC.
OPI QUEZON, INC., as Borrowers
By: ______________________________________ Name: Anthony Orlando Title: Authorized Officer
Notice Address for Borrowers:
c/o Covanta Energy Corporation
40 Lane Road
Fairfield, NJ 07007
Attn: Timothy J. Simpson
AGENTS AND LENDERS:
BANK OF AMERICA, N.A.,
as Administrative Agent
By: ______________________________________
Name: Henry Y. Yu
Title: Managing Director
Notice Address:
Bank of America, N.A., as Administrative Agent
555 So. Flower Street, 17th Floor
CA9-706-17-54
Los Angeles, California 90071
Attention: David Price, Vice President
Voice: (213) 345-1300
Fax: (415) 503-5011
email: david.price@bankofamerica.com
For all operational issues for Loans:
Bank of America, N.A., as Administrative Agent
901 Main St., 14th Floor
MC: TX1-492-14-11
Dallas, Texas 75202
Phone: 214-209-0987
Fax: 214-290-8370
Attention: Richard A. Piland
E-mail:
richard.a.piland@bankofamerica.com
BANK OF AMERICA, N.A.,
as Co-Arranger and as a Lender
By: ______________________________________
Name: Henry Y. Yu
Title: Managing Director
Notice Address:
Bank of America, N.A.
555 California Street
San Francisco, CA 94104-1503
Phone: 415-622-4438
Fax: 415-622-0234
Attention: Henry Yu
Email: henry.yu@bankofamerica.com
DEUTSCHE BANK SECURITIES, INC.,
as Documentation Agent and Co-Arranger
By: ______________________________________
Name:
Title:
By: ______________________________________
Name:
Title:
Notice Address:
Attention:
Deutsche Bank Securities, Inc.
60 Wall Street
New York, NY 10005
BANC OF AMERICA SECURITIES LLC, as
Agent for BANK OF AMERICA, N.A., as a Lender
By: ______________________________________
Name:
Title:
BANK OF TOKYO MITSUBISHI (CANADA),
as a Lender
By: ______________________________________
Name: Angelo Bisutti
Title: Senior Vice President
BAYERISCHE HYPO-UND VEREINSBANK AG,
as a Lender
By: ______________________________________
Name:
Title:
By: ______________________________________
Name:
Title:
BEAR STEARNS & CO. INC.,
as a Lender
By: ______________________________________
Name:
Title:
CANADIAN IMPERIAL BANK OF COMMERCE,
as a Lender
By: ______________________________________
Name:
Title:
CREDIT SUISSE FIRST BOSTON,
as a Lender
By: ______________________________________
Name:
Title:
DEUTSCHE BANK AG, NEW YORK BRANCH,
as a Lender
By: ______________________________________
Name: Keith Braun
Title: Director
By: ______________________________________
Name: Patrick Dowling
Title: Vice President
HSBC BANK USA,
as a Lender
By: ______________________________________
Name:
Title:
IIB BANK LIMITED,
as a Lender
By: ______________________________________
Name:
Title:
By: ______________________________________
Name:
Title:
JPMORGAN CHASE BANK
(FORMERLY KNOWN AS THE CHASE MANHATTAN BANK),
as a Lender
By: ______________________________________
Name: Michael Lancia
Title: Vice President
KBC BANK NV, NEW YORK BRANCH,
as a Lender
By: ______________________________________
Name:
Title:
By: ______________________________________
Name:
Title:
Notice Address:
Attention: Rose Pagan
KBC Bank NV, New York Branch
125 West 55th Street
New York, NY 10019
Telephone No.: (212) 541-0657
Fax No.: (212) 956-5581
LANDESBANK HESSEN-THURINGEN GIROZENTRALE,
as a Lender
By: ______________________________________
Name:
Title:
By: ______________________________________
Name:
Title:
Notice Address:
420 Fifth Avenue
New York, New York 10018
Attention: Structured Finance
Telephone: 212-703-5303
Telecopier: 212-703-5262
MERRILL LYNCH, PIERCE, FENNER &
SMITH, INCORPORATED,
as a Lender
By: ______________________________________
Name:
Title:
MINTO APARTMENTS LIMITED,
as a Lender
By: ______________________________________
Name:
Title:
QUANTUM PARTNERS LDC
C/O SOROS FUND MANAGEMENT LLC,
as a Lender
By: ______________________________________
Name:
Title:
SPECIAL SITUATIONS INVESTING GROUP,
as a Lender
By: ______________________________________
Name:
Title:
SUNTRUST BANK,
as a Lender
By: ______________________________________
Name:
Title:
TD SECURITIES (USA) INC.,
as a Lender
By: ______________________________________
Name:
Title:
THE BANK OF NEW YORK,
as a Lender
By: ______________________________________
Name:
Title:
THE TORONTO-DOMINION BANK,
as a Lender
By: ______________________________________
Name:
Title:
THE TORONTO-DOMINION BANK,
as a Lender(1)
By: ______________________________________
Name:
Title:
UBS LOAN FINANCE LLC,
as a Lender
By: ______________________________________
Name:
Title:
By: ______________________________________
Name:
Title:
U.S. BANK NATIONAL ASSOCIATION
(FORMERLY KNOWN AS FIRSTAR BANK, N.A.),
as a Lender
By: ______________________________________
Name: Alan R. Milster
Title: Vice President
WACHOVIA BANK, NATIONAL ASSOCIATION,
as a Lender
By: ______________________________________
Name: Joel Thomas
Title: Director
WESTLB AG (FORMERLY KNOWN AS WESTDEUTSCHE
LANDESBANK GIROZENTRALE), NEW YORK BRANCH,
as a Lender
By: ______________________________________
Name:
Title:
By: ______________________________________
Name:
Title:
2005646 ONTARIO INC.,
as a Lender
By: ______________________________________
Name:
Title:
4212657 CANADA INC., SUCCESSOR TO DRESDNER
BANK CANADA,
as a Lender
By: ______________________________________
Name:
Title:
By: ______________________________________
Name:
Title:
EXHIBIT 10.29
CREDIT AGREEMENT
DATED AS OF MARCH 10, 2004
AMONG
COVANTA POWER INTERNATIONAL HOLDINGS, INC.
AND
EACH OF ITS SUBSIDIARIES PARTY HERETO,
THE LENDERS LISTED HEREIN,
AS LENDERS,
DEUTSCHE BANK AG, NEW YORK BRANCH
AS ADMINISTRATIVE AGENT
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS.............................................................................. 1
1.1 Certain Defined Terms........................................................................ 1
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement........... 30
1.3 Other Definitional Provisions and Rules of Construction...................................... 31
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS............................................... 31
2.1 Commitments; Making of Loans; the Register; Optional Notes................................... 31
2.2 Interest on the Loans........................................................................ 34
2.3 Fees......................................................................................... 36
2.4 Repayments, Prepayments and Reductions in Commitments; General
Provisions Regarding Payments; Application of Proceeds of Collateral and
Payments Under CPIH Guaranty................................................................. 37
2.5 Use of Proceeds.............................................................................. 41
2.6 Special Provisions Governing Eurodollar Rate Loans........................................... 42
2.7 Increased Costs; Taxes; Capital Adequacy..................................................... 44
2.8 Statement of Lenders; Obligation of Lenders to Mitigate...................................... 47
2.9 Defaulting Lender............................................................................ 48
2.10 Joint and Several Liability; Payment Indemnifications........................................ 49
2.11 Rights of Subrogation, Contribution, Etc..................................................... 49
SECTION 3. CONDITIONS TO LOANS...................................................................... 50
3.1 Conditions to Closing Date................................................................... 50
3.2 Conditions to All Loans...................................................................... 59
SECTION 4. COMPANY'S REPRESENTATIONS AND WARRANTIES................................................. 60
4.1 Organization, Powers, Qualification, Good Standing, Business and Subsidiaries................ 60
4.2 Authorization of Borrowing, etc.............................................................. 61
4.3 Financial Condition.......................................................................... 62
4.4 No Material Adverse Change; No Restricted Payments........................................... 63
4.5 Title to Properties; Liens; Real Property; Intellectual Property............................. 63
4.6 Litigation; Adverse Facts.................................................................... 64
4.7 Payment of Taxes............................................................................. 64
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TABLE OF CONTENTS
(continued)
PAGE
4.8 Performance of Agreements; Material Contracts................................................ 64
4.9 Governmental Regulation...................................................................... 65
4.10 Securities Activities........................................................................ 65
4.11 Employee Benefit Plans....................................................................... 65
4.12 Certain Fees................................................................................. 66
4.13 Environmental Protection..................................................................... 67
4.14 Employee Matters............................................................................. 67
4.15 Matters Relating to Collateral............................................................... 67
4.16 Disclosure................................................................................... 68
4.17 Cash Management System....................................................................... 69
4.18 Matters Relating to Loan Parties............................................................. 69
4.19 Investigation................................................................................ 70
4.20 Matters Relating to Bankruptcy Proceedings................................................... 70
4.21 Subordinated Indebtedness.................................................................... 71
4.22 Reporting to IRS............................................................................. 71
SECTION 5. COMPANY'S AFFIRMATIVE COVENANTS.......................................................... 71
5.1 Financial Statements and Other Reports....................................................... 71
5.2 Existence, etc............................................................................... 76
5.3 Payment of Taxes and Claims; Tax............................................................. 77
5.4 Maintenance of Properties; Insurance; Application of Net Insurance/ Condemnation Proceeds.... 77
5.5 Inspection Rights; Lender Meeting............................................................ 79
5.6 Compliance with Laws, etc.................................................................... 80
5.7 Environmental Matters........................................................................ 80
5.8 Execution of the Personal Property Collateral Documents After the Closing Date............... 82
5.9 Matters Relating to Real Property Collateral................................................. 82
5.10 Deposit Accounts; Repatriation of Foreign Cash............................................... 83
5.11 Further Assurances........................................................................... 83
5.12 Most Favored Nations Payments................................................................ 85
SECTION 6. BORROWERS' NEGATIVE COVENANTS............................................................ 85
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TABLE OF CONTENTS
(continued)
PAGE
6.1 Indebtedness................................................................................. 85
6.2 Liens and Related Matters.................................................................... 87
6.3 Investments; Acquisitions.................................................................... 89
6.4 Contingent Obligations; Performance Guaranties............................................... 91
6.5 Restricted Payments.......................................................................... 92
6.6 Financial Covenants.......................................................................... 93
6.7 Restriction on Fundamental Changes; Asset Sales.............................................. 93
6.8 Transactions with Shareholders and Affiliates................................................ 95
6.9 Restriction on Leases........................................................................ 96
6.10 [Intentionally Omitted]...................................................................... 96
6.11 Conduct of Business.......................................................................... 96
6.12 Amendments to Related Agreements, Debt Documentation and Organizational Documents............ 96
6.13 End of Fiscal Years; Fiscal Quarters......................................................... 97
6.14 Amendment to Pension Plans................................................................... 98
SECTION 7. EVENTS OF DEFAULT........................................................................ 98
7.1 Failure to Make Payments When Due............................................................ 98
7.2 Default in Other Agreements.................................................................. 98
7.3 Breach of Certain Covenants.................................................................. 99
7.4 Breach of Warranty........................................................................... 99
7.5 Other Defaults Under Loan Documents.......................................................... 99
7.6 Involuntary Bankruptcy; Appointment of Receiver, etc......................................... 99
7.7 Voluntary Bankruptcy; Appointment of Receiver, etc........................................... 100
7.8 Judgments and Attachments.................................................................... 100
7.9 Dissolution.................................................................................. 100
7.10 Employee Benefit Plans....................................................................... 100
7.11 Material Adverse Effect...................................................................... 101
7.12 Change in Control............................................................................ 101
7.13 Invalidity of Intercreditor Agreement; Failure of Security; Repudiation of Obligations....... 101
7.14 Termination of Material Contracts............................................................ 101
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TABLE OF CONTENTS
(continued)
PAGE
7.15 Default under Existing IPP International Project Guaranties.................................. 102
SECTION 8. ADMINISTRATIVE AGENT..................................................................... 102
8.1 Appointment.................................................................................. 102
8.2 Powers and Duties; General Immunity.......................................................... 103
8.3 Independent Investigation by Lenders; No Responsibility For Appraisal of Creditworthiness.... 104
8.4 Right to Indemnity........................................................................... 105
8.5 Successor Agents............................................................................. 105
8.6 Collateral Documents and Intercreditor Agreement............................................. 105
8.7 Administrative Agent May File Proofs of Claim................................................ 106
SECTION 9. MISCELLANEOUS............................................................................ 107
9.1 Successors and Assigns; Assignments and Participations in Loans.............................. 107
9.2 Expenses..................................................................................... 110
9.3 Indemnity.................................................................................... 111
9.4 Set-Off...................................................................................... 112
9.5 Ratable Sharing.............................................................................. 112
9.6 Amendments and Waivers....................................................................... 113
9.7 Independence of Covenants.................................................................... 114
9.8 Notices; Effectiveness of Signatures......................................................... 114
9.9 Survival of Representations, Warranties and Agreements....................................... 115
9.10 Failure or Indulgence Not Waiver; Remedies Cumulative........................................ 115
9.11 Marshalling; Payments Set Aside.............................................................. 116
9.12 Severability................................................................................. 116
9.13 Obligations Several; Independent Nature of Lenders' Rights; Damage Waiver.................... 116
9.14 Release of Security Interest................................................................. 116
9.15 Headings..................................................................................... 117
9.16 Applicable Law............................................................................... 117
9.17 Construction of Agreement.................................................................... 117
9.18 Consent to Jurisdiction and Service of Process............................................... 117
9.19 Waiver of Jury Trial......................................................................... 118
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TABLE OF CONTENTS
(continued)
PAGE
9.20 Confidentiality.............................................................................. 119
9.21 Release of Parties; Waivers.................................................................. 119
9.22 No Fiduciary Duty............................................................................ 120
9.23 Counterparts; Effectiveness.................................................................. 120
9.24 No Third Party Beneficiaries................................................................. 121
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EXHIBITS
I. FORM OF NOTE
II. FORM OF COMPLIANCE CERTIFICATE
III. FORM OF ASSIGNMENT AGREEMENT
IV. FORM OF NOTICE OF BORROWING
V. FORM OF NOTICE OF CONVERSION/CONTINUATION
VI. FORM OF OPINIONS OF LOAN PARTIES' COUNSEL
VII. FORM OF SECURITY AGREEMENT
VIII. FORM OF CEA Stock Pledge AgREEMENT
IX. FORM OF INTERCREDITOR AGREEMENT
X. FORM OF MORTGAGE
SCHEDULES
1.1A PRINCIPAL LEASE, SERVICE AND OPERATING AGREEMENTS
1.1B BUDGET
2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES
3.1C CORPORATE STRUCTURE
3.1P CASH MANAGEMENT SYSTEM
4.1 COMPANY AND SUBSIDIARIES
4.5B REAL PROPERTY
4.5C INTELLECTUAL PROPERTY
4.6 LITIGATION
4.8A CERTAIN ALLEGED DEFAULTS
4.8C MATERIAL CONTRACTS
4.11 MATTERS RELATING TO EMPLOYEE BENEFIT PLANS
4.13 ENVIRONMENTAL MATTERS
4.14 EMPLOYEE MATTERS (BATAAN)
6.1(v) CERTAIN EXISTING INDEBTEDNESS
6.2 CERTAIN EXISTING LIENS
6.3(v) CERTAIN EXISTING INVESTMENTS
6.4(iii) CERTAIN EXISTING CONTINGENT OBLIGATIONS
6.6E STIPULATED ADJUSTED EBITDA
6.8 CERTAIN TRANSACTIONS WITH AFFILIATES
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COVANTA POWER INTERNATIONAL HOLDINGS, INC.
CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of March 10, 2004 and entered into by and among COVANTA POWER INTERNATIONAL HOLDINGS, INC., a Delaware corporation ("COMPANY" or "CPIH"); EACH OF COMPANY'S SUBSIDIARIES LISTED ON THE SIGNATURE PAGES HEREOF (each such Subsidiary and Company individually referred to herein as a "BORROWER" and, collectively (this and other capitalized terms used in the recitals hereto without definition being used as defined in subsection 1.1), on a joint and several basis, as "Borrowers"); THE PERSONS IDENTIFIED ON THE SIGNATURE PAGES HEREOF AS LENDERS (each individually referred to herein as a "LENDER" and collectively as "LENDERS"); DEUTSCHE BANK AG, NEW YORK BRANCH ("DEUTSCHE BANK"), as administrative agent for Lenders (in such capacity, "ADMINISTRATIVE AGENT" or "AGENT").
R E C I T A L S
WHEREAS, on April 1, 2002 (the "PETITION DATE"), Covanta Energy Corporation, a Delaware corporation ("COVANTA"), and certain of its Domestic Subsidiaries, including Borrowers (collectively, the "DEBTORS"), filed voluntary petitions for relief under the Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York (such proceedings being jointly administered under Case Nos. 02-40826 through 02-40949, 02-16322, 03-13679 through 03-13685, and 03-13687 through 03-13709 are hereinafter referred to as the "CHAPTER 11 CASES"), and each Borrower has operated its businesses and managed its properties as a debtor-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code;
WHEREAS, the Debtors have proposed, their creditors have approved, and the Bankruptcy Court has confirmed, the Plan of Reorganization;
WHEREAS, in connection with the Plan of Reorganization, Borrowers have requested that certain of the Lenders provide priority secured credit facilities on a post-bankruptcy basis on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Borrowers, Lenders and Administrative Agent agree as follows:
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS.
The following terms used in this Agreement shall have the following meanings:
"ADJUSTED EBITDA" means, for any period, (i) without duplication, the aggregate amount derived by combining the amounts for such period of (a) "Operating income (loss)", plus (b) Net Depreciation and Amortization Expense, minus (ii) the amount (expressed as a positive number) for such period of "Minority interests", as each such line item referred to in clause (i)(a) and clause (ii) is reflected in Company's consolidated statement of income prepared
in conformity with GAAP and reported in a manner consistent with Company's reporting of such amount in its quarterly or annual report (as the case may be) on Form 10Q or 10K, respectively, prior to the Closing Date, whether such line items are so titled or otherwise titled.
"ADMINISTRATIVE AGENT" has the meaning assigned to that term in the introduction to this Agreement and also means and includes any successor Administrative Agent appointed pursuant to subsection 8.5.
"AFFILIATE", as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person (other than exclusively as a result of such Person's role as a senior executive of that Person or a Project manager or operator), whether through the ownership of voting securities or by contract or otherwise.
"AGENT" has the meaning assigned to that term in the introduction to this Agreement and also means and includes any successor Administrative Agent appointed pursuant to subsection 8.5.
"AGGREGATE AMOUNTS DUE" has the meaning assigned to that term in subsection 9.5.
"AGREEMENT" means this Credit Agreement dated as of March 10, 2004, as it may be amended, restated, supplemented or otherwise modified from time to time.
"APPROVED FUND" means a Fund that is administered or managed by (i) a Lender, (ii) an Affiliate of a Lender or (iii) an entity or an Affiliate of an entity that administers or manages a Lender.
"APPROVED PLAN OF REORGANIZATION" has the meaning assigned to that term in subsection 3.1E.
"ASSET SALE" means (A) the sale by CEA of any of the Capital Stock of Company to any Person or (B) the sale by Company or any of its Subsidiaries to any Person of (i) any of the Capital Stock of any of Company's Subsidiaries, (ii) substantially all of the assets of any division or line of business of Company or any of its Subsidiaries, or (iii) any other assets (whether tangible or intangible) of Company or any of its Subsidiaries (other than (a) inventory sold in the ordinary course of business and (b) any such other assets to the extent that the aggregate value of such assets sold in any single transaction or related series of transactions is equal to $250,000 or less and the aggregate value of all such other assets since the Closing Date is equal to $1,000,000 or less, in each case so long as not less than 90% of the consideration received for such assets shall be cash); provided, however, that Asset Sales shall not include (1) any sale or discount, in each case without recourse, of accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof (provided, that sales and discounts of not more than $2,000,000 in face value of accounts receivable may be excluded from Asset Sales pursuant to this clause (1), and the sole consideration received in
connection with any such sale of accounts receivable shall be cash), (2) any sale or exchange of specific items of equipment, so long as the purpose of each such sale or exchange is to acquire (and results within 120 days of such sale or exchange in the acquisition of) replacement items of equipment which are the functional equivalent of the item of equipment so sold or exchanged (provided, that any cash received in connection with any such sale or exchange that is not expended as part of such sale or exchange to obtain such replacement items of equipment, to the extent in excess of the amounts set forth in clause (b) of this definition, shall be deemed cash proceeds of an Asset Sale), (3) disposals of obsolete, worn out or surplus property in the ordinary course of business (provided, that not less than 75% of the consideration, if any, received in connection with any such disposal shall be cash, and any such cash received, to the extent in excess of the amounts set forth in clause (b) of this definition, shall be deemed cash proceeds of an Asset Sale), (4) any discount or compromise of notes or accounts receivable for less than the face value thereof, to the extent Company deems necessary in order to resolve disputes that occur in the ordinary course of business, or (5) any sale of shares in the Madurai Project Entity permitted under subsection 6.7(vi).
"ASSIGNMENT AGREEMENT" means an Assignment Agreement in substantially the form of Exhibit III annexed hereto.
"ASSUMPTIONS" has the meaning assigned to that term in subsection 4.11D.
"AVAILABLE CASH" has the meaning given to that term in subsection 2.4A(iii).
"BANK OF AMERICA" means Bank of America, N.A.
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled "Bankruptcy", as now and hereafter in effect, or any successor statute.
"BANKRUPTCY COURT" means the United States Bankruptcy Court for the Southern District of New York and any other court properly exercising jurisdiction over any relevant Chapter 11 Case.
"BASE RATE" means, at any time, the higher of (i) the Prime Rate or (ii) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change.
"BASE RATE LOANS" means Loans bearing interest at rates determined by reference to the Base Rate as provided in subsection 2.2A.
"BASE RATE MARGIN" means a per annum rate equal to 7.00%.
"BORROWERS" has the meaning assigned to that term in the introduction to this Agreement.
"BUDGET" means (i) with respect to Fiscal Year 2004, the budget delivered by Company to Lenders on or prior to the Closing Date pursuant to subsection 3.1G, setting forth projected cash receipts and expenditures for Company and its Subsidiaries for each calendar
month and each Fiscal Quarter from the Closing Date through December 31, 2004, and projected net cash flows for Company and its Subsidiaries for each Fiscal Year thereafter through December 31, 2007, as such budget may be supplemented pursuant to subsection 5.1(i), and (ii) with respect to each Fiscal Year after 2004, the budget delivered by Company to Lenders pursuant to subsection 5.1(xvi), setting forth projected cash receipts and expenditures for Company and its Subsidiaries for each calendar month and Fiscal Quarter during such Fiscal Year and projected net cash flows for Company and its Subsidiaries for each Fiscal Year thereafter through December 31, 2007, as such budget may be supplemented pursuant to subsection 5.1(i).
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York or is a day on which banking institutions located in such state are authorized or required by law or other governmental action to close.
"CAPITAL LEASE", as applied to any Person, means any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person.
"CAPITAL STOCK" means the capital stock or other equity interests of a Person.
"CASH MANAGEMENT SYSTEM" means the cash management system of Company and its Subsidiaries in the United States described in Schedule 3.1P annexed hereto, as such Cash Management System may be modified pursuant to subsection 5.10.
"CASH ON HAND" means, as of any date of determination, the aggregate amounts on deposit in the Cash Management System in the United States as of the close of business on the preceding Business Day.
"CEA" means Covanta Energy Americas, Inc., a Delaware corporation.
"CEA STOCK PLEDGE AGREEMENT" means the Pledge Agreement executed and delivered by CEA on the Closing Date, substantially in the form of Exhibit VIII annexed hereto (it being understood that such Pledge Agreement shall contain a covenant requiring CEA to pay to Collateral Agent any proceeds received by it from or in connection with the sale of any of the common stock of Company to any Person), as such Pledge Agreement may thereafter be amended, restated, supplemented or otherwise modified from time to time.
"CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Section 9601 et seq.), or any successor statute, and all implementing regulations promulgated thereunder.
"CHANGE IN CONTROL" means the occurrence of any one or more of the following: (i) DHC shall cease to own, directly, 80% or more of the outstanding Capital Stock of Covanta; (ii) Covanta shall cease to own, directly or indirectly, 100% of the outstanding Capital Stock of CEA; (iii) CEA shall cease to own, directly, 100% of the outstanding common stock of Company; or (iv) the occurrence of a change in the composition of the Governing Body of
Company such that less than one of the members of such Governing Body is a Continuing Member.
"CHAPTER 11 CASES" has the meaning assigned to that term in the recitals to this Agreement.
"CLOSING DATE" means the date on which each of the conditions described in subsection 3.1 have been satisfied or waived by Administrative Agent and Requisite Lenders (or such other Lenders as may be required under subsection 9.6).
"COLLATERAL" means, collectively, all of the real, personal and mixed property (including Capital Stock) in which Liens are purported to be granted pursuant to the Collateral Documents, as security for the Obligations.
"COLLATERAL AGENT" means Bank of America, in its capacity as Collateral Agent under the Intercreditor Agreement and the Collateral Documents.
"COLLATERAL DOCUMENTS" means the Security Agreement, the CEA Stock Pledge Agreement, the Foreign Pledge Agreements, the Control Agreements, the Mortgages and all other instruments or documents (pursuant to which a Lien to secure all or any portion of the Obligations is purported or intended to be created, granted, evidenced or perfected) delivered from time to time by any Loan Party pursuant to this Agreement or any of the other Loan Documents, as such instruments and documents may be amended, restated, supplemented or otherwise modified from time to time.
"COMMITMENT" means the commitment of a Lender to make Loans to Borrowers pursuant to subsection 2.1A, and "COMMITMENTS" means such commitments of all Lenders in the aggregate.
"COMMITMENT FEE PERCENTAGE" means, on any date of determination, a per annum rate equal to 0.50%.
"COMMODITIES AGREEMENT" means any long-term or forward purchase contract or option contract to buy, sell or exchange commodities or similar agreement or arrangement to which Company or any of its Subsidiaries is a party unless, under the terms of such contract, option contract agreement or arrangement Company expects to make or take delivery of the commodities which are the subject thereof.
"COMPANY" has the meaning assigned to that term in the introduction to this Agreement.
"COMPETITOR" means any Person (and its Affiliates) primarily engaged in the business of (i) the generation and sale of electricity or (ii) municipal waste management.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form of Exhibit II annexed hereto.
"CONFIRMATION ORDER" means the Findings of Fact, Conclusions of Law and Order under 11 U.S.C. Section 1129 and Rule 3020 of the Federal Rules of Bankruptcy Procedure Confirming Debtors' Second Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code entered by the Bankruptcy Court on March 5, 2004 in the Chapter 11 Cases, without modification, revision or amendment.
"CONSOLIDATED CASH INTEREST EXPENSE" means, for any period, Consolidated Interest Expense for such period to the extent paid or payable in cash.
"CONSOLIDATED FACILITIES CAPITAL EXPENDITURES" means, for any period, the aggregate of all cash expenditures by Company and its Subsidiaries during that period that, in conformity with GAAP, would be included in "additions to property, plant or equipment" or comparable items reflected in the consolidated statement of cash flows of Company and its Subsidiaries for that or any other period.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, (i) total interest expense, net of interest income, of Company and its Subsidiaries on a consolidated basis with respect to all outstanding Indebtedness of Company and its Subsidiaries to the extent such Indebtedness is or is required to be reflected on the consolidated balance sheet of Company and its Subsidiaries in conformity with GAAP, but excluding any Indebtedness consisting of Non Recourse Debt, and (ii) to the extent not included in the calculation of the amount described in clause (i), all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and net costs under Interest Rate Agreements, but excluding, however, from clauses (i) and (ii) any amounts referred to in subsection 2.3 payable to Administrative Agent and Lenders on or before the Closing Date.
"CONSOLIDATED LEVERAGE RATIO" means, as at any date of determination, the ratio of (a) Total Debt as at such date to (b) Adjusted EBITDA for the four-Fiscal Quarter period most recently ended prior to such date.
"CONTINGENT OBLIGATION", as applied to any Person, means any
direct or indirect liability, contingent or otherwise, of that Person (i) with
respect to any Indebtedness, lease, dividend or other obligation of another if
the primary purpose or intent thereof by the Person incurring the Contingent
Obligation is to provide assurance to the obligee of such obligation of another
that such obligation of another will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected (in whole or in part) against loss in respect
thereof, (ii) with respect to any letter of credit issued for the account of
that Person or as to which that Person is otherwise liable for reimbursement of
drawings, or (iii) under Hedge Agreements. Contingent Obligations shall include
(a) the direct or indirect guaranty, endorsement (otherwise than for collection
or deposit in the ordinary course of business), co-making, discounting with
recourse or sale with recourse by such Person of the obligation of another, (b)
the obligation to make take-or-pay or similar payments if required regardless of
non-performance by any other party or parties to an agreement, and (c) any
liability of such Person for the obligation of another through any agreement
(contingent or otherwise) (1) to purchase, repurchase or otherwise acquire such
obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise) or (2) to maintain the solvency
or
any balance sheet item, level of income or financial condition of another if, in the case of any agreement described under subclauses (1) or (2) of this sentence, the primary purpose or intent thereof is as described in the preceding sentence. The amount of any Contingent Obligation shall be equal to the amount (if stated) of the obligation so guaranteed or otherwise supported or, if less, the amount to which such Contingent Obligation is specifically limited, or, if the amount of any Contingent Obligation is not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by Company in good faith based upon reasonable assumptions. No obligations under Performance Guaranties shall constitute Contingent Obligations.
"CONTINUING MEMBER" has the meaning assigned to that term in the CPIH Term Loan Agreement.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any provision of any Security issued by that Person or of any material indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject.
"CONTROL AGREEMENT" means an agreement, satisfactory in form and substance to Administrative Agent and executed by the financial institution or securities intermediary at which a Deposit Account or a Securities Account, as the case may be, is maintained, pursuant to which such financial institution or securities intermediary confirms and acknowledges Collateral Agent's security interest in such account, and agrees that the financial institution or securities intermediary, as the case may be, will comply with instructions originated by Collateral Agent as to disposition of funds in such account, without further consent by Company or any Subsidiary, as such agreement may be amended, restated, supplemented or otherwise modified from time to time.
"CORPORATE SERVICES REIMBURSEMENT AGREEMENT" means the corporate services reimbursement agreement entered into by DHC and Covanta on the Closing Date, as such agreement may be amended, restated, supplemented or otherwise modified from time to time.
"COVANTA" has the meaning assigned to such term in the recitals to this Agreement.
"CPIH" has the meaning assigned to that term in the introduction to this Agreement.
"CPIH TERM LOAN AGREEMENT" means (i) that certain credit agreement dated as of the date hereof by and among Borrowers, as borrowers, and the other Persons listed on the signature pages thereof, as lenders, and (ii) any credit agreement entered into by Borrowers to refinance, replace, renew or extend, in whole or in part, the credit agreement referenced in clause (i) and the Indebtedness thereunder (provided, that (a) the terms of such credit agreement, such Indebtedness so refinanced, replaced, renewed or extended shall not be more disadvantageous to Company and its Subsidiaries and the Lenders (in a manner deemed material by Administrative Agent or Requisite Lenders so notifying Administrative Agent or Company)
than the CPIH Term Loan Agreement in effect on the Closing Date, (b) the aggregate amount of Indebtedness outstanding, and additional commitments to extend credit, if any, under the CPIH Term Loan Agreement as refinanced, replaced, renewed or extended, shall not exceed the aggregate amount of the commitments to extend credit in effect under the CPIH Term Loan Agreement on the Closing Date, (c) the obligations under (and the Liens securing) such credit agreement as refinanced, replaced, renewed or extended shall be subject to the Intercreditor Agreement on terms substantively identical to the terms applicable to the obligations in effect under the CPIH Term Loan Agreement on the Closing Date, and (d) Company shall provide to Agents reasonable prior advance written notice of such proposed refinancing, replacement, renewal or extension and copies of all material contracts or other agreements being entered into in connection therewith), in the case of clause (i) or (ii) as such credit agreement may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under subsection 6.12.
"CPIH TERM LOAN DOCUMENTS" means the "Loan Documents" as defined in the CPIH Term Loan Agreement.
"CPIH TERM LOAN LENDERS" means the "Lenders" as defined in the CPIH Term Loan Agreement.
"CPIH TERM LOAN EXPOSURE" means, with respect to any CPIH Term Loan Lender as of any date of determination, the aggregate outstanding principal amount of the CPIH Term Loans of that CPIH Term Loan Lender.
"CPIH TERM LOANS" means the loans made (or deemed made) by CPIH Term Loan Lenders to Borrowers pursuant to subsection 2.1A of the CPIH Term Loan Agreement.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap agreement, or option contract to buy, sell or exchange currencies or other similar agreement or arrangement to which Company or any of its Subsidiaries is a party.
"D.E. SHAW" means D.E. Shaw Laminar Portfolios, L.L.C. a Delaware limited liability company.
"DEBTORS" has the meaning assigned to that term in the recitals to this Agreement.
"DEFAULTED LOAN" has the meaning assigned to that term in subsection 2.9.
"DEFAULT EXCESS" has the meaning assigned to that term in subsection 2.9.
"DEFAULTING LENDER" has the meaning assigned to that term in subsection 2.9.
"DEFAULT PERIOD" has the meaning assigned to that term in subsection 2.9.
"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or similar account maintained with a Person engaged in the business of banking, including a savings bank, savings and loan association, credit union or trust company.
"DETROIT L/CS" means the letters of credit issued under the Detroit L/C Credit Agreement on the Closing Date.
"DETROIT L/C CREDIT AGREEMENT" means (i) that certain credit agreement dated as of the date hereof by and among Domestic Borrowers, as borrowers, the Detroit L/C Lenders, as lenders, and Bank of America and Deutsche Bank, as agents for such lenders, and (ii) any credit agreement entered into by Domestic Borrowers to refinance, replace, renew or extend in whole or in part, the credit agreement referenced in clause (i) and the Indebtedness and letters of credit issued thereunder as permitted pursuant to the New L/C Facility Agreement, in each case as such credit agreement may be amended, restated, supplemented or otherwise modified from time to time.
"DETROIT L/C LENDERS" means the "Lenders" under and as defined in the Detroit L/C Credit Agreement.
"DEUTSCHE BANK" has the meaning assigned to that term in the introduction to this Agreement.
"DHC" means Danielson Holding Corporation, a Delaware corporation.
"DIP AGENTS" means the Persons identified as "Agents" under the DIP Credit Agreement, in their capacities as agents for DIP Lenders under the DIP Credit Agreement.
"DIP CREDIT AGREEMENT" means that certain Debtor-In-Possession Credit Agreement dated as April 1, 2002, by and among Covanta and certain of its Subsidiaries, as debtors and debtors-in-possession, the financial institutions listed on the signature pages thereof, as lenders, and Bank of America and Deutsche Bank, as agents for such lenders, as such agreement is in effect immediately prior to the Closing Date.
"DIP CREDIT DOCUMENTS" means the "Loan Documents" as defined in the DIP Credit Agreement.
"DIP LENDER" means each of the "Lenders" under the DIP Credit Agreement on the Closing Date, in its capacity as a lender under the DIP Credit Agreement.
"DISTRIBUTABLE CASH" has the meaning assigned to that term in subsection 3.1T.
"DOLLARS" and the sign "$" mean the lawful money of the United States.
"DOMESTIC BORROWERS" means Covanta and the Subsidiaries thereof party from time to time to the Detroit L/C Credit Agreement and New L/C Facility Agreement.
"DOMESTIC CASH EQUIVALENTS" means, as at any date of determination, (i) marketable securities (a) issued or directly and unconditionally guaranteed as to interest and principal by the United States Government or (b) issued by any agency of the United States the obligations of which are backed by the full faith and credit of the United States, in each case maturing within 30 days after such date; (ii) marketable direct obligations issued by any state of the United States or any political subdivision of any such state or any public instrumentality
thereof, in each case maturing within 30 days after such date and having, at the time of the acquisition thereof, the highest rating obtainable from either Standard & Poor's ("S&P") or Moody's Investors Service, Inc. ("MOODY'S"); (iii) commercial paper maturing no more than 30 days from the date of creation thereof and having, at the time of the acquisition thereof, a rating of at least "A-1" from S&P or at least "P-1" from Moody's; (iv) certificates of deposit or bankers' acceptances maturing within 30 days after such date and issued or accepted by any Lender or by any commercial bank organized under the laws of the United States or any state thereof or the District of Columbia that (a) is at least "adequately capitalized" (as defined in the regulations of its primary Federal banking regulator) and (b) has Tier 1 capital (as defined in such regulations) of not less than $100,000,000; (v) shares of any money market mutual fund that (a) has at least 95% of its assets invested continuously in the types of investments referred to in clauses (i) and (ii) above, (b) has net assets of not less than $500,000,000, and (c) has the highest rating obtainable from either S&P or Moody's; and (vi) such other securities as Company and Administrative Agent may agree on from time to time.
"DOMESTIC LOAN DOCUMENTS" means the "Credit Documents" as defined in each of the Detroit L/C Credit Agreement and New L/C Facility Agreement.
"DOMESTIC SUBSIDIARY" means any Subsidiary of any Borrower that is incorporated or organized under the laws of the United States, any state thereof or in the District of Columbia.
"ELIGIBLE ASSIGNEE" means (i) any Person that is (a) a commercial bank organized under the laws of the United States or any state thereof, (b) a savings and loan association or savings bank organized under the laws of the United States or any state thereof, (c) a commercial bank organized under the laws of any other country or a political subdivision thereof, provided that (1) such bank is acting through a branch or agency located in the United States or (2) such bank is organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development or a political subdivision of such country, or (d) any other financial institution that extends credit or buys loans as one of its businesses; (ii) any Person that is a Lender at the time of the relevant assignment; or (iii) any other Person designated as an Eligible Assignee pursuant to the prior written consent of Administrative Agent in their sole discretion; provided that neither Company nor any Affiliate of Company nor any Competitor shall be an Eligible Assignee; and provided further that, in order to be an Eligible Assignee, a Person must have at the time of determination a long term senior unsecured debt rating of "A2" or better from Moody's and/or "A" or better from S&P.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as defined in Section 3(3) of ERISA which is maintained or contributed to by Company, any of its Subsidiaries or any of their respective ERISA Affiliates.
"EMPLOYMENT AGREEMENTS" means those employment agreements entered into on the Closing Date by Company with such Persons as Agent shall approve prior to the Closing Date, in each case providing for the exclusive employment of such Persons by Company and its Subsidiaries, in the form provided to Administrative Agent pursuant to subsection 3.1C on or prior to the Closing Date.
"ENFORCING LENDERS" has the meaning assigned to that term in subsection 9.5B.
"ENVIRONMENTAL CLAIM" means any investigation, notice, notice of violation, claim, action, suit, proceeding, demand, abatement order or other order or directive (conditional or otherwise), by any Government Authority or any other Person, arising (i) pursuant to or in connection with any actual or alleged violation of any Environmental Law, or (ii) in connection with any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment.
"ENVIRONMENTAL LAWS" means any and all current or future statutes, ordinances, orders, rules, regulations, guidance documents, judgments, Governmental Authorizations, or any other requirements of any Government Authority relating to (i) environmental matters, including those relating to any Hazardous Materials Activity, (ii) the generation, use, storage, transportation or disposal of Hazardous Materials, or (iii) occupational safety and health, industrial hygiene, land use or the protection of human, plant or animal health or welfare, in any manner applicable to Company or any of its Subsidiaries or any Facility.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto.
"ERISA AFFILIATE" means, as applied to any Person, (i) any corporation that is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is a member; (ii) any trade or business (whether or not incorporated) that is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member.
"ERISA EVENT" means (i) a "reportable event" within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for 30-day notice to the PBGC has been waived by regulation) that would reasonably be expected to have a Material Adverse Effect; (ii) the failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) of the Internal Revenue Code) or the imposition of a Lien on the property of Company or any of its Subsidiaries pursuant to Section 412(n) of the Internal Revenue Code, except any such failure or imposition attributable to an error made in good faith which results in the imposition of liability or a Lien on Company and its Subsidiaries and their respective ERISA Affiliates of an immaterial amount, so long as such error, failure and imposition are promptly corrected after discovery of such error by Company or any of its Subsidiaries, or the failure to make by its due date a required installment of a material amount under Section 412(m) of the Internal Revenue Code with respect to any Pension Plan or the failure to make any required contribution of a material amount to a Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal by Company, any of its Subsidiaries or any of their respective ERISA Affiliates from any Pension Plan with two or more contributing
sponsors or the termination of any such Pension Plan resulting in material
current liability of Company or any of its Subsidiaries pursuant to Section 4063
or 4064 of ERISA; (v) the institution by the PBGC of proceedings to terminate
any Pension Plan, or the occurrence of any event or condition would reasonably
be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension Plan;
(vi) the imposition of material current liability on Company, any of its
Subsidiaries or any of their respective ERISA Affiliates pursuant to Section
4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of
ERISA; (vii) the withdrawal of Company, any of its Subsidiaries or any of their
respective ERISA Affiliates in a complete or partial withdrawal (within the
meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if it
would reasonably be expected that Company or any of its Subsidiaries will incur
material liability therefor (in excess of the contribution that would otherwise
have been due absent such withdrawal), or the receipt by Company, any of its
Subsidiaries or any of their respective ERISA Affiliates of notice from any
Multiemployer Plan that it is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated
under Section 4041A or 4042 of ERISA; (viii) the assertion of a material claim
(other than routine claims for benefits) against any Employee Benefit Plan other
than a Multiemployer Plan or the assets thereof, or against Company, any of its
Subsidiaries or any of their respective ERISA Affiliates in connection with any
Employee Benefit Plan if such assertion or the liability with respect thereto
would reasonably be expected to have a Material Adverse Effect; (ix) receipt
from the Internal Revenue Service of notice of the failure of any Pension Plan
(or any other Employee Benefit Plan intended to be qualified under Section
401(a) of the Internal Revenue Code) to qualify under Section 401(a) of the
Internal Revenue Code, or of the failure of any trust forming part of any
Pension Plan to qualify for exemption from taxation under Section 501(a) of the
Internal Revenue Code, in either case if such failure would reasonably be
expected to have a Material Adverse Effect; or (x) the imposition of a Lien on
the property of Company or any of its Subsidiaries pursuant to Section
401(a)(29) of the Internal Revenue Code or pursuant to ERISA with respect to any
Pension Plan.
"EURODOLLAR RATE" means, for any Interest Rate Determination Date with respect to an Interest Period for a Eurodollar Rate Loan, the rate per annum that is the higher of (x) the rate obtained by dividing (i) the rate per annum (rounded upward to the nearest 1/16 of one percent) that appears on the Dow Jones Markets (Telerate) page 3750 (or such other comparable page as may, in the opinion of Administrative Agent, replace such page for the purpose of displaying such rate) with maturities comparable to such Interest Period as of approximately 10:00 a.m. (London time) on such Interest Rate Determination Date by (ii) a percentage equal to 100% minus the stated maximum rate of all reserve requirements (including any marginal, emergency, supplemental, special or other reserves) applicable on such Interest Rate Determination Date to any member bank of the Federal Reserve System in respect of "Eurocurrency liabilities" as defined in Regulation D (or any successor category of liabilities under Regulation D); and (y) 2.00%.
"EURODOLLAR RATE LOANS" means Revolving Loans bearing interest at rates determined by reference to the Eurodollar Rate as provided in subsection 2.2A.
"EURODOLLAR RATE MARGIN" means a per annum rate equal to 8.00%.
"EVENT OF DEFAULT" has the meaning assigned to that term in
Section 7.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute.
"EXISTING DETROIT L/CS" means, collectively, (i) Irrevocable Standby Letter of Credit Number SBY501806 issued by UBS Bank, in the available amount of $96,731,392.81 as of the Closing Date, for the benefit of PMCC Leasing Corporation and Resource Recovery Business Trust - A, and (ii) Irrevocable Standby Letter of Credit Number SBY501835 issued by UBS Bank, in the available amount of $41,460,161.38 as of the Closing Date for the benefit of Aircraft Services Corporation and Resource Recovery Business Trust - B.
"EXISTING INTERCREDITOR AGREEMENT" means the "Intercreditor Agreement" as defined in the DIP Credit Agreement on the Closing Date, as such "Intercreditor Agreement" is in effect on the Closing Date.
"EXISTING IPP INTERNATIONAL PROJECT GUARANTIES" means, collectively, (i) the existing guaranty by Covanta Energy Group of the obligations of certain Subsidiaries of Company under certain agreements relating to the Haripur Project, the Samalpatti Project and the Trezzo Project, (ii) the existing guaranty by Covanta Projects, Inc. of the obligations of certain Subsidiaries of Company under certain agreements relating to the Quezon Project, and (iii) the existing guaranty by Covanta of certain Subsidiaries of Company under certain agreements relating to the Balaji/Madurai Project and the LICA Project, as each such guaranty may be amended, restated, supplemented or otherwise modified to the extent permitted hereunder.
"FACILITIES" means any and all real property (including all buildings, fixtures or other improvements located thereon) now, hereafter or heretofore owned, leased, operated or used by any Borrower or any of its Subsidiaries, by any of their respective predecessors or by any Person who is an Affiliate of Borrower or any of its Subsidiaries prior to the Closing Date.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Administrative Agent from three Federal funds brokers of recognized standing selected by Administrative Agent.
"FIFRA" means the Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. Section 136 et seq.), or any successor statute, and all implementing regulations promulgated thereunder.
"FIRST PRIORITY" means, with respect to any Lien purported to be created in any Collateral pursuant to any Collateral Document, that (i) such Lien is perfected and has priority over any other Lien on such Collateral (other than Liens permitted pursuant to subsections 6.2A(iii) through (vi)) and (ii) such Lien is the only Lien (other than Liens permitted pursuant to subsection 6.2) to which such Collateral is subject.
"FISCAL QUARTER" means a fiscal quarter of any Fiscal Year.
"FISCAL YEAR" means the fiscal year of Company and its Subsidiaries ending on December 31st of each calendar year.
"FLOOD HAZARD PROPERTY" means any real property that is subject to a Mortgage and is located in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards.
"FOREIGN CASH EQUIVALENTS" means, as at any date of determination, (i) securities issued or directly and fully guaranteed by the government of the country within which an Investment by Company or any of its Subsidiaries has been or is being made and (ii) time deposits and certificates of deposit of commercial banks having offices in such country, in each case with a long term unsecured debt rating of at least equal to (a) the rating of the relevant government, in the event that such government is rated below investment grade by either Moody's or S&P, or when there is no Moody's or S&P rating of such government, (b) investment grade in the event that the relevant government is rated above investment grade by either Moody's or S&P, or (c) "A" or better to the extent that the relevant government is rated better than "A" by either Moody's or S&P, and (iii) such other securities as Company and Administrative Agent may agree on from time to time.
"FOREIGN PLEDGE AGREEMENT" means each pledge agreement or similar instrument governed by the laws of a country other than the United States, executed on the Closing Date or from time to time thereafter in accordance with subsection 5.8 by Company or any Domestic Subsidiary that owns Capital Stock of one or more Foreign Subsidiaries organized in such country, in form and substance satisfactory to Collateral Agent, as such Foreign Pledge Agreement may be amended, restated, supplemented or otherwise modified from time to time.
"FOREIGN SUBSIDIARY" means any Subsidiary of any Borrower that is not a Domestic Subsidiary.
"FUND" means any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.
"FUNDING AND PAYMENT OFFICE" means (i) the office of Administrative Agent located at 60 Wall Street, New York, NY 10005 or (ii) such other office of Administrative Agent as may from time to time hereafter be designated as such in a written notice delivered by Administrative Agent to Company and each Lender.
"FUNDING BORROWER" has the meaning assigned to that term in subsection 2.10C.
"FUNDING DATE" means the date of funding of a Loan.
"FUNDING DEFAULT" has the meaning assigned to that term in subsection 2.9.
"GAAP" means, subject to the limitations on the application thereof set forth in subsection 1.2, accounting principles generally accepted in the United States set forth in opinions
and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as are approved by the American Institute of Certified Public Accountants.
"GEOTHERMAL SALE" means (i) the sale or other disposition by Covanta and its Subsidiaries of all or substantially all of their respective (1) Capital Stock in Heber Geothermal Company, Heber Field Company and Second Imperial Geothermal Company, L.P., and (2) Capital Stock in non-debtor Affiliate Mammoth-Pacific L.P., which entities own or lease geothermal plants and facilities in California (the "GEOTHERMAL BUSINESS"), and (ii) the assumption and/or assignment by Covanta and its Subsidiaries of certain contracts related to the Geothermal Business, in the case of both clauses (i) and (ii) occurring prior to or concurrently with the consummation of the Plan of Reorganization.
"GOVERNING BODY" means the board of directors or other body having the power to direct or cause the direction of the management and policies of a Person that is a corporation, partnership, trust or limited liability company.
"GOVERNMENT AUTHORITY" means any political subdivision or department thereof, any other governmental or regulatory body, commission, central bank, board, bureau, organ or instrumentality or any court, in each case whether federal, state, local or foreign.
"GOVERNMENTAL AUTHORIZATION" means any permit, license, registration, authorization, plan, directive, consent, order or consent decree of or from, or notice to, any Government Authority.
"GROSS RECEIPTS" means, in respect of any Asset Sale, the total cash payments (including any cash received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) received from such Asset Sale minus any repayment of debt related to the assets sold in such Asset Sale which is made in connection therewith and is not prohibited under this Agreement.
"HAZARDOUS MATERIALS" means (i) any chemical, material or
substance at any time defined as or included in the definition of (a) "hazardous
wastes" or "mixed wastes" as defined in RCRA or in any other Environmental Law;
(b) "hazardous substances", "pollutants" or "contaminants" as defined in CERCLA
or in any other Environmental Law; (c) "chemical substances" or "mixtures" as
defined in TSCA or any other substance which is tested pursuant to TSCA or any
other Environmental Law, or the manufacture, processing, distribution, use or
disposal of which is regulated or prohibited pursuant to TSCA or any other
Environmental Law, including without limitation polychlorinated biphenyls and
electrical equipment which contains any oil or dielectric fluid containing
regulated concentrations of polychlorinated biphenyls; (d) "insecticides",
"fungicides", "pesticides" or "rodenticides" as defined in FIFRA or any other
Environmental Law; or (e) "infectious waste" or "biohazardous waste" as defined
in any Environmental Law; (ii) asbestos or any asbestos-containing materials;
(iii) urea formaldehyde foam insulation; (iv) any oil, petroleum, petroleum
fraction or petroleum derived substance; (v) any drilling fluids, produced
waters and other wastes associated with the exploration, development or
production of crude oil, natural gas or geothermal resources; (vi) any flammable
substances or explosives; (vii) any radioactive materials; and (viii) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any Government Authority or which may or could pose a hazard to the health and safety of the owners, occupants or any Persons in the vicinity of any Facility or to the indoor or outdoor environment.
"HAZARDOUS MATERIALS ACTIVITY" means any past, current, proposed or threatened activity, event or occurrence involving any Hazardous Materials, including the use, manufacture, possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, construction, treatment, abatement, removal, remediation, disposal, disposition or handling of any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing.
"HEDGE AGREEMENT" means (i) an Interest Rate Agreement or a Currency Agreement designed to hedge against fluctuations in interest rates or currency values, respectively, or (ii) a forward agreement or arrangement designed to hedge against fluctuation in electricity rates pertaining to electricity produced by a Project so long as the contractual arrangements relating to such Project contemplate that Company or its Subsidiaries shall deliver such electricity to third parties.
"HIGH YIELD INDENTURE" means (i) the indenture pursuant to which the High Yield Notes are issued and (ii) any replacement indenture entered into in connection with a refinancing, renewal, replacement or extension of the High Yield Notes permitted under the Detroit L/C Credit Agreement and New L/C Facility Agreement, in each case as such indenture or replacement indenture may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under the Detroit L/C Credit Agreement.
"HIGH YIELD NOTES" means (i) the $230,000,000 in aggregate principal amount at maturity of 8.25% Senior Notes due 2010 of Covanta issued pursuant to the High Yield Indenture, and (ii) any Indebtedness incurred to refinance, renew, replace or extend the High Yield Notes permitted to be incurred under the Detroit L/C Credit Agreement; provided, that the initial principal amount (and issue price) of such High Yield Notes on the Closing Date shall be $205,000,000.
"INDEBTEDNESS", as applied to any Person, means (i) all
indebtedness for borrowed money, (ii) that portion of obligations with respect
to Capital Leases that is properly classified as a liability on a balance sheet
in conformity with GAAP, (iii) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed money,
(iv) any obligation owed for all or any part of the deferred purchase price of
property or services received by such Person (excluding any such obligations
incurred under ERISA), which purchase price is (a) due more than six months from
the date of incurrence of the obligation in respect thereof or (b) evidenced by
a promissory note or similar written instrument, but excluding in either case
current trade payables incurred in the ordinary course of business and payable
in accordance with customary practices, (v) Synthetic Lease Obligations, and
(vi) all indebtedness secured by any Lien on any property or asset owned by that
Person regardless of whether the indebtedness secured thereby shall have been
assumed by that Person or is nonrecourse to the credit of that Person. Any
obligations under Interest Rate Agreements and Currency Agreements (and Hedge
Agreements that protect against fluctuation in electricity rates)
constitute (1) in the case of Hedge Agreements, Contingent Obligations, and (2) in all other cases, Investments, and in neither case constitute Indebtedness. For purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer, unless the Indebtedness of such partnership or joint venture is expressly Non Recourse Debt of such partnership or joint venture.
"INDEMNIFIED LIABILITIES" has the meaning assigned to that term in subsection 9.3.
"INDEMNITEE" has the meaning assigned to that term in subsection 9.3.
"INSURANCE PREMIUM FINANCERS" means Persons who are non-Affiliates of Company that advance insurance premiums for Company and its Subsidiaries pursuant to Insurance Premium Financing Arrangements.
"INSURANCE PREMIUM FINANCING ARRANGEMENTS" means, collectively, such agreements as Company and its Subsidiaries shall enter into after the Closing Date with Insurance Premium Financers pursuant to which such Insurance Premium Financers shall advance insurance premiums for Company and its Subsidiaries. Such Insurance Premium Financing Arrangements (i) shall provide for the benefit of such Insurance Premium Financers a security interest in no property of Company or any of its Subsidiaries other than gross unearned premiums for the insurance policies, (ii) shall not purport to prohibit any portion of the Liens created in favor of Collateral Agent (for the benefit of Secured Parties) pursuant to the Collateral Documents, and (iii) shall not contain any provision or contemplate any transaction prohibited by this Agreement and shall otherwise be in form and substance reasonably satisfactory to Agent.
"INTELLECTUAL PROPERTY" means all patents, trademarks, tradenames, copyrights, technology, software, know-how and processes used in or necessary for the conduct of the business of Borrowers and their Subsidiaries as currently conducted that are material to the condition (financial or otherwise), business or operations of Borrowers and their Subsidiaries, taken as a whole.
"INTERCOMPANY MASTER NOTE" means a promissory note evidencing Indebtedness of Company and each of its Subsidiaries which (a) to the extent the Indebtedness evidenced thereby is owed to any Borrower, is pledged pursuant to the Collateral Documents, and (b) to the extent the Indebtedness evidenced thereby is owed by a Subsidiary of Company, is senior Indebtedness of such Subsidiary (except to the extent that requiring such Indebtedness to be senior would breach a contractual obligation binding on such Subsidiary), except that any such Indebtedness owed by any Borrower to any Subsidiary which is not a Borrower shall be subordinated in right of payment to the payment in full of the Obligations pursuant to the terms of such note.
"INTERCREDITOR AGREEMENT" means that certain Intercreditor Agreement executed and delivered on the Closing Date by Borrowers, CEA, Lenders, Administrative Agent, Collateral Agent, CPIH Term Loan Lenders, the agents under the CPIH Term Loan Documents, in the form of Exhibit IX annexed hereto, as it may thereafter be amended, restated, supplemented or otherwise modified from time to time.
"INTEREST PAYMENT DATE" means (i) with respect to any Base Rate Loan, the last Business Day of each month, commencing on the first such date to occur after the Closing Date, and (ii) with respect to any Eurodollar Rate Loan, the last day of each Interest Period applicable to such Loan; provided that in the case of each Interest Period of longer than one month "Interest Payment Date" shall also include each date that is a multiple of one month after the commencement of such Interest Period.
"INTEREST PERIOD" has the meaning assigned to that term in subsection 2.2B.
"INTEREST RATE AGREEMENT" means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement to which any Borrower or any of Subsidiary of any Borrower is a party.
"INTEREST RATE DETERMINATION DATE" means, with respect to any Interest Period, the second Business Day prior to the first day of such Interest Period.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter, and any successor statute.
"INVESTMENT" means (i) any direct or indirect purchase or
other acquisition by Company or any of its Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person (including any Subsidiary of
Company), (ii) any direct or indirect redemption, retirement, purchase or other
acquisition for value, by any Subsidiary of Company from any Person other than
Company or any of its Subsidiaries, of any equity Securities of such Subsidiary,
(iii) any direct or indirect loan, advance (other than advances to employees for
moving, entertainment and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business) or capital contribution by
Company or any of its Subsidiaries to any other Person, including all
indebtedness and accounts receivable from that other Person that are not current
assets or did not arise from sales or services to that other Person in the
ordinary course of business, (iv) Interest Rate Agreements or Currency
Agreements not constituting Hedge Agreements, or (v) Commodities Agreements not
constituting Hedge Agreements. The amount of any Investment shall be the
original cost of such Investment plus the cost of all additions thereto, without
any adjustments for increases or decreases in value, or write-ups, write-downs
or write-offs with respect to such Investment. No account receivable owed by a
Person to Company or any of its Subsidiaries that on the relevant date of
determination constitutes a current asset and arose from sales or services to
such Person in the ordinary course of business shall constitute an Investment on
such date.
"INVESTOR PARTIES" means D.E. Shaw, SZ Investments, LLC, a Delaware limited liability company, and Third Avenue Trust, on behalf of the Third Avenue Value Fund Series.
"IP COLLATERAL" means, collectively, the Intellectual Property that constitutes Collateral.
"IPP INTERNATIONAL BUSINESS" means the assets and operations of the business of Covanta and its Subsidiaries referred to by Covanta as the "IPP International business" prior to the Closing Date, including the Haripur Project, the Samalpatti Project, the Trezzo Project, the Quezon Project, the Balaji/Madurai Project, the Linasa Project, the Don Pedro Project, the Rio
Volcan Project, the Bataan Project, the Magellan Project, the Linan Project, the Huantai Project, the Yanjiang Project and the Island Power Project.
"JOINT VENTURE" means a joint venture, partnership or other similar arrangement, whether in corporate, partnership or other legal form.
"LEASEHOLD PROPERTY" means any leasehold interest of any Borrower as lessee under any lease of real property.
"LENDER" and "LENDERS" means the Persons identified as "Lenders" and listed on the signature pages of this Agreement, together with their successors and permitted assigns pursuant to subsection 9.1.
"LIEN" means any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing.
"LOAN" or "LOANS" means one or more of the Loans made by Lenders pursuant to subsection 2.1A.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Collateral Documents, the Intercreditor Agreement and all amendments, waivers and consents relating thereto.
"LOAN EXPOSURE" means, with respect to any Lender as of any date of determination (i) prior to the termination of the Commitments, that Lender's Commitment, and (ii) after the termination of the Commitments, the aggregate outstanding principal amount of the Revolving Loans of that Lender.
"LOAN PARTY" means each Borrower and CEA, and "LOAN PARTIES" means all such Persons, collectively.
"MADURAI PROJECT ENTITY" has the meaning assigned to that term in subsection 6.7(vi).
"MAGELLAN SUBSIDIARY" means Magellan Cogeneration, Inc., a Philippines corporation.
"MANAGEMENT SERVICES AND REIMBURSEMENT AGREEMENT" means the management services and reimbursement agreement entered into by Company, Covanta and certain of their respective Subsidiaries on the Closing Date, in form and substance satisfactory to the Agent, as such agreement may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted thereunder and under subsection 6.12.
"MANDATORY PAYMENT" means any amount described in subsections 2.4A(iii)(a)-(e) to be applied as a prepayment of the Loans and/or the CPIH Term Loans and/or a permanent reduction of the Commitments, as determined pursuant to subsection 2.4A.
"MARGIN STOCK" has the meaning assigned to that term in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect upon the business, operations, properties, assets, condition (financial or otherwise) or prospects of Borrowers, taken as a whole, or Company and its Subsidiaries, taken as a whole, or (ii) the impairment of the ability of Loan Parties taken as a whole to perform, or of Administrative Agent or Lenders to enforce, the Obligations.
"MATERIAL CONTRACT" means (i) the principal service or operating agreement, if any, with respect to each waste-to-energy Project and the principal power sales agreement, if any, with respect to each independent power plant Project to which Company or any of its Subsidiaries is a party, each of which is in existence as of the Closing Date and is described on Schedule 1.1A annexed hereto, and (ii) any other contract or other arrangement to which Company or any of its Subsidiaries is a party (other than the Loan Documents) for which breach, nonperformance, cancellation or failure to renew would reasonably be expected to have a Material Adverse Effect.
"MATERIAL LEASEHOLD PROPERTY" means a Leasehold Property reasonably determined by Administrative Agent to be of material value as Collateral or of material importance to the operations of Company or any of its Subsidiaries.
"MATERIAL SUBSIDIARY" means, with respect to any Person, any
Subsidiary of such Person now existing or hereafter acquired or formed by such
Person which, on a consolidated basis for such Subsidiary and all of its
Subsidiaries, (i) for the most recent fiscal year of such Person accounted for
more than 1% of the consolidated revenues of such Person and its Subsidiaries,
(ii) as at the end of such fiscal year, was the owner of more than 1% of the
consolidated assets of such Person and its Subsidiaries, or (iii) is capitalized
with more than $500,000 of equity.
"MATURITY DATE" means March 10, 2007.
"MORTGAGE" means (i) a security instrument (whether designated as a deed of trust or a mortgage or by any similar title) executed and delivered by any Loan Party, substantially in the form of Exhibit X annexed hereto or in such other form as may be approved by Administrative Agent in its sole discretion, in each case with such changes thereto as may be recommended by Administrative Agent's local counsel based on local laws or customary local mortgage or deed of trust practices, or (ii) at Administrative Agent's option, in the case of any real property or Material Leasehold Property that is the subject of subsection 5.9, an amendment to an existing Mortgage, in form satisfactory to Administrative Agent, in either case as such security instrument or amendment may be amended, restated, supplemented or otherwise modified from time to time. "MORTGAGES" means all such instruments collectively, whether executed as of or subsequent to the Closing Date.
"MULTIEMPLOYER PLAN" means any Employee Benefit Plan that is a "multiemployer plan" as defined in Section 3(37) of ERISA.
"NET ASSET SALE PROCEEDS" means, with respect to any Asset Sale, Gross Receipts received from such Asset Sale, net of any bona fide direct costs incurred in connection with such Asset Sale, including (i) income taxes reasonably estimated to be actually payable prior to the earlier of (a) the date which is eighteen months from the date of such Asset Sale and (b) the Maturity Date as a result of any gain recognized in connection with such Asset Sale, (ii) additional Taxes actually payable upon the closing of such Asset Sale (including any transfer Taxes or Taxes on gross receipts), (iii) actual, reasonable and documented out-of-pocket fees and expenses (including reasonable legal fees, reasonable fees to advisors and severance costs that are due (pursuant to a Contractual Obligation, or written employment policy applicable to terminated employees generally, of Company or any of its Subsidiaries in effect prior to such Asset Sale or pursuant to applicable law) and payable immediately upon consummation of such Asset Sale to employees of Company and its Subsidiaries that are terminated as a result thereof) paid to Persons other than Company and its Subsidiaries and their respective Affiliates in connection with such Asset Sale (including fees necessary to obtain any required consents of such Persons to such Asset Sale), and (iv) payment of the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness (other than Loans) that is (x) secured by a valid, enforceable and perfected Lien on the stock or assets in question that is permitted under subsection 6.2 and (y) required to be repaid under the terms of such Indebtedness as a result of such Asset Sale (without duplication of amounts deducted in calculating the Gross Receipts from such Asset Sale) and is permitted to be paid under the Loan Documents.
"NET DEPRECIATION AND AMORTIZATION EXPENSE" means, for any period, the sum (expressed as a positive number) of (i) "Depreciation" for such period plus (ii) "Amortization" for such period, as each such line item referred to in clauses (i) and (ii) is reflected in Company's consolidated statement of cash flows prepared in conformity with GAAP and reported in a manner consistent with Company's reporting of such amount in its quarterly or annual report (as the case may be) on Form 10Q or 10K, respectively, prior to the Closing Date, whether such line items are so titled or otherwise titled.
"NET INDEBTEDNESS PROCEEDS" means the cash proceeds (net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith (including reasonable legal fees and expenses)) from the incurrence of Indebtedness by Company or any of its Subsidiaries.
"NET INSURANCE/CONDEMNATION PROCEEDS" means any cash payments
or proceeds received by Company or any of its Subsidiaries (i) under any
business interruption or casualty insurance policy in respect of a covered loss
thereunder or (ii) as a result of the taking of any assets of Company or any of
its Subsidiaries by any Person pursuant to the power of eminent domain,
condemnation or otherwise, or pursuant to a sale of any such assets to a
purchaser with such power under threat of such a taking, in each case net of (a)
income taxes reasonably estimated to be actually payable prior to the earlier of
(1) the date which is eighteen months from the date of such receipt and (2) the
Maturity Date as a result of the receipt of such payments of proceeds and (b)
any actual, reasonable and documented out-of-pocket fees and expenses (including
reasonable legal fees, reasonable fees to advisors and severance costs that are
due (pursuant to a Contractual Obligation, or written employment policy
applicable to terminated employees generally, of Company or any of its
Subsidiaries in effect prior to the event causing or
relating to the payment referred to in clause (i) or (ii) above or pursuant to applicable law) and payable on or prior to the receipt of such payment or proceeds to employees of Company and its Subsidiaries that have been terminated as a result of the relevant loss, taking or sale) paid to Persons other than Company and its Subsidiaries and their respective Affiliates in connection with the relevant loss, taking or sale or the adjustment or settlement of any claims of Company or such Subsidiary in respect thereof; provided, however, that Net Insurance/Condemnation Proceeds shall be reduced in an amount equal to the amount of proceeds Subsidiaries of Company are legally bound or required, pursuant to agreements in effect on the Closing Date, or which were entered into after the Closing Date with respect to the financing or acquisition of a Project, to use for purposes other than a Mandatory Payment.
"NEW L/C FACILITY AGREEMENT" means (i) that certain credit agreement dated as of the date hereof by and among the Domestic Borrowers, as borrowers, and the Investor Parties and the other financial institutions listed on the signature pages thereof, as lenders, and (ii) any credit agreement entered into by Domestic Borrowers to refinance, replace, renew or extend, in whole or in part, the credit agreement referenced in clause (i) and the Indebtedness and letters of credit issued thereunder as permitted under the Detroit L/C Credit Agreement, in each case as such credit agreement may be amended, restated, supplemented or otherwise modified from time to time.
"9.25% DEBENTURES" means the "9.25% Debenture Claims" as such term is defined in the Approved Plan of REORGANIZATION.
"NON RECOURSE DEBT" means, with respect to any Subsidiary of Company, Indebtedness of such Subsidiary with respect to which the recourse of the holder or obligee of such Indebtedness is limited to (i) assets associated with the Project (which in any event shall not include assets held by any Borrower other than a Borrower, if any, whose sole business is the ownership and/or operation of such Project and substantially all of whose assets are associated with such Project) in respect of which such Indebtedness was incurred and/or (ii) such Subsidiary or the equity interests in such Subsidiary, but in the case of clause (ii) only if such Subsidiary's sole business is the ownership and/or operation of such Project and substantially all of such Subsidiary's assets are associated with such Project.
"NON-US LENDER" means a Lender that is organized under the laws of any jurisdiction other than the United States or any state or other political subdivision thereof.
"NOTES" means any promissory notes of Borrowers issued pursuant to subsection 2.1E to evidence the Loans of any Lenders, substantially in the form of Exhibit I annexed hereto, as they may be amended, restated, supplemented or otherwise modified from time to time.
"NOTICE OF BORROWING" means a notice substantially in the form of Exhibit IV annexed hereto.
"NOTICE OF CONVERSION/CONTINUATION" means a notice
substantially in the form of Exhibit V annexed hereto.
"OBLIGATIONS" means all obligations of every nature of Loan Parties under the Loan Documents, including any liability of such Loan Party on any claim arising out of or relating to the Loan Documents, whether or not the right to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed or contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any bankruptcy, insolvency, reorganization or other similar proceeding. Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Loan Documents include (a) the obligation to pay principal, interest (including all interest which accrues after the commencement of any case or proceeding in bankruptcy after the insolvency of, or for the reorganization of, any Loan Party, whether or not allowed in such case or proceeding), charges, expenses, fees, attorneys' fees and disbursements, indemnities and other amounts payable by any Borrower and any other Loan Party under any Loan Document and (b) the obligation to reimburse any amount in respect of any of the foregoing that Agent or any Lender, in its sole discretion, may elect to pay or advance on behalf of such Borrower or other Loan Party.
"OFFICER" means the president, chief executive officer, a vice president, chief financial officer, treasurer, general partner (if an individual), managing member (if an individual) or other individual appointed by the Governing Body or the Organizational Documents of a corporation, partnership, trust or limited liability company to serve in a similar capacity as the foregoing.
"OFFICER'S CERTIFICATE" means, as applied to any Person that is a corporation, partnership, trust or limited liability company, a certificate executed on behalf of such Person by one or more Officers of such Person or one or more Officers of a general partner or a managing member if such general partner or managing member is a corporation, partnership, trust or limited liability company; provided, that any Officer's Certificate delivered pursuant to subsection 2.4A(iii)(g) or 5.1(v) shall be executed by a senior financial officer of Company reasonably acceptable to Administrative Agent.
"ORGANIZATIONAL DOCUMENTS" means the documents (including Bylaws, if applicable) pursuant to which a Person that is a corporation, partnership, trust or limited liability company is organized.
"PARTICIPANT" means a purchaser of a participation in the rights and obligations under this Agreement pursuant to subsection 9.1C.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto.
"PENSION PLAN" means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to section 412 of the Internal Revenue Code or section 302 of ERISA.
"PERFORMANCE GUARANTY" means any agreement entered into by Company or any of its Subsidiaries under which Company or any such Subsidiary guarantees the performance of a Subsidiary of Company under a principal lease, service or operating agreement relating to a Project.
"PERMITTED ENCUMBRANCES" means the following types of Liens (excluding any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or by ERISA, any such Lien relating to or imposed in connection with any Environmental Claim, and any such Lien expressly prohibited by any applicable terms of any of the Collateral Documents):
(i) Liens for taxes, assessments or governmental charges or claims the payment of which is not, at the time, required by subsection 5.3;
(ii) statutory Liens of landlords, statutory Liens and rights of set-off of banks, statutory Liens of carriers, warehousemen, mechanics, repairmen, workmen and materialmen, and other Liens imposed by law, in each case incurred in the ordinary course of business (a) for amounts not yet overdue or (b) for amounts that are overdue and that (in the case of any such amounts overdue for a period in excess of 5 days) are being contested in good faith by appropriate proceedings, so long as (1) such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts, and (2) in the case of a Lien with respect to any portion of the Collateral, such contest proceedings conclusively operate to stay the sale of any portion of the Collateral on account of such Lien;
(iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money), so long as no foreclosure, sale or similar proceedings have been commenced with respect to any portion of the Collateral on account thereof;
(iv) any attachment or judgment Lien not constituting an Event of Default under subsection 7.8;
(v) leases or subleases granted to third parties in accordance with any applicable terms of the Collateral Documents and not interfering in any material respect with the ordinary conduct of the business of Company or any of its Subsidiaries or resulting in a material diminution in the value of any Collateral as security for the Secured Obligations;
(vi) easements, rights-of-way, restrictions, encroachments, and other minor defects or irregularities in title to the real property of Company and its Subsidiaries, in each case which do not and will not interfere in any material respect with the ordinary conduct of the business of Company or any of its Subsidiaries or result in a material diminution in the value of any Collateral as security for the Secured Obligations;
(vii) any (a) interest or title of a lessor or sublessor under any lease not prohibited by this Agreement, (b) restriction or encumbrance that the interest or title of such lessor or sublessor may be subject to, or (c) subordination of the interest of the lessee or sublessee under such lease to any restriction or encumbrance referred to in the
preceding clause (b), so long as the holder of such restriction or encumbrance agrees to recognize the rights of such lessee or sublessee under such lease;
(viii) Liens arising from filing UCC financing statements relating solely to leases not prohibited by this Agreement;
(ix) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;
(x) any zoning or similar law or right reserved to or vested in any governmental office or agency to control or regulate the use of any real property;
(xi) Liens securing obligations (other than obligations representing Indebtedness for borrowed money) under operating, reciprocal easement or similar agreements entered into in the ordinary course of business of Company and its Subsidiaries; and
(xii) licenses of Intellectual Property granted by Company or any of its Subsidiaries in the ordinary course of business and not interfering in any material respect with the ordinary conduct of the business of Company or such Subsidiary.
Other Liens on assets of Borrowers and their Subsidiaries permitted under this Agreement (which are not Permitted Encumbrances) are described in subsection 6.2A.
"PERSON" means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, Joint Ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments (whether federal, state or local, domestic or foreign, and including political subdivisions thereof) and agencies or other administrative or regulatory bodies thereof.
"PETITION DATE" has the meaning assigned to that term in the recitals to this Agreement.
"PLAN OF REORGANIZATION" means the Debtors' Second Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code as filed with the Bankruptcy Court on January 14, 2004 (and as revised and amended through March 2, 2004), together with the Reorganization Plan Supplement to Debtors' Second Joint Plan of Reorganization filed with the Bankruptcy Court on February 18, 2004 in connection therewith.
"PLEDGED COLLATERAL" means the "Pledged Collateral" as defined in each of the Security Agreement and the CEA Stock Pledge Agreement.
"POTENTIAL EVENT OF DEFAULT" means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default.
"PREPETITION CREDIT AGREEMENT" means the Revolving Credit and Participation Agreement dated as of March 14, 2001, among Company, certain of its Subsidiaries, the
financial institutions listed on the signature pages thereof, Deutsche Bank, as Documentation Agent, and Bank of America, as Administrative Agent, as amended, restated, supplemented or otherwise modified through the Closing Date and as it may hereafter be amended, restated, supplemented or otherwise modified.
"PREPETITION CREDIT DOCUMENTS" means all "Loan Documents" as defined in the Prepetition Credit Agreement.
"PREPETITION LENDERS" means the Persons identified as "Lenders" under the Prepetition Credit Agreement, in their capacities as lenders under the Prepetition Credit Agreement, together with their successors and permitted assigns.
"PREPETITION OBLIGATIONS" means all "Obligations" as defined in the Prepetition Credit Agreement.
"PREPETITION SECURED CLAIMS" means, collectively, the "Secured Bank Claims" and the "9.25% Debenture Claims", as such terms are defined in the Approved Plan of Reorganization.
"PREPETITION UNSECURED CLAIMS" means "Parent and Holding Company Unsecured Claims" that are "Allowed," as such terms are defined in the Approved Plan of Reorganization.
"PRIME RATE" means the rate that Deutsche Bank announces from time to time as its prime lending rate in effect for commercial borrowers in the United States, as in effect from time to time. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Deutsche Bank or any other Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Rate.
"PROCEEDINGS" means any action, suit, proceeding (whether administrative, judicial or otherwise), governmental investigation or arbitration.
"PROJECT" means any waste-to-energy facility, electrical generation plant, cogeneration plant, water treatment facility or other facility for the generation of electricity or engaged in another line of business in which Company and its Subsidiaries are permitted to be engaged hereunder for which a Subsidiary or Subsidiaries of Company was, is or will be (as the case may be) an owner, operator, manager or builder, and shall also mean any two or more of such plants or facilities in which an interest has been acquired in a single transaction, so long as such interest constitutes an existing Investment on the Closing Date permitted under this Agreement; provided, however, that a Project shall cease to be a Project of Company and its Subsidiaries at such time that Company or any of its Subsidiaries ceases to have any existing or future rights or obligations (whether direct or indirect, contingent or matured) associated therewith.
"PRO RATA SHARE" means with respect to all payments, computations and other matters relating to the Commitment of any Lender or any Loans deemed made by any Lender, the percentage obtained by dividing (i) the Loan Exposure of that Lender by (ii) the aggregate Loan Exposure of all Lenders, in any such case as the applicable percentage may be adjusted by
assignments permitted pursuant to subsection 9.1. The initial Pro Rata Share of each Lender is set forth opposite the name of that Lender in Schedule 2.1 annexed hereto.
"PTO" means the United States Patent and Trademark Office or any successor or substitute office in which filings are necessary or, in the opinion of Administrative Agent, desirable in order to create or perfect Liens on any IP Collateral.
"PUHCA" has the meaning assigned to that term in subsection 4.9.
"PURPA" means the Public Utility Regulatory Policies Act of 1978, as amended.
"RCRA" means the Resource Conservation and Recovery Act, as amended (42 U.S.C. Section 6901 et seq.), or any successor statute, and all implementing regulations promulgated thereunder.
"REAL PROPERTY ASSET" means, at any time of determination, any interest then owned by any Borrower in any real property.
"RECORDED LEASEHOLD INTEREST" means a Leasehold Property with respect to which a Record Document (as hereinafter defined) has been recorded in all places necessary or desirable, in Administrative Agent's reasonable judgment, to give constructive notice of such Leasehold Property to third-party purchasers and encumbrancers of the affected real property. For purposes of this definition, the term "RECORD DOCUMENT" means, with respect to any Leasehold Property, (a) the lease evidencing such Leasehold Property or a memorandum thereof, executed and acknowledged by the owner of the affected real property, as lessor, or (b) if such Leasehold Property was acquired or subleased from the holder of a Recorded Leasehold Interest, the applicable assignment or sublease document, executed and acknowledged by such holder, in each case in form sufficient to give such constructive notice upon recordation and otherwise in form reasonably satisfactory to Administrative Agent.
"REGISTER" has the meaning assigned to that term in subsection 2.1D.
"RELATED AGREEMENTS" means the CPIH Term Loan Documents, the Management Services and Reimbursement Agreement, the Existing IPP International Project Guaranties, and the Tax Sharing Agreement, as such agreements and instruments may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under subsection 6.12.
"RELEASE" means any releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing or migrating of Hazardous Materials into the indoor or outdoor environment (including the abandonment, discarding or disposal of any barrels, containers or other closed receptacles containing any Hazardous Materials), including the movement of any Hazardous Materials through the air, soil, surface water or groundwater.
"REQUISITE DIP LENDERS" means DIP Lenders having or holding more than 50% of the aggregate credit exposure under the "Tranche A L/Cs" and the "Tranche B L/Cs" (as such terms are defined in the DIP Credit Agreement).
"REQUISITE LENDERS" means Lenders having or holding more than 50% of the aggregate Loan Exposure of all Lenders; provided, however, that prior to the Closing Date, for purposes of this definition, the Loan Exposure of each Lender shall equal the original Commitment of such Lender on the Closing Date.
"RESTRICTED PAYMENT" means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of Company now or hereafter outstanding, except a dividend payable solely in shares of that class of stock to the holders of that class, (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of Company now or hereafter outstanding, (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock of Company now or hereafter outstanding, and (iv) any payment or prepayment of principal of, premium, if any, or interest on, or redemption, purchase, retirement, defeasance (including in-substance or legal defeasance), sinking fund or similar payment with respect to, any Indebtedness of Company and its Subsidiaries other than (a) the Obligations, (b) Indebtedness owed by a Subsidiary to a Borrower, (c) payments under the CPIH Term Loan Agreement and (d) other amounts required to be paid under this Agreement.
"SECURED OBLIGATIONS" means the obligations secured by the Collateral pursuant to the Collateral Documents.
"SECURED PARTIES" means the "Secured Parties" as defined in the Intercreditor Agreement.
"SECURITIES" means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated, certificated or uncertificated, or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to time, and any successor statute.
"SECURITIES ACCOUNT" means an account to which a financial asset is or may be credited in accordance with an agreement under which the Person maintaining the account undertakes to treat the Person for whom the account is maintained as entitled to exercise the rights that comprise the financial asset.
"SECURITY AGREEMENT" means the Security Agreement executed and delivered on the Closing Date by Borrowers, substantially in the form of Exhibit VII annexed hereto, as such Security Agreement may thereafter be amended, restated, supplemented or otherwise modified from time to time.
"SOLVENT" means, with respect to any Person, that as of the date of determination, in light of all of the facts and circumstances existing at such time, (i) the then fair saleable value
of the property of such Person is (a) greater than the total amount of liabilities (including contingent liabilities) of such Person and (b) not less than the amount that will be required to pay the probable liabilities on such Person's then existing debts as they become absolute and due considering all financing alternatives and potential asset sales reasonably available to such Person; (ii) such Person's capital is not unreasonably small in relation to its business or any contemplated or undertaken transaction; and (iii) such Person does not intend to incur, or believe (nor should it reasonably believe) that it will incur, debts beyond its ability to pay such debts as they become due. For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.
"SUBORDINATED INDEBTEDNESS" means, collectively, (i) Indebtedness under the Unsecured Creditor Notes and the Unsecured Creditor Notes Indenture and (ii) any other Indebtedness of Company or any of its Subsidiaries incurred from time to time and subordinated by its terms in right of payment to the Obligations.
"SUBSIDIARY" means, with respect to any Person, any corporation, partnership, trust, limited liability company, association, joint venture or other business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the members of the Governing Body is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof. Unless otherwise specified herein or unless the context otherwise requires, any reference to a "Subsidiary" contained herein means a Subsidiary of Company.
"SYNTHETIC LEASE OBLIGATION" means the monetary obligation of a Person under (i) a so-called synthetic, off-balance sheet or tax retention lease, or (ii) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).
"TAX" or "TAXES" means any present or future tax, levy, impost, duty, charge, fee, deduction or withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed, including interest, penalties, additions to tax and any similar liabilities with respect thereto; except that, in the case of a Lender, there shall be excluded franchise taxes and all taxes that are imposed on the overall income or profits of such Lender by the United States or by any other Government Authority under the laws of which Lender is organized or has its principal office or maintains its applicable lending office.
"TAX NOTE" has the meaning assigned to that term in subsection 3.1F(iv).
"TAX SHARING AGREEMENT" means the tax sharing agreement entered into by DHC, Covanta and Company on the Closing Date, in form and substance satisfactory to the Administrative Agent, as such agreement may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under subsection 6.12.
"TOTAL DEBT" means, as at any date of determination, (i) the
aggregate stated balance sheet amount of all Indebtedness of Company and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP, minus
(ii) the amounts of "Current portion of project debt" and "Project Debt",
whether such line items are so titled or otherwise titled, as such line items
are or would be reflected in Company's consolidated balance sheet as at such
date prepared in conformity with GAAP and reported in a manner consistent with
Company's reporting of such amounts in its quarterly or annual report (as the
case may be) on Form 10Q or 10K, respectively, prior to the Closing Date, minus
(iii) any portion of Indebtedness of Company and its Subsidiaries under the Tax
Sharing Agreement included in the amount described in clause (i) above.
"TOTAL UTILIZATION OF COMMITMENTS" means, as at any date of determination, the aggregate principal amount of all outstanding Revolving Loans.
"TREASURY REGULATIONS" means the Treasury Regulations promulgated under the Internal Revenue Code.
"TSCA" means the Toxic Substances Control Act of 1976, as amended (15 U.S.C. Section 2601 et seq.), or any successor statute, and all implementing regulations promulgated thereunder.
"UBS BANK" means UBS AG, Stamford Branch.
"UCC" means the Uniform Commercial Code (or any similar or equivalent legislation) as in effect in any applicable jurisdiction.
"UNITED STATES" means the United States of America.
"UNSECURED CREDITOR NOTES" has the meaning assigned to that term in subsection 3.1F(iv).
"UNSECURED CREDITOR NOTES INDENTURE" means the Indenture pursuant to which the Unsecured Creditor Notes are issued.
1.2 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS UNDER AGREEMENT.
Except as otherwise expressly provided in this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP. Financial statements and other information
required to be delivered by Company to Lenders pursuant to clauses (iii) and
(iv) of subsection 5.1 shall be prepared in accordance with GAAP as in effect at
the time of such preparation (and delivered together with the reconciliation
statements provided for in subsection 5.1(vi)). Except as otherwise permitted by
this Agreement, calculations in connection with the definitions, covenants and
other provisions of this Agreement shall utilize GAAP as in effect on the date
of determination, applied in a manner consistent with that used in preparing the
financial statements referred to in subsection 4.3. If at any time any change in
GAAP would affect the computation of any financial ratio or requirement set
forth in any Loan Document, and Company, Administrative Agent or Requisite
Lenders shall so request,
Administrative Agent, Lenders and Company shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of Requisite Lenders); provided that, until so amended, such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and Company shall provide to Administrative Agent and Lenders reconciliation statements provided for in subsection 5.1(vi).
1.3 OTHER DEFINITIONAL PROVISIONS AND RULES OF CONSTRUCTION.
A. Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference.
B. References to "Sections" and "subsections" shall be to Sections and subsections, respectively, of this Agreement unless otherwise specifically provided.
C. The use in any of the Loan Documents of the word "include" or "including", when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation" or "but not limited to" or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter.
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 COMMITMENTS; MAKING OF LOANS; THE REGISTER; OPTIONAL NOTES.
A. COMMITMENTS. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Borrowers herein set forth, each Lender severally agrees to lend to Borrowers, on a joint and several basis, from time to time during the period from the Closing Date to but excluding the Maturity Date an aggregate amount not exceeding its Pro Rata Share of the aggregate amount of the Commitments to be used for the purposes identified in subsection 2.5A. The original amount of each Lender's Commitment is set forth opposite its name on Schedule 2.1 annexed hereto and the aggregate original principal amount of the Commitments is $10,000,000; provided, however, that the Commitments of Lenders shall be adjusted to give effect to any assignments of the Commitments pursuant to subsection 9.1B and shall be reduced from time to time by the amount of any reductions thereto made pursuant to subsection 2.4. Each Lender's Commitment shall expire on the day before the Maturity Date and all Loans and all other amounts owed hereunder with respect to the Loans and the Commitments shall be paid in full no later than the Maturity Date. Amounts borrowed under this subsection 2.1A may be repaid and reborrowed up to but excluding the Maturity Date. Anything contained in this Agreement to the contrary notwithstanding, in no event shall the Total Utilization of Commitments at any time exceed the Commitments then in effect.
B. BORROWING MECHANICS. Loans made on any Funding Date shall be in an aggregate minimum amount of $200,000 and integral multiples of $100,000 in excess of that amount (or, if the amount of the Commitments unfunded and available for borrowing is less than such aggregate minimum amount, an amount equal to the amount of the Commitments unfunded
and available for borrowing); provided that Loans made on any Funding Date as Eurodollar Rate Loans with a particular Interest Period shall be in an aggregate minimum amount of $500,000 and integral multiples of $200,000 in excess of that amount. Whenever Borrowers desire that Lenders make Loans they shall deliver to Administrative Agent a Notice of Borrowing no later than 10:00 A.M. (New York City time) at least three Business Days in advance of the proposed Funding Date (in the case of a Eurodollar Rate Loan) or at least one Business Day in advance of the proposed Funding Date (in the case of a Base Rate Loan). Loans may be continued as or converted into Base Rate Loans and Eurodollar Rate Loans in the manner provided in subsection 2.2D. In lieu of delivering a Notice of Borrowing, Borrowers may give Administrative Agent telephonic notice by the required time of any proposed borrowing under this subsection 2.1B; provided that such notice shall be promptly confirmed in writing by delivery of a duly executed Notice of Borrowing to Administrative Agent on or before the applicable Funding Date.
Neither Administrative Agent nor any Lender shall incur any liability to any Borrower in acting upon any telephonic notice referred to above that Administrative Agent believes in good faith to have been given by an Officer of a Borrower or for otherwise acting in good faith under this subsection 2.1B or under subsection 2.2D, and upon funding of Loans by Lenders, and upon conversion or continuation of the applicable basis for determining the interest rate with respect to any Loans pursuant to subsection 2.2D, in each case in accordance with this Agreement, pursuant to any such telephonic notice Borrowers shall have effected Loans or a conversion or continuation, as the case may be, of Loans hereunder.
Borrowers shall notify Administrative Agent prior to the funding of any Loans in the event that any of the matters to which Borrowers are required to certify in the applicable Notice of Borrowing is no longer true and correct as of the applicable Funding Date, and the acceptance by Borrowers of the proceeds of any Loans shall constitute a re-certification by Borrowers, as of the applicable Funding Date, as to the matters to which Borrowers are required to certify in the applicable Notice of Borrowing.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice of Borrowing for, or a Notice of Conversion/Continuation for conversion to, or continuation of, a Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and Borrowers shall be bound to make a borrowing or to effect a conversion or continuation in accordance therewith.
Notwithstanding the foregoing provisions of this subsection 2.1B, no Eurodollar Rate Loans may be made and no Base Rate Loan may be converted into a Eurodollar Rate Loan until the third Business Day after the Closing Date.
C. DISBURSEMENT OF FUNDS. All Loans under this Agreement shall be made by Lenders simultaneously and proportionately to their respective Pro Rata Shares, it being understood that neither Administrative Agent nor any Lender shall be responsible for any default by any other Lender in that other Lender's obligation to make a Loan requested hereunder nor shall the Commitment of any Lender to make a Loan requested be increased or decreased as a result of a default by any other Lender in that other Lender's obligation to make a Loan requested hereunder. Promptly after receipt by Administrative Agent of a Notice of Borrowing
pursuant to subsection 2.1B (or telephonic notice in lieu thereof) or a notice deemed to be a Notice of Borrowing pursuant to subsection 2.1B, Administrative Agent shall notify each Lender of the proposed borrowing. Each such Lender shall make the amount of its Loan available to Administrative Agent not later than 12:00 Noon (New York City time) on the applicable Funding Date, in same day funds in Dollars, at the Funding and Payment Office. Upon satisfaction or waiver of the conditions precedent specified in subsections 3.1 (in the case of Loans made on the Closing Date) and 3.2 (in the case of all Loans), Administrative Agent shall make the proceeds of such Loans available to Borrowers on the applicable Funding Date by causing an amount of same day funds in Dollars equal to the proceeds of all such Loans received by Administrative Agent from Lenders to be credited to the account of Borrowers at the Funding and Payment Office.
Unless Administrative Agent shall have been notified by any Lender prior to a Funding Date that such Lender does not intend to make available to Administrative Agent the amount of such Lender's Loan requested on such Funding Date, Administrative Agent may assume that such Lender has made such amount available to Administrative Agent on such Funding Date and Administrative Agent may, in its sole discretion, but shall not be obligated to, make available to Borrowers a corresponding amount on such Funding Date. If such corresponding amount is not in fact made available to Administrative Agent by such Lender, Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from such Funding Date until the date such amount is paid to Administrative Agent, at the customary rate set by Administrative Agent for the correction of errors among banks for three Business Days and thereafter at the Base Rate. If such Lender does not pay such corresponding amount forthwith upon Administrative Agent's demand therefor, Administrative Agent shall promptly notify Borrowers and Borrowers shall immediately pay such corresponding amount to Administrative Agent together with interest thereon, for each day from such Funding Date until the date such amount is paid to Administrative Agent, at the rate payable under this Agreement for Base Rate Loans. Nothing in this subsection 2.1C shall be deemed to relieve any Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights that Borrowers may have against any Lender as a result of any default by such Lender hereunder.
D. THE REGISTER. Administrative Agent, acting for these purposes solely as an agent of Borrowers (it being acknowledged that Administrative Agent, in such capacity, and its officers, directors, employees, agent and affiliates shall constitute Indemnitees under subsection 9.3), shall maintain (and make available for inspection by Borrowers and Lenders upon reasonable prior notice at reasonable times) at its address referred to in subsection 9.8 a register for the recordation of, and shall record, the names and addresses of Lenders and the Commitment and Loans of each Lender from time to time (the "REGISTER"). Borrowers, Administrative Agent and Lenders shall deem and treat the Persons listed as Lenders in the Register as the holders and owners of the corresponding Commitments and Loans listed therein for all purposes hereof; all amounts owed with respect to any Commitment or Loan shall be owed to the Lender listed in the Register as the owner thereof; and any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is listed in the Register as a Lender shall be conclusive and binding on any subsequent holder, assignee or transferee of the corresponding Commitments or Loans. Each Lender shall record on its internal records the amount of its Loans and Commitments and each payment in
respect hereof, and any such recordation shall be conclusive and binding on Borrowers, absent manifest error, subject to the entries in the Register, which shall, absent manifest error, govern in the event of any inconsistency with any Lender's records. Failure to make any recordation in the Register or in any Lender's records, or any error in such recordation, shall not affect any Loans or Commitments or any Obligations in respect of any Loans.
E. OPTIONAL NOTES. If so requested by any Lender by written notice to Company (with a copy to Administrative Agent) at least two Business Days prior to the Closing Date or at any time thereafter, Borrowers shall execute and deliver to such Lender (and/or, if applicable and if so specified in such notice, to any Person who is an assignee of such Lender pursuant to subsection 9.1) on the Closing Date (or, if such notice is delivered after the date which is two Business Days prior to the Closing Date, promptly after Company's receipt of such notice) a promissory note or promissory notes to evidence such Lender's Loan, substantially in the form of Exhibit I annexed hereto, with appropriate insertions, including the principal amount of that Lender's Commitment.
2.2 INTEREST ON THE LOANS.
A. RATE OF INTEREST. Subject to the provisions of subsections 2.6 and 2.7, each Loan shall bear interest on the unpaid principal amount thereof from the date made until repayment in full at a rate determined by reference to the Base Rate or the Eurodollar Rate. The applicable basis for determining the rate of interest with respect to any Loan shall be selected by Borrowers initially at the time a Notice of Borrowing is given with respect to such Loan pursuant to subsection 2.2B (subject to the last sentence of subsection 2.1B), and the basis for determining the interest rate with respect to any Loan may be changed from time to time pursuant to subsection 2.2B (subject to the last sentence of subsection 2.1B). If on any day a Loan is outstanding with respect to which notice has not been delivered to Administrative Agent in accordance with the terms of this Agreement specifying the applicable basis for determining the rate of interest, then for that day that Loan shall bear interest determined by reference to the Base Rate. Subject to the provisions of subsections 2.2E, 2.2G and 2.7, the Loans shall bear interest through maturity as follows:
(i) if a Base Rate Loan, then at the sum of the Base Rate plus the Base Rate Margin; or
(ii) if a Eurodollar Rate Loan, then at the sum of the Eurodollar Rate plus the Eurodollar Rate Margin.
B. INTEREST PERIODS. In connection with each Eurodollar Rate Loan, Borrowers may, pursuant to the applicable Notice of Borrowing or Notice of Conversion/Continuation, as the case may be, select an interest period (each an "INTEREST PERIOD") to be applicable to such Loan, which Interest Period shall be a one-, two-, three- or six-month period; provided that:
(i) the initial Interest Period for any Eurodollar Rate Loan shall commence on the Funding Date in respect of such Loan, in the case of a Loan initially made as a Eurodollar Rate Loan, or on the date specified in the applicable Notice of Conversion/Continuation, in the case of a Loan converted to a Eurodollar Rate Loan;
(ii) in the case of immediately successive Interest Periods applicable to a Eurodollar Rate Loan continued as such pursuant to a Notice of Conversion/Continuation, each successive Interest Period shall commence on the day on which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided that, if any Interest Period would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day;
(iv) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (v) of this subsection 2.2B, end on the last Business Day of a calendar month;
(v) no Interest Period with respect to any portion of the Loans shall extend beyond the Maturity Date in effect at the commencement of such Interest Period; and
(vi) there shall be no more than four Interest Periods outstanding at any time.
C. INTEREST PAYMENTS. Subject to the provisions of subsection 2.2E, interest on each Loan shall be payable in arrears on and to each Interest Payment Date applicable to that Loan, upon any prepayment of that Loan (to the extent accrued on the amount being prepaid) and at maturity (including final maturity).
D. CONVERSION OR CONTINUATION. Subject to the provisions of subsection 2.6, Borrowers shall have the option (i) to convert at any time all or any part of their outstanding Loans equal to $200,000 and integral multiples of $100,000 in excess of that amount from Loans bearing interest at a rate determined by reference to one basis to Loans bearing interest at a rate determined by reference to an alternative basis or (ii) upon the expiration of any Interest Period applicable to a Eurodollar Rate Loan, to continue all or any portion of such Loan equal to $500,000 and integral multiples of $200,000 in excess of that amount as a Eurodollar Rate Loan; provided, however, that a Eurodollar Rate Loan may only be converted into a Base Rate Loan on the expiration date of an Interest Period applicable thereto.
Borrowers shall deliver a Notice of Conversion/Continuation to Administrative Agent no later than 10:00 A.M. (New York City time) at least one Business Day in advance of the proposed conversion date (in the case of a conversion to a Base Rate Loan) and at least three Business Days in advance of the proposed conversion/continuation date (in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan). In lieu of delivering a Notice of Conversion/Continuation Borrowers may give Administrative Agent telephonic notice by the required time of any proposed conversion/continuation under this subsection 2.2D; provided that such notice shall be promptly confirmed in writing by delivery of a Notice of Conversion/Continuation to Administrative Agent on or before the proposed conversion/continuation date. Administrative Agent shall promptly notify each Lender of any Loan subject to the Notice of Conversion/Continuation.
E. DEFAULT RATE. Upon the occurrence and during the continuation of any Event of Default, the outstanding principal amount of all Loans and, to the extent permitted by applicable law, any interest payments thereon not paid when due and any fees and other amounts then due and payable hereunder, shall thereafter bear interest (including post petition interest in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws) payable upon demand at a rate that is (i) in the case of Loans, 2.00% per annum in excess of (a) the interest rate otherwise payable under this Agreement for Base Rate Loans or (b) the interest rate otherwise payable under this Agreement with respect to such Loans, if such Loans are Eurodollar Rate Loans, the Interest Period in effect at the time of the relevant Event of Default has not yet expired, and such interest rate otherwise payable with respect to such Loans is greater than the interest rate otherwise payable under this Agreement for Base Rate Loans, or (ii) in the case of fees and other amounts, 2.00% per annum in excess of the interest rate otherwise payable under this Agreement for Base Rate Loans. Payment or acceptance of the increased rates of interest provided for in this subsection 2.2E is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Administrative Agent or any Lender.
F. COMPUTATION OF INTEREST. Interest on the Loans and other amounts bearing interest with reference to the Base Rate shall be computed (i) in the case of Base Rate Loans and other amounts bearing interest with reference to the Base Rate, on the basis of a 365-day or 366-day year, as the case may be, and (ii) in the case of Eurodollar Rate Loans, on the basis of a 360-day year, in each case for the actual number of days elapsed in the period during which it accrues. In computing interest on any Loan, the date of the making of such Loan or the first day of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted from a Eurodollar Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate Loan, as the case may be, shall be included; and the date of payment of such Loan or the expiration date of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the case may be, shall be excluded; provided that if a Loan is repaid on the same day on which it is made, one day's interest shall be paid on that Loan.
G. MAXIMUM RATE. Notwithstanding the foregoing provisions of this subsection 2.2, in no event shall the rate of interest payable by Borrowers with respect to any Loan exceed the maximum rate of interest permitted to be charged under applicable law.
2.3 FEES.
A. AGENCY FEE; FACILITY FEES. Borrowers, jointly and severally, agree to pay to Administrative Agent (i) on the Closing Date and each anniversary of the Closing Date (excluding the Maturity Date), for Administrative Agent's own account and in advance for the forthcoming year, an annual agency fee in an amount equal to $30,000 (which fee shall be fully earned and non-refundable when due), and (ii) on the Closing Date, for distribution to each Lender, a facility fee in an amount equal to 2.0% of the Commitment of such Lender as of the Closing Date.
B. COMMITMENT FEES. Borrowers, jointly and severally, agree to pay to Administrative Agent, for distribution to each Revolving Lender in proportion to that Lender's
Pro Rata Share of the Commitments, commitment fees for the period from and including the Closing Date to but excluding the Maturity Date equal to (i) the daily excess of the Commitments over the Total Utilization of Commitments, multiplied by (ii) the Commitment Fee Percentage then in effect, expressed as a daily rate. Such commitment fees shall be payable in arrears on and to (but excluding) the last day of each month and on the Maturity Date and computed on the basis of a 360-day year, for the actual number of days elapsed.
C. OTHER FEES. Borrowers, jointly and severally, agree to pay to Administrative Agent such fees in the amounts and at the times separately agreed upon between Company and Administrative Agent. All fees referenced in this subsection 2.3 shall be earned when payable and shall be non-refundable.
2.4 REPAYMENTS, PREPAYMENTS AND REDUCTIONS IN COMMITMENTS; GENERAL PROVISIONS REGARDING PAYMENTS; APPLICATION OF PROCEEDS OF COLLATERAL AND PAYMENTS UNDER CPIH GUARANTY.
A. PREPAYMENTS AND REDUCTIONS IN COMMITMENTS.
(i) Voluntary Prepayments. Borrowers may, upon not less than one Business Day's prior written or telephonic notice, in the case of Base Rate Loans, and three Business Days' prior written or telephonic notice, in the case of Eurodollar Rate Loans, in each case given to Administrative Agent by 12:00 Noon (New York City time) on the date required and, if given by telephone, promptly confirmed in writing to Administrative Agent, who will promptly notify each Lender whose Loans are to be prepaid of such prepayment, at any time and from time to time prepay any Loans on any Business Day in whole or in part in an aggregate minimum amount of $1,000,000 and integral multiples of $500,000 in excess of that amount (or, if the amount of the Loans is less than such aggregate minimum amount, an amount equal to the amount of the Loans); provided that voluntary prepayments of Eurodollar Rate Loans made on a date other than an Interest Payment Date applicable to such Loan shall be subject to breakage fees, costs and expenses, if any, in accordance with subsection 2.6D. Notice of prepayment having been given as aforesaid, the principal amount of the Loans specified in such notice shall become due and payable on the prepayment date specified therein. Any such voluntary prepayment shall be applied as specified in subsection 2.4A(iv).
(ii) Voluntary Reductions of Commitments. Borrowers may, upon not less than one Business Day's prior written or telephonic notice confirmed in writing to Administrative Agent, at any time and from time to time, terminate in whole or permanently reduce in part, without premium or penalty, the Commitments in an amount up to the amount by which the Commitments exceed the aggregate Loans outstanding at the time of such proposed termination or reduction; provided that any such partial reduction of either the Commitments shall be in an aggregate minimum amount of $1,000,000 and integral multiples of $1,000,000 in excess of that amount. Borrowers' notice to Administrative Agent (who shall promptly notify each Revolving Lender of such notice) shall designate the date (which shall be a Business Day) of such termination or reduction and the amount of any partial reduction, and such termination or reduction of any of the Commitments shall be effective on the date specified in Company's notice and
shall reduce the Commitment of each Lender proportionately to its Pro Rata Share. No such voluntary reduction of the Commitments shall be permitted if such reduction would result in the Commitments being less than the Total Utilization of Commitments.
(iii) Mandatory Payments. Mandatory Payments shall be made in the amounts and under the circumstances set forth below, all such Mandatory Payments to be applied as set forth below or as more specifically provided in subsection 2.4A(iv), except to the extent the Intercreditor Agreement requires application thereof in a different manner than as set forth in this subsection 2.4A(iii) or subsection 2.4A(iv):
(a) Net Asset Sale Proceeds. No later than two days after the date of receipt by CEA, Company or any of its Subsidiaries of any Net Asset Sale Proceeds in respect of any Asset Sale, Company shall make a Mandatory Payment in an aggregate amount equal to the remaining amount of such Net Asset Sale Proceeds.
(b) Net Insurance/Condemnation Proceeds. No later than the fifth Business Day following the date of receipt by Administrative Agent or by Company or any of its Subsidiaries of any Net Insurance/Condemnation Proceeds that are required to be used for a Mandatory Payment pursuant to the provisions of subsection 5.4C, Company shall make a Mandatory Payment in an aggregate amount equal to the amount of such Net Insurance/Condemnation Proceeds.
(c) Issuance of Indebtedness. On the date of receipt of the Net Indebtedness Proceeds from the issuance of any Indebtedness of Company or any of its Subsidiaries after the Closing Date, other than Indebtedness permitted pursuant to subsections 6.1(i) through (vii), Company shall make a Mandatory Payment in an aggregate amount equal to such Net Indebtedness Proceeds.
(d) Tax Refunds. If after the Closing Date, Company or any of its Subsidiaries receives any payment of a cash refund or rebate of any Tax, the Borrowers shall no later than the Business Day following the date of receipt of such refund or rebate make a Mandatory Payment in the amount of such Tax refund or rebate, except to the extent such application would constitute a material violation of a valid Contractual Obligation in connection with a Project of Company or any of its Subsidiaries to remit such refund or rebate to the client of such Project.
(e) Excess Cash. If as of the last Business Day of any calendar month the sum of (1) Cash On Hand (after giving effect to the aggregate interest to be paid on such date pursuant to subsection 2.2C) plus (2) the aggregate Commitments minus (3) the Total Utilization of Commitments (after giving effect to any voluntary repayment of outstanding Loans to be made on such date that are made on such date) exceeds $10,000,000, then Borrowers shall apply an amount equal to such excess (provided, that, in the event that such application would cause Cash On Hand to be less than $6,000,000, then such excess amount so applied shall be reduced such that Cash On Hand is not less than $6,000,000) (the
amount so applied as it may be adjusted pursuant to the foregoing proviso, "AVAILABLE CASH")) to the payment of outstanding Term Loans.
(f) Prepayments Due to Reductions or Restrictions of Commitments. Borrowers shall from time to time prepay the Loans to the extent necessary to give effect to the limitations set forth in the last sentence of subsection 2.1A. Without limiting the preceding sentence, if at any time and from time to time after the Closing Date the outstanding principal amount of Loans shall exceed the Commitments then in effect Borrowers shall promptly prepay Loans in an aggregate amount equal to the amount of any such excess.
(g) Calculations of Net Proceeds Amounts; Additional Prepayments and Reductions Based on Subsequent Calculations. Concurrently with the receipt of any amount which would require a Mandatory Payment pursuant to subsections 2.4A(iii)(a) - (e), Company shall deliver to Administrative Agent an Officer's Certificate demonstrating the calculation of the amount of the applicable Net Asset Sale Proceeds, Net Insurance/Condemnation Proceeds, Net Indebtedness Proceeds, cash in the Cash Management System or Tax refund or rebate, as the case may be, that gave rise to such Mandatory Payment. In the event that Company shall subsequently determine that the actual amount was greater than the amount set forth in such Officer's Certificate, Company shall promptly make an additional Mandatory Payment in an amount equal to the amount of such excess, and Company shall concurrently therewith deliver to Administrative Agent an Officer's Certificate demonstrating the derivation of the additional amount resulting in such excess.
(iv) Application of Prepayments.
(a) Application of Prepayments. Except as provided in subsection 2.4C and to the extent the Intercreditor Agreement requires application of any Mandatory Payment in a different manner than as set forth in this sentence, (1) any voluntary prepayments pursuant to subsection 2.4A(i) shall be applied to repay outstanding Loans, and (2) any Mandatory Payment made pursuant to subsections 2.4A(iii)(a) - (d) shall be applied to repay Loans and/or to permanently reduce Commitments in accordance with the provisions of the Intercreditor Agreement, and the application of Mandatory Payments to Loans and/or Commitments required under the terms of the Intercreditor Agreement shall apply as if set forth herein.
(b) Application of Prepayments to Base Rate Loans and Eurodollar Rate Loans. Any prepayment of Loans shall be applied first to Base Rate Loans to the full extent thereof before application to Eurodollar Rate Loans, in each case in a manner which minimizes the amount of any payments required to be made by Borrowers pursuant to subsection 2.6D.
(v) Application of Payments to Principal and Interest. All payments in respect of the principal amount of any Loan shall include payment of accrued interest on the
principal amount being repaid or prepaid, and all such payments (and, in any event, any payments in respect of any Loan on a date when interest is due and payable with respect to such Loan) shall be applied to the payment of interest before application to principal.
B. GENERAL PROVISIONS REGARDING PAYMENTS.
(i) Manner and Time of Payment. All payments by Borrowers of principal, interest, fees and other Obligations shall be made in Dollars in same day funds, without defense, setoff or counterclaim, free of any restriction or condition, and delivered to Administrative Agent not later than 12:00 Noon (New York City time) on the date due at the Funding and Payment Office for the account of Lenders; funds received by Administrative Agent after that time on such due date shall be deemed to have been paid by Borrowers on the next succeeding Business Day. Each Borrower hereby authorizes Administrative Agent to charge its accounts with Administrative Agent in order to cause timely payment to be made to Administrative Agent of all principal, interest, fees and expenses due hereunder (subject to sufficient funds being available in its accounts for that purpose). Anything contained herein to the contrary notwithstanding, Borrowers jointly and severally promise to repay all Loans when due in accordance with the terms hereof.
(ii) Application of Payments to Principal and Interest. All payments in respect of the principal amount of any Loan shall include payment of accrued interest on the principal amount being repaid or prepaid, and all such payments (and, in any event, any payments in respect of any Loan on a date when interest is due and payable with respect to such Loan) shall be applied to the payment of interest before application to principal.
(iii) Apportionment of Payments. Aggregate payments of principal and interest shall be apportioned among all outstanding Loans to which such payments relate, in each case proportionately to Lenders' respective Pro Rata Shares. Administrative Agent shall promptly distribute to each Lender, at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Lender may request, its Pro Rata Share of all such payments received by Administrative Agent and the commitment fees of such Lender, if any, when received by Administrative Agent pursuant to subsection 2.3. Notwithstanding the foregoing provisions of this subsection 2.4B(iii), if, pursuant to the provisions of subsection 2.6C, any Notice of Conversion/Continuation is withdrawn as to any Affected Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any Eurodollar Rate Loans, Administrative Agent shall give effect thereto in apportioning payments received thereafter.
(iv) Payments on Business Days. Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest hereunder or of the commitment fees hereunder, as the case may be.
(v) Notation of Payment. Each Lender agrees that before disposing of any Note held by it, or any part thereof (other than by granting participations therein), that
Lender will make a notation thereon of all Loans evidenced by that Note and all principal payments previously made thereon and of the date to which interest thereon has been paid; provided that the failure to make (or any error in the making of) a notation of any Loan made under such Note shall not limit or otherwise affect the Obligations of Borrowers hereunder or under such Note with respect to any Loan or any payments of principal or interest on such Note.
C. APPLICATION OF PROCEEDS OF COLLATERAL AND PAYMENTS AFTER EVENT OF DEFAULT. Except to the extent the Intercreditor Agreement requires application in a different manner than as set forth in this subsection 2.4C, upon the occurrence and during the continuation of an Event of Default, either if requested by Requisite Lenders or upon termination of the Commitments (a) all Mandatory Payments or other payments received on account of the Obligations, whether from any Borrower, or otherwise, shall be applied by Administrative Agent against the Obligations and (b) all proceeds received by Administrative Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the discretion of Administrative Agent, be held by Administrative Agent as Collateral for, and/or (then or at any time thereafter) applied in full or in part by Administrative Agent against, the applicable Secured Obligations (as defined in the Collateral Documents), in each case in the following order of priority:
(i) to the payment of all costs and expenses of such sale, collection or other realization, all other expenses, liabilities and advances made or incurred by Administrative Agent in connection therewith, and all amounts for which Administrative Agent is entitled to compensation (including the fees described in subsection 2.3), reimbursement and indemnification under any Loan Document and all advances made by Administrative Agent thereunder for the account of the applicable Loan Party, and to the payment of all costs and expenses paid or incurred by Administrative Agent in connection with the Loan Documents, all in accordance with subsections 8.4, 9.2 and 9.3 and the other terms of this Agreement and the Loan Documents;
(ii) thereafter, to the extent of any excess such proceeds, to the payment of all Obligations, for the ratable benefit of the holders thereof (subject to the provisions of subsection 2.4B(ii) hereof); and
(iii) thereafter, to the extent of any excess such proceeds, to the payment to or upon the order of such Loan Party or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.
2.5 USE OF PROCEEDS.
A. LOANS. The proceeds of any Loans shall be applied by
Borrowers to fund working capital requirements and general corporate purposes
relating to Borrowers' post-Closing Date operations and other expenditures;
provided that no portion of the Loans shall be used, directly or indirectly, to
(a) finance or make any Restricted Payment or other payment or prepayment
prohibited under subsection 6.5, or (b) make any payment or prepayment
(including by way of an Investment) to any Person that is otherwise prohibited
under this Agreement.
Borrowers shall use the entire amount of the proceeds of each Loan in accordance with this subsection 2.5A.
B. MARGIN REGULATIONS. No portion of the proceeds of any borrowing under this Agreement shall be used by any Borrower or any Subsidiary of any Borrower in any manner that might cause the borrowing or the application of such proceeds to violate Regulation U, Regulation T or Regulation X of the Board of Governors of the Federal Reserve System or any other regulation of such Board or to violate the Exchange Act, in each case as in effect on the date or dates of such borrowing and such use of proceeds.
2.6 SPECIAL PROVISIONS GOVERNING EURODOLLAR RATE LOANS.
Notwithstanding any other provision of this Agreement to the contrary, the following provisions shall govern with respect to Eurodollar Rate Loans as to the matters covered:
A. DETERMINATION OF APPLICABLE INTEREST RATE. On each Interest Rate Determination Date, Administrative Agent shall determine in accordance with the terms of this Agreement (which determination shall, absent manifest error, be conclusive and binding upon all parties) the interest rate that shall apply to the Eurodollar Rate Loans for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to Borrowers and each Lender.
B. INABILITY TO DETERMINE APPLICABLE INTEREST RATE. In the event that Administrative Agent shall have determined (which determination shall be conclusive and binding upon all parties hereto) on any Interest Rate Determination Date that by reason of circumstances affecting the interbank Eurodollar market adequate and fair means do not exist for ascertaining the interest rate applicable to such Loans on the basis provided for in the definition of Eurodollar Rate, Administrative Agent shall on such date give notice (by telefacsimile or by telephone confirmed in writing) to Borrowers and each Lender of such determination, whereupon (i) no Loans may be made as, or converted to, Eurodollar Rate Loans until such time as Administrative Agent notifies Borrowers and Lenders that the circumstances giving rise to such notice no longer exist and (ii) any Notice of Borrowing or Notice of Conversion/Continuation given by Borrowers with respect to the Loans in respect of which such determination was made shall be deemed to be for a Base Rate Loan.
C. ILLEGALITY OR IMPRACTICABILITY OF EURODOLLAR RATE LOANS. In the event that on any date any Lender shall have determined (which determination shall be conclusive and binding upon all parties hereto but shall be made only after consultation with Borrowers and Administrative Agent) that the making, maintaining or continuation of its Eurodollar Rate Loans (i) has become unlawful as a result of compliance by such Lender in good faith with any law, treaty, governmental rule, regulation, guideline or order (or would conflict with any such treaty, governmental rule, regulation, guideline or order not having the force of law even though the failure to comply therewith would not be unlawful) or (ii) has become impracticable, or would cause such Lender material hardship, as a result of contingencies occurring after the date of this Agreement which materially and adversely affect the interbank Eurodollar market or the position of such Lender in that market, then, and in any such event, such Lender shall be an "AFFECTED
LENDER" and it shall on that day give notice (by telefacsimile or by telephone confirmed in writing) to Borrowers and Administrative Agent of such determination. Administrative Agent shall promptly notify each other Lender of the receipt of such notice. Thereafter (a) the obligation of the Affected Lender to make Loans as, or to convert Loans to, Eurodollar Rate Loans shall be suspended until such notice shall be withdrawn by the Affected Lender, (b) to the extent such determination by the Affected Lender relates to a Eurodollar Rate Loan then being requested by Borrowers pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation, the Affected Lender shall make such Loan as (or convert such Loan to, as the case may be) a Base Rate Loan, (c) the Affected Lender's obligation to maintain its outstanding Eurodollar Rate Loans (the "AFFECTED LOANS") shall be terminated at the earlier to occur of the expiration of the Interest Period then in effect with respect to the Affected Loans or when required by law, and (d) the Affected Loans shall automatically convert into Base Rate Loans on the date of such termination. Notwithstanding the foregoing, to the extent a determination by an Affected Lender as described above relates to a Eurodollar Rate Loan then being requested by Borrowers pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation, Borrowers shall have the option, subject to the provisions of subsection 2.6D, to rescind such Notice of Borrowing or Notice of Conversion/Continuation as to all Lenders by giving notice (by telefacsimile or by telephone confirmed in writing) to Administrative Agent of such rescission on the date on which the Affected Lender gives notice of its determination as described above. Administrative Agent shall promptly notify each other Lender of the receipt of such notice. Except as provided in the immediately preceding sentence, nothing in this subsection 2.6C shall affect the obligation of any Lender other than an Affected Lender to make or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in accordance with the terms of this Agreement.
D. COMPENSATION FOR BREAKAGE OR NON-COMMENCEMENT OF INTEREST PERIODS. Borrowers shall, jointly and severally, compensate each Lender, upon written request by that Lender pursuant to subsection 2.6, for all reasonable losses, expenses and liabilities (including any interest paid by that Lender to lenders of funds borrowed by it to make or carry its Eurodollar Rate Loans and any loss, expense or liability sustained by that Lender in connection with the liquidation or re-employment of such funds) which that Lender may sustain: (i) if for any reason (other than a default by that Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of Borrowing or a telephonic request therefor, or a conversion to or continuation of any Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of Conversion/Continuation or a telephonic request therefor, (ii) if any prepayment (including any prepayment or conversion occasioned by the circumstances described in subsection 2.6C) or other principal payment or any conversion of any of its Eurodollar Rate Loans occurs on a date prior to the last day of an Interest Period applicable to that Loan, (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on any date specified in a notice of prepayment given by Borrowers, or (iv) as a consequence of any other default by Borrowers in the repayment of Eurodollar Rate Loans when required by the terms of this Agreement.
E. BOOKING OF EURODOLLAR RATE LOANS. Any Lender may make, carry or transfer Eurodollar Rate Loans at, to, or for the account of any of its branch offices or the office of an Affiliate of that Lender.
F. ASSUMPTIONS CONCERNING FUNDING OF EURODOLLAR RATE LOANS. Calculation of all amounts payable to a Lender under this subsection 2.6 and under subsection 2.7A shall be made as though that Lender had funded each of its Eurodollar Rate Loans through the purchase of a Eurodollar deposit bearing interest at the rate obtained pursuant to clause (i) of the definition of Eurodollar Rate in an amount equal to the amount of such Eurodollar Rate Loan and having a maturity comparable to the relevant Interest Period, whether or not its Eurodollar Rate Loans had been funded in such manner.
G. EURODOLLAR RATE LOANS AFTER DEFAULT. After the occurrence of and during the continuation of a Potential Event of Default or an Event of Default, (i) Borrowers may not elect to have a Loan be made or maintained as, or converted to, a Eurodollar Rate Loan after the expiration of any Interest Period then in effect for that Loan and (ii) subject to the provisions of subsection 2.6D, any Notice of Borrowing or Notice of Conversion/Continuation given by Borrowers with respect to a requested borrowing or conversion/continuation that has not yet occurred shall be deemed to be for a Base Rate Loan or, if the conditions to making a Loan set forth in subsection 3.2 cannot then be satisfied, to be rescinded by Borrowers.
2.7 INCREASED COSTS; TAXES; CAPITAL ADEQUACY.
A. COMPENSATION FOR INCREASED COSTS. Subject to the provisions of subsection 2.7B (which shall be controlling with respect to the matters covered thereby), in the event that any Lender shall determine (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or other Government Authority, in each case that becomes effective after the date hereof, or compliance by such Lender with any guideline, request or directive issued or made after the date hereof by any central bank or other Government Authority (whether or not having the force of law):
(i) subjects such Lender to any additional Tax (other than any withholding tax with respect to which subsection 2.7B applies) with respect to this Agreement or any of its obligations hereunder (including with respect to maintaining any Commitment hereunder) or any payments to such Lender of principal, interest, fees or any other amount payable hereunder;
(ii) imposes, modifies or holds applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets held by, or deposits or other liabilities in or for the account of, or advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Lender (other than any such reserve or other requirements with respect to Eurodollar Rate Loans that are reflected in the definition of Eurodollar Rate); or
(iii) imposes any other condition (other than with respect to Taxes) on or affecting such Lender or its obligations hereunder or the interbank Eurodollar market;
and the result of any of the foregoing is to increase the cost to such Lender of agreeing to make, making or maintaining its Loans or Commitments or to reduce any amount received or receivable by such Lender with respect thereto; then, in any such case, Borrowers shall promptly pay, on a joint and several basis, to such Lender, upon receipt of the statement referred to in subsection 2.8A, such additional amount or amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall determine) as may be necessary to compensate such Lender on an after-tax basis for any such increased cost or reduction in amounts received or receivable hereunder.
B. TAXES.
(i) Payments to Be Free and Clear. All sums payable by Borrowers under this Agreement and the other Loan Documents shall be paid free and clear of, and without any deduction or withholding on account of, any Tax imposed, levied, collected, withheld or assessed by or within the United States or any political subdivision in or of the United States or any other jurisdiction from or to which a payment is made by or on behalf of Borrowers or by any federation or organization of which the United States or any such jurisdiction is a member at the time of payment.
(ii) Grossing-up of Payments. If any Borrower or any other Person is required by law to make any deduction or withholding on account of any such Tax from any sum paid or payable by Borrowers to Administrative Agent or any Lender under any of the Loan Documents:
(a) Borrowers shall notify Administrative Agent of any such requirement or any change in any such requirement as soon as Borrowers become aware of it;
(b) Borrowers shall pay any such Tax when such Tax is due, such payment to be made (if the liability to pay is imposed on any Borrower) for their own account or (if that liability is imposed on Administrative Agent or such Lender, as the case may be) on behalf of and in the name of Administrative Agent or such Lender;
(c) the sum payable by Borrowers in respect of which the relevant deduction, withholding or payment is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, Administrative Agent or such Lender, as the case may be, receives on the due date a net sum equal to what it would have received had no such deduction, withholding or payment been required or made; and
(d) within 30 days after paying any sum from which any or all of them are required by law to make any deduction or withholding, and within 30 days after the due date of payment of any Tax which any or all of them are required by clause (b) above to pay, Borrowers shall deliver to Administrative Agent evidence satisfactory to the other affected parties of such deduction, withholding or payment and of the remittance thereof to the relevant taxing or other authority.
(iii) Evidence of Exemption from U.S. Withholding Tax.
(a) Each Lender that is organized under the laws of any jurisdiction other than the United States or any state or other political subdivision thereof (for purposes of this subsection 2.7B(iii), a "NON-US LENDER") shall deliver to Administrative Agent and to Company, on or prior to the Closing Date (in the case of each Lender listed on the signature pages hereof) or on or prior to the date of the Assignment Agreement pursuant to which it becomes a Lender (in the case of each other Lender), and at such other times as may be necessary in the determination of Company or Administrative Agent (each in the reasonable exercise of its discretion), two original copies of Internal Revenue Service Form W-8BEN or W-8ECI (or any successor forms) properly completed and duly executed by such Lender, together with any other certificate or statement of exemption required under the Internal Revenue Code or the regulations issued thereunder to establish that such Lender is not subject to United States withholding tax with respect to any payments to such Lender of interest payable under any of the Loan Documents.
(b) Each Non-US Lender hereby agrees, from time to time after the initial delivery by such Lender of such forms, whenever a lapse in time or change in circumstances renders such forms, certificates or other evidence so delivered obsolete or inaccurate in any material respect, that such Lender shall promptly (1) deliver to Administrative Agent and to Company two original copies of renewals, amendments or additional or successor forms, properly completed and duly executed by such Lender, together with any other certificate or statement of exemption required in order to confirm or establish that such Lender is not subject to United States withholding tax with respect to payments to such Lender under the Loan Documents or (2) notify Administrative Agent and Company of its inability to deliver any such forms, certificates or other evidence.
(c) Borrowers shall not be required to pay any additional amount to any Non-US Lender under clause (c) of subsection 2.7B(ii) if such Lender shall have failed to satisfy the requirements of clause (a) or (b)(1) of this subsection 2.7B(iii); provided that if such Lender shall have satisfied the requirements of subsection 2.7B(iii)(a) on the date such Lender became a Lender, nothing in this subsection 2.7B(iii)(c) shall relieve Borrowers of their obligation to pay any amounts pursuant to subsection 2.7B(ii)(c) in the event that, as a result of any change in any applicable law, treaty or governmental rule, regulation or order, or any change in the interpretation, administration or application thereof, such Lender is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent date establishing the fact that such Lender is not subject to withholding as described in subsection 2.7B(iii)(a).
(iv) Indemnity for Withheld Amounts. Borrowers hereby agree to indemnify Lenders and Administrative Agent for the full amount of any deduction or withholding on account of any Taxes imposed, levied, collected, withheld or assessed by or within the United States or any political subdivision in or of the United States or any other
jurisdiction from or to which a payment is made by or on behalf of Borrowers or by any federation or organization of which the United States or any such jurisdiction is a member at the time of payment (including any such Taxes imposed by any jurisdiction on amounts payable under this subsection 2.7B) that Borrowers are required to pay pursuant to subsection 2.7B(ii) but were paid by Administrative Agent or Lenders with respect to sums payable by Borrowers under this Agreement and the other Loan Documents and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made promptly, and in any event within 10 days after, the relevant Lender or Agent makes demand therefor in writing.
C. CAPITAL ADEQUACY ADJUSTMENT. If any Lender shall have determined that the adoption, effectiveness, phase-in or applicability after the date hereof of any law, rule or regulation (or any provision thereof) regarding capital adequacy, or any change therein or in the interpretation or administration thereof by any Government Authority charged with the interpretation or administration thereof, or compliance by any Lender with any guideline, request or directive regarding capital adequacy (whether or not having the force of law) of any such Government Authority, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of, or with reference to, such Lender's Loans, Commitments, or other Obligations to a level below that which such Lender or such controlling corporation could have achieved but for such adoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of such Lender or such controlling corporation with regard to capital adequacy), then from time to time, within five Business Days after receipt by Borrowers from such Lender of the statement referred to in subsection 2.8A, Borrowers shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling corporation on an after-tax basis for such reduction.
2.8 STATEMENT OF LENDERS; OBLIGATION OF LENDERS TO MITIGATE.
A. STATEMENTS. Each Lender claiming compensation or reimbursement pursuant to subsection 2.6D, 2.7 or 2.8B shall deliver to Company (with a copy to Administrative Agent) a written statement, setting forth in reasonable detail the basis of the calculation of such compensation or reimbursement, which statement shall be conclusive and binding upon all parties hereto absent manifest error; provided that a Lender claiming compensation or reimbursement pursuant to subsection 2.7B(ii) due to circumstances in effect as of the Closing Date shall not be required to deliver more than one such statement to Borrowers or Administrative Agent, and such statement shall remain effective with respect to this Agreement until all Obligations have been paid in full.
B. MITIGATION. Each Lender agrees that, as promptly as
practicable after the officer of such Lender responsible for administering the
Loans of such Lender becomes aware of the occurrence of an event or the
existence of a condition that would cause such Lender to become an Affected
Lender or that would entitle such Lender to receive payments under subsection
2.7 (other than subsection 2.7B(ii)), it will use reasonable efforts to make,
fund or maintain the Commitments of such Lender or the Loans of such Lender
through another lending office of such Lender, if (i) as a result thereof the
circumstances which would cause such Lender to be an Affected Lender would cease
to exist or the additional amounts which would otherwise
be required to be paid to such Lender pursuant to subsection 2.7 would be materially reduced and (ii) as determined by such Lender in its sole discretion, such action would not otherwise be disadvantageous to such Lender; provided that such Lender will not be obligated to utilize such other lending office pursuant to this subsection 2.8B unless Borrowers agree to pay, on a joint and several basis, all incremental expenses incurred by such Lender as a result of utilizing such other lending office as described above.
2.9 DEFAULTING LENDER.
Anything contained herein to the contrary notwithstanding, in the event that any Lender (any such Lender being a "DEFAULTING LENDER") defaults (a "FUNDING DEFAULT") in its obligation to fund any Loan (a "DEFAULTED LOAN") in accordance with the terms of this Agreement, then (i) during any Default Period (as defined below) with respect to such Defaulting Lender, such Defaulting Lender shall not be deemed a "Lender" for purposes of voting on any matters (including the granting of any consents or waivers) with respect to any of the Loan Documents (provided, however, that nothing in this clause (i) shall be construed as permitting, without the consent of the relevant Defaulting Lender, a reduction in the principal amount of such Defaulting Lender's funded Loans or other outstanding funded Obligations, an increase in the amount of such Lender's Commitment, or an extension of the Maturity Date), (ii) to the extent permitted by applicable law, until such time as the Default Excess (as defined below) with respect to such Defaulting Lender shall have been reduced to zero, any payment of amounts with respect to the Loans shall be applied first, to amounts funded by Administrative Agent or other Lenders (together with unpaid interest accrued thereon) in lieu of such amounts required to be funded by Defaulting Lenders and second, to the Loans of other Lenders (other than any other Defaulting Lenders) as if such Defaulting Lender (and any other Defaulting Lenders) had no Loans outstanding and the Loan Exposure of such Defaulting Lender were zero, (iii) such Defaulting Lender's Commitment, Loans and Pro Rata Share with respect thereto shall be excluded for purposes of calculating the commitment fee in respect of any day during any Default Period with respect to such Defaulting Lender, and such Defaulting Lender shall not be entitled to receive any such commitment fee with respect to such Defaulting Lender's Commitments in respect of any Default Period with respect to such Defaulting Lender, and (iv) the Total Utilization of Commitments as at any date of determination shall be calculated as if such Defaulting Lender had funded all Defaulted Loans of such Defaulting Lender.
For purposes of this Agreement, (I) "DEFAULT PERIOD" means,
with respect to any Defaulting Lender, the period commencing on the date of the
applicable Funding Default and ending on the earliest of the following dates:
(A) the date on which all Commitments are cancelled or terminated and/or the
Obligations are declared or become immediately due and payable, (B) the date on
which (1) the Default Excess with respect to such Defaulting Lender shall have
been reduced to zero (whether by the funding by such Defaulting Lender of any
Defaulted Loans of such Defaulting Lender or by the non-pro rata application of
any payments of amounts with respect to the Loans in accordance with the terms
hereof or any combination thereof), and (2) such Defaulting Lender shall have
delivered to Company and Administrative Agent a written reaffirmation of its
intention to honor its obligations under this Agreement with respect to its
Commitments, and (C) the date on which Company and Administrative Agent waive
all Funding Defaults of such Defaulting Lender in writing, and (II) "DEFAULT
EXCESS" means, with respect to any Defaulting Lender, the excess, if any, of (x)
such Defaulting Lender's
applicable Pro Rata Share of the aggregate outstanding principal amount of Loans of all Lenders (calculated as if all Defaulting Lenders (other than such Defaulting Lender) had funded all of their respective Defaulted Loans) over (y) the aggregate outstanding principal amount of Loans of such Defaulting Lender.
No Commitment of any Lender shall be increased or otherwise affected, and, except as otherwise expressly provided in this subsection 2.9, performance by any Borrower of its obligations under this Agreement and the other Loan Documents shall not be excused or otherwise modified, as a result of any Funding Default or the operation of this subsection 2.9. The rights and remedies against a Defaulting Lender under this subsection 2.9 are in addition to other rights and remedies that Borrowers may have against such Defaulting Lender with respect to any Funding Default and that Administrative Agent or any Lender may have against such Defaulting Lender with respect to any Funding Default.
2.10 JOINT AND SEVERAL LIABILITY; PAYMENT INDEMNIFICATIONS.
A. JOINT AND SEVERAL OBLIGATIONS. All Obligations of Borrowers under the Loan Documents shall be the joint and several Obligations of each Borrower.
B. NO IMPAIRMENT OR RELEASE. The Obligations of and the Liens granted by any Borrower under the Loan Documents shall not be impaired or released by any action or inaction on the part of Administrative Agent or any Lender with respect to any other Loan Party, including any action or inaction which would otherwise release a surety.
C. CONTRIBUTION RIGHTS. In order to provide for just and equitable contribution among Borrowers if any payment is made by a Borrower (a "FUNDING BORROWER") in discharging any of the Obligations, that Funding Borrower shall be entitled to a contribution from the other Borrowers for all payments, damages and expenses incurred by that Funding Borrower in discharging the Obligations, in the manner and to the extent required to allocate liabilities in an equitable manner among Borrowers on the basis of the relative benefits received by Borrowers. If and to the extent that a Funding Borrower makes any payment to any Lender or any other Person in respect of the Obligations, any claim which said Funding Borrower may have against the other Borrowers by reason thereof shall be subject and subordinate to the prior cash payment in full of the Obligations. The parties hereto acknowledge that the right to contribution hereunder shall constitute an asset of the party to which such contribution is owing and shall be subject to the Liens and security interests of Administrative Agent. Notwithstanding any of the foregoing to the contrary, such contribution arrangements shall not limit in any manner the joint and several nature of the Obligations, limit, release or otherwise impair any rights of Administrative Agent or any Lender under the Loan Documents, or alter, limit or impair the obligation of each Borrower, which is absolute and unconditional, to repay the Obligations.
2.11 RIGHTS OF SUBROGATION, CONTRIBUTION, ETC.
Except as prohibited under applicable law, Company hereby waives any claim, right or remedy, direct or indirect, that Company now has or may hereafter have against any other Borrower or any guarantor of the Obligations in connection with this Agreement or the performance by Company of its obligations hereunder, in each case whether such claim, right or
remedy arises in equity, under contract, by statute, under common law or otherwise and including (a) any right of subrogation, reimbursement or indemnification that Company now has or may hereafter have against any other Borrower or any guarantor of the Obligations, (b) any right to enforce, or to participate in, any claim, right or remedy that Agent or Lender now has or may hereafter have against any other Borrower or any guarantor of the Obligations, and (c) any benefit of, and any right to participate in, any collateral or security now or hereafter held by Agent or Lender. In addition, until the Obligations shall have been indefeasibly paid in full and the Commitments shall have terminated, Company shall withhold exercise of any right of contribution Company may have against any other Borrower or Loan Party. Company further agrees that, to the extent the waiver or agreement to withhold the exercise of its rights of subrogation, reimbursement, indemnification and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification Company may have against any other Borrower or Loan Party or against any collateral or security shall be junior and subordinate to any rights Agent or Lender may have against any other Borrower, to all right, title and interest Agent or Lender may have in any such collateral or security, and to any right Agent or Lender may have against such Loan Party. If any amount shall be paid to Company on account of any such subrogation, reimbursement, indemnification or contribution rights at any time when all Obligations shall not have been paid in full, such amount shall be held in trust for Administrative Agent on behalf of Administrative Agent and Lenders and shall forthwith be paid over to Administrative Agent for the benefit of Administrative Agent and Lenders to be credited and applied against the Obligations, whether matured or unmatured, in accordance with the terms hereof.
SECTION 3. CONDITIONS TO LOANS
The obligations of Lenders to make Loans hereunder are subject to the satisfaction of the following conditions.
3.1 CONDITIONS TO CLOSING DATE.
The obligations of Lenders with respect to their respective Commitments and to make any Loans to be made on the Closing Date, are subject to prior or concurrent satisfaction of the following conditions:
A. LOAN PARTY DOCUMENTS. On or before the Closing Date, Borrowers shall, and shall cause each other Loan Party to, deliver to Lenders (or to Administrative Agent with sufficient originally executed copies, where appropriate, for each Lender) the following with respect to Borrowers or such Loan Party, as the case may be, each, unless otherwise noted, dated the Closing Date:
(i) Copies of the Organizational Documents of such Person, certified by the Secretary of State of its jurisdiction of organization or, if such document is of a type that may not be so certified, certified by the secretary or similar officer of the applicable Loan Party, together with a good standing certificate from the Secretary of State of its jurisdiction of organization and each other state in which such Person is qualified to do business and, to the extent generally available, a certificate or other evidence of good standing as to payment of any applicable franchise or similar taxes from the appropriate
taxing authority of each of such jurisdictions, each dated a recent date prior to the Closing Date;
(ii) Resolutions of the Governing Body of such Person approving and authorizing the execution, delivery and performance of the Loan Documents to which it is a party certified as of the Closing Date by the secretary or similar officer of such Person as being in full force and effect without modification or amendment;
(iii) Signature and incumbency certificates of the officers of such Person executing the Loan Documents to which it is a party;
(iv) Executed originals of the Loan Documents to which such Person is a party; and
(v) Such other documents as Administrative Agent may reasonably request.
B. FEES. Borrowers shall have paid out of Debtors' estates to
Administrative Agent, (i) for distribution (as appropriate) to Administrative
Agent, the fees payable on the Closing Date referred to in subsection 2.3 and
all reasonable and documented costs and expenses (including legal fees, due
diligence fees, recordation expenses, other out-of-pocket expenses and taxes) of
Administrative Agent incurred in connection with the negotiation, preparation,
recordation, execution and completion of the Loan Documents and the transactions
contemplated thereby, including such fees and expenses of O'Melveny & Myers LLP,
counsel to Administrative Agent, and Ernst & Young Corporate Finance LLC, and
(ii) for distribution (as appropriate) to DIP Lenders and DIP Agents, all unpaid
interest and fees accrued under the DIP Credit Agreement on or before the
Closing Date, and all reasonable and documented costs and expenses of DIP Agents
and DIP Lenders owed pursuant to subsection 10.2 of the DIP Credit Agreement.
Borrowers shall have paid out of Debtors' estates to D.E. Shaw an arrangement
fee of $450,000, unless Borrowers have previously paid out of Debtors' estates
to D.E. Shaw the commitment fee required pursuant to the "Commitment Letter" (as
defined in the Order Pursuant to Section 363 of the Bankruptcy Code Authorizing
Debtors to Enter into Letter Agreement with D.E. Shaw Laminar Portfolios, L.L.C.
as Additional New Lender and Make Certain Payments in Connection Therewith
entered by the Bankruptcy Court on November 21, 2003).
C. CORPORATE AND CAPITAL STRUCTURE; MANAGEMENT; OWNERSHIP.
(i) Corporate Structure. DHC shall own all of the issued and outstanding Capital Stock of Covanta. CEA shall own all of the issued and outstanding common stock of Company. The corporate organizational structure of Company and its Subsidiaries on the Closing Date, after giving effect to the Approved Plan of Reorganization, shall be satisfactory to Requisite Lenders, shall be consistent in all material respects with the Approved Plan of Reorganization and the Disclosure Statement related thereto.
(ii) Capital Structure and Ownership. DHC shall have made a cash equity contribution to Covanta of not less than $30,000,000. The capital structure and ownership of Company and its Subsidiaries on the Closing Date, after giving effect to the
Approved Plan of Reorganization, shall be satisfactory to Requisite Lenders, shall be consistent in all material respects with the Approved Plan of Reorganization and the Disclosure Statement related thereto.
(iii) Management. The Governing Bodies, officers and management structure of Covanta, Company and its Subsidiaries on the Closing Date, after giving effect to the Approved Plan of Reorganization, shall be satisfactory to Requisite Lenders, shall be consistent in all material respects with the Approved Plan of Reorganization and the Disclosure Statement related thereto and shall be as set forth on Schedule 3.1C annexed hereto. Lenders shall have received copies of, and Requisite Lenders shall be satisfied with the form and substance of, the Employment Agreements and any other employment agreements with and any incentive arrangements for senior management of Company and its Subsidiaries.
D. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENTS. Company shall have delivered to Administrative Agent an Officer's Certificate, in form and substance satisfactory to Administrative Agent, to the effect that the representations and warranties in Section 4 are true, correct and complete in all material respects on and as of the Closing Date to the same extent as though made on and as of that date (or, to the extent such representations and warranties specifically relate to an earlier date, that such representations and warranties were true, correct and complete in all material respects on and as of such earlier date) and that Borrowers shall have performed in all material respects all agreements and satisfied all conditions which this Agreement provides shall be performed or satisfied by it on or before the Closing Date.
E. PLAN OF REORGANIZATION; CONFIRMATION ORDER; DISCHARGE OF
EXISTING CREDIT FACILITIES.
(i) Plan of Reorganization. The Plan of Reorganization and all amendments, modifications, revisions and restatements thereof, if any, shall have been approved by the creditors of Borrowers (including the DIP Lenders and the Prepetition Lenders) in requisite number and percentage, and confirmed by the Bankruptcy Court pursuant to the Confirmation Order and delivered to Administrative Agent (the "APPROVED PLAN OF REORGANIZATION"). Except as set forth in modifications filed with the Bankruptcy Court and approved by Administrative Agent, there shall have been no modifications, amendments, revisions or restatements of the Approved Plan of Reorganization. Any representation and warranty made by Covanta or any of its Subsidiaries in the Approved Plan of Reorganization shall be accurate, true, correct and complete in all material respects as of the Closing Date. The Approved Plan of Reorganization (a) shall provide for the payments on the Closing Date described in subsection 3.1T, the corporate reorganization described in subsection 3.1S, the making of the Loans under this Agreement and the Indebtedness described in subsection 3.1F; and (b) upon satisfaction of all conditions to the effectiveness of this Agreement, shall become effective in accordance with its terms without waiver of any condition to such effectiveness that, in Administrative Agent's reasonable judgment, is material.
(ii) Confirmation Order. The Confirmation Order shall have been delivered to Lenders, shall address the matters set forth in subsections 3.1F, 3.1S and 3.1T, the making of the Loans and Commitments under this Agreement and the terms hereof and the granting of all Liens and consents required under this Agreement and the other Loan Documents and otherwise be in form and substance satisfactory to Requisite Lenders. The Confirmation Order shall be in full force and effect and no portion thereof shall have been stayed pending any appeal or petition for review or for rehearing, not less than 11 days shall have elapsed since entry of the Confirmation Order and Administrative Agent shall have received evidence satisfactory to each demonstrating such facts. Debtors' Second Joint Plan of Liquidation under Chapter 11 of the Bankruptcy Code and the Liquidation Plan Supplement to Debtors' Second Joint Plan of Liquidation, as filed with the Bankruptcy Court on December 18, 2003 and February 18, 2004, respectively, and as amended, supplemented or otherwise modified from time to time thereafter to the extent permitted under the DIP Credit Agreement, shall have been confirmed by the Bankruptcy Court pursuant to an order in form and substance satisfactory to Requisite Lenders.
(iii) Approval of Fees Related to Exit Financing. The Bankruptcy Court order approving the fees payable to Administrative Agent and the Lenders described in subsection 3.1B shall be in full force and effect, without modification or amendment except to the extent approved by Administrative Agent.
(iv) Material Contracts. The terms and conditions of any Material Contracts to be entered into by the Borrowers or any of their Subsidiaries pursuant to the Approved Plan of Reorganization shall be in form and substance satisfactory to Requisite Lenders and Administrative Agent.
F. MATTERS RELATING TO EXISTING INDEBTEDNESS.
(i) Termination of DIP Credit Agreement and Related Liens. (a) Indebtedness consisting of funded amounts outstanding under the DIP Credit Agreement on the Closing Date shall have been repaid in full in cash, (b) all undrawn "Tranche A L/Cs" and "Tranche B L/Cs" under the DIP Credit Agreement (other than the Existing Detroit L/Cs) shall be replaced (or any further drawings thereunder shall be fully supported pursuant to arrangements satisfactory to DIP Lenders and the issuers thereof) with letters of credit issued under the New L/C Facility Agreement, (c) the Existing Detroit L/Cs shall be replaced with letters of credit issued under the Detroit L/C Credit Agreement as the Detroit L/Cs, (d) each letter of credit (if any) issued or deemed issued under the DIP Credit Agreement other than the "Tranche A L/Cs" and "Tranche B L/Cs" shall have been cash collateralized pursuant to arrangements reasonably satisfactory to the issuer of such letter of credit, or cancelled and returned undrawn, or reimbursed, (e) all commitments to lend or make other extensions of credit under the DIP Credit Agreement shall have terminated (except that the participations of DIP Lenders purchased in the letters of credit, if any, referred to in clause (d) above shall continue), and (f) all documents or instruments necessary to release all Liens securing Indebtedness or other obligations of Borrowers and their Subsidiaries under the DIP Credit Agreement shall have been delivered to Administrative Agent to the extent required by Administrative Agent.
(ii) Termination of Prepetition Credit Agreement, 9.25% Debentures and Related Liens. (a) Indebtedness consisting of the 9.25% Debentures and the Prepetition Obligations on the Closing Date shall be satisfied by application of the High Yield Notes and the Loans and by application of Cash On Hand of Borrowers (as described in subsection 3.1T), and (b) all documents or instruments necessary to release all Liens securing Indebtedness or other obligations of Borrowers and their Subsidiaries under the Prepetition Credit Agreement and the 9.25% Debentures shall have been delivered to Administrative Agent to the extent required by Administrative Agent.
(iii) Domestic Facilities. Indebtedness under the Detroit L/C Credit Agreement, the New L/C Facility Agreement and the High Yield Notes shall be secured as set forth in the Domestic Loan Documents and High Yield Indenture and shall be non-recourse to the Borrowers or their assets. The Domestic Loan Documents, High Yield Notes and High Yield Indenture shall be in full force and effect, the "Closing Date" as defined in each of the Domestic Loan Documents, High Yield Notes, and High Yield Indenture shall have occurred, and the Domestic Loan Documents, High Yield Notes and High Yield Indenture and shall be in form and substance satisfactory to Requisite Lenders.
(iv) Existing Indebtedness to Remain Outstanding. After giving effect to the Approved Plan of Reorganization, the Indebtedness of Domestic Borrowers and Borrowers (other than Indebtedness under the Loan Documents, the Domestic Loan Documents, and the CPIH Term Loan Documents) shall consist of (a) $205,000,000 in aggregate initial principal amount of High Yield Notes, (b) a note issued by Covanta in a principal amount not to exceed $35,000,000 (the "TAX NOTE"), representing the back tax liability of Covanta and its Subsidiaries as of the Closing Date, which Tax Note shall be unsecured and unguarantied, shall have a final maturity date of 6 years from the Closing Date, shall bear interest payable in arrears at a rate no greater than 7.5% per annum, and shall amortize on a 30-year schedule for the first 5 years after the issuance thereof with the balance due at maturity, (c) "Class 6 Unsecured Notes" (as defined in the Approved Plan of Reorganization) in the aggregate principal amount of $4,000,000 and subordinated notes issued by Covanta (the "UNSECURED CREDITOR NOTES") in an aggregate principal amount equal to the amount of "Operating Company Unsecured Claims" that are "Allowed" (as such terms are defined in the Approved Plan of Reorganization), which Unsecured Creditor Notes shall be unsecured and unguarantied, shall have a final maturity date of 8 years from the Closing Date, shall bear interest payable in arrears at a rate no greater than 7.5% per annum, and shall amortize in an amount not to exceed $3,900,000 annually commencing on the second anniversary of the Closing Date with the remainder due at final maturity, (d) outstanding Indebtedness described in Schedule 6.1(v) annexed hereto, and (e) Indebtedness under the CEA Stock Pledge Agreement. The terms and conditions of all such Indebtedness (including payment terms, covenants, representations and warranties, defaults and, in the case of the Unsecured Creditor Notes, payment subordination provisions), and the definitive documentation therefor, shall be in form and in substance satisfactory to Requisite Lenders.
(v) Related Agreements in Full Force and Effect. Lenders shall have received a fully executed or conformed copy of the Domestic Loan Documents, CPIH Term Loan Documents, the High Yield Indenture and the High Yield Notes, the Management Services and Reimbursement Agreement, the Corporate Services Reimbursement Agreement, the Tax Note, the Unsecured Creditor Notes, the Unsecured Creditor Notes Indenture, the Employment Agreement, the Intercreditor Agreement and any documents executed in connection therewith, each such Related Agreement, the Domestic Loan Documents, the High Yield Notes, the Unsecured Creditor Notes, the Employment Agreements, the Intercreditor Agreement, the High Yield Indenture, the Management Services and Reimbursement Agreement, the Corporate Services Reimbursement Agreement and the Unsecured Creditor Notes Indenture shall be in full force and effect and no provision thereof shall have been modified or waived in any respect determined by either Agent to be material.
G. FINANCIAL STATEMENTS; PROJECTIONS. On or before the Closing Date, Lenders shall have received (i) the audited consolidated financial statements of Covanta and its Subsidiaries for the Fiscal Year ended December 31, 2002 delivered pursuant to clause (i) of subsection 4.1G of the Domestic Credit Agreement, (ii) the unaudited consolidated financial statements of Covanta and its Subsidiaries for the Fiscal Quarters ended March 31, 2003, June 30, 2003 and September 30, 2003 delivered pursuant to clause (ii) of subsection 4.1G of the Domestic Credit Agreement, and (iii) financial statements with respect to Company and its Subsidiaries derived from the financial statements described in clauses (i) and (ii) above in form satisfactory to Administrative Agent, all in reasonable detail and (in the case of the financial statements described in clause (iii)) certified by the chief executive officer or chief financial officer of Company that they fairly present, in all material respects, the financial condition of Company and its Subsidiaries as of the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments. Company shall have delivered to Administrative Agent and Lenders such projected financial statements as Administrative Agent may reasonably request for the period from the Closing Date through December 31, 2007, including the budget of monthly and quarterly cash receipts and expenditures for Fiscal Year 2004 and annual net cash flow for Fiscal Years 2005, 2006 and 2007 attached hereto as Schedule 1.1B, which budget and other projections shall be satisfactory to Administrative Agent and Requisite Lenders and shall be accompanied by a certificate from the chief executive officer or chief financial officer of Company certifying that they are based upon good faith estimates and assumptions believed by Company to be reasonable at the time made.
H. SOLVENCY ASSURANCES. On the Closing Date, Administrative Agent and Lenders shall have received an Officer's Certificate from Covanta dated the Closing Date, substantially in the form delivered under subsection 4.1H of the Domestic Credit Agreement and with appropriate attachments, demonstrating that, after giving effect to the consummation of the transactions contemplated by the Domestic Loan Documents, Domestic Borrowers, taken as a whole, and Covanta will be Solvent.
I. OPINIONS OF COUNSEL TO LOAN PARTIES. Lenders shall have
received originally executed copies of one or more favorable written opinions of
(a) Cleary, Gottlieb, Steen & Hamilton, (b) LeBoeuf, Lamb, Greene & McRae, (c)
Morris, James, Hitchens & Williams LLP
and (d) Nixon Peabody, LLP, counsel for Borrowers, in form and substance reasonably satisfactory to Administrative Agent and their counsel, dated as of the Closing Date and setting forth substantially the matters in the opinions designated in Exhibit VI annexed hereto and as to such other matters as Administrative Agent acting on behalf of Lenders may reasonably request (this Agreement constituting a written request by Borrowers to such counsel to deliver such opinions to Administrative Agent and Lenders).
J. OPINIONS OF COUNSEL DELIVERED UNDER RELATED AGREEMENTS AND OTHER DOCUMENTS. Administrative Agent and its counsel shall have received copies of the opinions of counsel delivered to the parties under the Related Agreements, the Domestic Loan Documents, the High Yield Note, the High Yield Indenture, the Unsecured Creditor Notes and the Unsecured Creditor Notes Indenture, and Borrowers shall have made reasonable efforts to obtain from each such counsel letters authorizing Lenders to rely on such opinions to the same extent as though such opinions were addressed to Lenders.
K. EVIDENCE OF INSURANCE. Administrative Agent shall have received a certificate from Covanta's insurance broker or other evidence satisfactory to it that all insurance required to be maintained pursuant to subsection 5.4 is in full force and effect and that Collateral Agent and/or Administrative Agent on behalf of Lenders has been named as additional insured and/or loss payee thereunder to the extent required under subsection 5.4.
L. NECESSARY GOVERNMENTAL AUTHORIZATIONS AND CONSENTS. Covanta and its Subsidiaries shall have obtained all Governmental Authorizations and all consents of other Persons, in each case that are necessary or advisable in connection with the transactions contemplated by the Loan Documents and the continued operation of the business conducted by Covanta, Company and its Subsidiaries in substantially the same manner as conducted prior to the Closing Date. Each such Governmental Authorization or consent shall be in full force and effect, except in a case where the failure to obtain or maintain a Governmental Authorization or consent, either individually or in the aggregate, should not reasonably be expected to have a Material Adverse Effect. Administrative Agent shall have received an Officer's Certificate of Company in form and substance reasonably satisfactory to Administrative Agent certifying as to the foregoing matters and any other evidence reasonably requested by Administrative Agent in support thereof. All applicable waiting periods shall have expired without any action being taken or threatened by any competent authority that would restrain, prevent or otherwise impose adverse conditions on the transactions contemplated by the Loan Documents or the financing thereof. No action, request for stay, petition for review or rehearing, reconsideration, or appeal with respect to any of the foregoing shall be pending, and the time for any applicable Government Authority to take action to set aside its consent on its own motion shall have expired.
M. SECURITY INTERESTS IN PERSONAL AND MIXED PROPERTY.
Administrative Agent shall have received evidence satisfactory to it that Loan
Parties shall have taken or caused to be taken all such actions, executed and
delivered or caused to be executed and delivered all such agreements, documents
and instruments, and made or caused to be made all such filings and recordings
(other than the filing or recording of items described in clauses (ii) and (iii)
below) that Administrative Agent may reasonably request in order to evidence, in
favor of Collateral Agent, for the benefit of Secured Parties, a valid and
perfected security interest in the entire
personal and mixed property Collateral, with the priority set forth in the Collateral Documents (it being understood that such actions by CEA shall relate solely to its pledge of the common stock of Company). Such actions shall include the following:
(i) Stock Certificates and Instruments. Delivery to Collateral Agent of (a) certificates (which certificates shall be accompanied by irrevocable undated stock powers, duly endorsed in blank and otherwise satisfactory in form and substance to Collateral Agent) representing all capital stock included in the Collateral and (b) all promissory notes or other instruments (duly endorsed, where appropriate, in a manner satisfactory to Collateral Agent) evidencing any Collateral;
(ii) Lien Searches and UCC Termination Statements. Delivery to Collateral Agent of (a) the results of a recent search, by a Person satisfactory to Collateral Agent, of all effective UCC financing statements and fixture filings and all judgment and tax lien filings which may have been made with respect to any personal or mixed property of any Borrower and of all effective UCC financing statements which may have been made with respect to Capital Stock of Company, in each case, together with copies of all such filings disclosed by such search, and (b) UCC termination statements duly executed by all applicable Persons for filing in all applicable jurisdictions as may be necessary to terminate any effective UCC financing statements or fixture filings disclosed in such search (other than any such financing statements or fixture filings in respect of Liens permitted to remain outstanding pursuant to the terms of this Agreement);
(iii) UCC Financing Statements and Fixture Filings. Delivery to Collateral Agent of UCC financing statements and, where appropriate, fixture filings, duly executed by each applicable Borrower with respect to all personal and mixed property Collateral of such Borrower and by CEA with respect to the common stock of Company, in each case, for filing in all jurisdictions as may be necessary or in the opinion of Collateral Agent desirable to perfect the security interests in favor of Collateral Agent created in such Collateral pursuant to the Collateral Documents;
(iv) PTO Cover Sheets, Etc. Delivery to Collateral Agent of all cover sheets or other documents or instruments Collateral Agent may reasonably request to be filed with the PTO in order to evidence Liens in favor of Collateral Agent in respect of any IP Collateral; and
(v) Control Agreements. Delivery to Collateral Agent of Control Agreements with financial institutions and other Persons in order to perfect Liens in respect of Deposit Accounts, Securities Accounts and other Collateral pursuant to the Collateral Documents;
N. [INTENTIONALLY OMITTED].
O. NO MATERIAL ADVERSE CHANGE. Administrative Agent (in its sole discretion) shall be satisfied that there has been no material adverse change (other than as disclosed in reports delivered pursuant to subsection 6.1(i) of the DIP Credit Agreement) since December 31, 2002 in the business, property, assets, operations, financial condition or prospects of Company
and its Subsidiaries taken as a whole, and Company shall have delivered to Administrative Agent an Officer's Certificate to the foregoing effect.
P. CASH MANAGEMENT SYSTEM. The cash management system of Company and its Subsidiaries shall be as set forth on Schedule 3.1P annexed hereto.
Q. [INTENTIONALLY OMITTED].
R. GEOTHERMAL SALE. Covanta shall have consummated the Geothermal Sale on terms and conditions and pursuant to documentation in form and substance satisfactory to the Requisite DIP Lenders.
S. COMPANY REORGANIZATION. On the Closing Date, (i) Covanta
shall own, directly or indirectly, 100% of the outstanding Capital Stock of CEA,
(ii) CEA shall own 100% of the outstanding common stock of Company, which shall
own the Capital Stock of all Persons (including Persons holding the equity
interests in other Persons) holding the assets and operations of the IPP
International Business to the extent described in the Approved Plan of
Reorganization and the Disclosure Statement related thereto, (ii) all relevant
operating and administrative expenses associated with the IPP International
Business shall be transferred into Company in accordance with the Management
Services and Reimbursement Agreement, and (iii) not less than $5,000,000 of cash
for working capital shall have been transferred from Covanta and its
Subsidiaries (other than Borrowers) to the Borrowers as an equity contribution.
T. DISTRIBUTION. All unrestricted Cash On Hand (including, without limitation, net sale proceeds from the Geothermal Sale) of Covanta and its Subsidiaries remaining prior to the equity contribution referred to in subsection 3.1C(ii) but after (i) the transfer of working capital amounts to Company as described in subsection 3.1S, (ii) the payment of the fees referred to in subsection 3.1B, (iii) the disposition of those letters of credit referred to in subsection 3.1F(i)(c), (iv) the payment of allowed administrative expenses, (v) the reimbursement of reasonable accrued fees and expenses of DHC not to exceed $4,000,000 in the aggregate and reasonable accrued fees and expenses of D.E. Shaw not to exceed $350,000 in the aggregate, and (vi) payment of funded outstanding obligations under the DIP Credit Agreement (if any) and (without duplication of clauses (i) through (vi)) the payment of other "Exit Costs" (as defined in the Approved Reorganization Plan), subject to an amount of cash (which amount shall be determined in accordance with terms set forth in the draft Plan of Reorganization attached (on the date of execution thereof) to the Investment and Purchase Agreement dated as of December 2, 2003 between DHC and Covanta) (plus reserves required to address timing issues associated with the Geothermal Sale and emergence from the Chapter 11 Cases (in an aggregate amount satisfactory to the DIP Lenders)) to be retained in the Cash Management System in the United States by Covanta and its Subsidiaries (collectively, such Cash On Hand, net of such transferred amount, such payments and reimbursements, such retained amount and such reserves, is referred to herein as "DISTRIBUTABLE CASH"), shall have been distributed as follows: first, to the extent of the first $60,000,000 of such Distributable Cash, for the benefit of the holders of Prepetition Secured Claims that are Detroit L/C Lenders on the Closing Date, on account of their allowed pre-petition exposure, in accordance with the Approved Plan of Reorganization second, to the extent of the next $7,200,000 of such Distributable Cash, for the benefit of the holders of Prepetition Secured Claims, on account of any remaining allowed pre-Petition Date exposure, in accordance with the
Approved Plan of Reorganization, and third, to the extent of 25% of any remaining Distributable Cash, to Covanta, and to the extent of the remaining 75%, for the benefit of the holders of Prepetition Secured Claims, on account of any remaining allowed pre-Petition Date exposure, in accordance with the Approved Plan of Reorganization.
U. NOL AVAILABILITY. Covanta, its independent advisers, Administrative Agent and Administrative Agent's counsel shall have determined to their respective sole satisfaction that the net operating losses disclosed to Administrative Agent and Lenders prior to the Closing Date as being held by DHC are available and accessible to Covanta and its Subsidiaries.
V. LITIGATION. On the Closing Date, there shall be no action, suit, investigation, litigation or proceeding pending or threatened in any court or before any arbitrator or governmental instrumentality that purports to affect the Approved Plan of Reorganization, any of the Loan Documents, any of the Domestic Loan Documents, the High Yield Notes or the High Yield Indenture that could reasonably be expected to have a Material Adverse Effect or a material adverse effect on the Approved Plan of Reorganization, or any of the Loan Documents, or any of the Domestic Loan Documents.
W. COMPLETION OF PROCEEDINGS. All corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Administrative Agent, acting on behalf of Lenders, and their counsel shall be satisfactory in form and substance to Administrative Agent and such counsel, and Administrative Agent and such counsel shall have received all such counterpart originals or certified copies of such documents as Administrative Agent may reasonably request.
Each Lender, by delivering to Administrative Agent a signed counterpart to this Agreement, shall be deemed (unless such Lender indicates otherwise in writing to Administrative Agent and Company) to have acknowledged receipt of, and to have consented to, approved and be satisfied with, the documents, agreements, instruments or information which require approval, consent or satisfaction of the Lenders or Requisite Lenders, as applicable, in order for the conditions precedent contained in this subsection 3.1 to be satisfied.
Notwithstanding anything in this Section 3 to the contrary, it is understood and agreed that the conditions of subsection 3.1A(i) shall be deemed satisfied notwithstanding failure to deliver all of the certificates or other evidence of good standing described in subsection 3.1A(i), so long as (i) Administrative Agent is notified which certificates or other evidence shall not have been delivered and, in its sole discretion, agrees that such certificates or other evidence may be delivered with respect to the relevant Persons after the Closing Date, (ii) failure to deliver all of the certificates or other evidence of good standing described in subsection 3.1A(i) on or prior to the date which is 60 days after the Closing Date shall constitute an immediate Event of Default on such date.
3.2 CONDITIONS TO ALL LOANS.
The obligations of Lenders to make Loans on each Funding Date are subject to the following further conditions precedent:
A. Administrative Agent shall have received before that Funding Date, in accordance with the provisions of subsection 2.1B, an originally executed Notice of Borrowing, in each case signed by a duly authorized Officer of Borrowers.
B. As of that Funding Date:
(i) The representations and warranties contained herein and in the other Loan Documents shall be true, correct and complete in all material respects on and as of that Funding Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true, correct and complete in all material respects on and as of such earlier date;
(ii) No event shall have occurred and be continuing or would result from the consummation of the borrowing contemplated by such Notice of Borrowing that would constitute an Event of Default or a Potential Event of Default;
(iii) Each Loan Party shall have performed in all material respects all agreements and satisfied all conditions which this Agreement provides shall be performed or satisfied by it on or before that Funding Date;
(iv) No order, judgment or decree of any arbitrator or Government Authority (including the Bankruptcy Court) shall purport to enjoin or restrain any Lender from making the Loans to be made by it on that Funding Date;
(v) After giving effect to the proposed borrowing, the aggregate principal amount of all outstanding Loans shall not exceed the Commitments then in effect;
(vi) Company shall have delivered to Administrative Agent an Officer's Certificate (together with such supporting calculations as Administrative Agent may reasonably request) certifying that, before and after giving effect to the contemplated application of amounts proposed to be borrowed, Company and its Subsidiaries shall be in pro forma compliance with subsection 6.6; and
(vii) The aggregate amount of Cash On Hand shall not exceed $2,000,000.
SECTION 4. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to make the Loans, Borrowers represent and warrant to each Lender, on the date of this Agreement, on the Closing Date and on each Funding Date, that the following statements are true, correct and complete:
4.1 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS AND SUBSIDIARIES.
A. ORGANIZATION AND POWERS. Each Loan Party is a corporation, partnership, trust or limited liability company duly organized, validly existing and in good standing under the laws of its jurisdiction of organization as specified in Schedule 4.1 annexed hereto. Each Loan
Party has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to enter into the Loan Documents to which it is a party and to carry out the transactions contemplated thereby. Each Loan Party is in compliance with all material terms of its Organizational Documents.
B. QUALIFICATION AND GOOD STANDING. Each Loan Party is qualified to do business and in good standing in every jurisdiction necessary to carry out its business and operations, except in jurisdictions where the failure to be so qualified or in good standing has not had and could not reasonably be expected to have a Material Adverse Effect.
C. CONDUCT OF BUSINESS. Company and its Subsidiaries are engaged only in the businesses permitted to be engaged in pursuant to subsection 6.11.
D. SUBSIDIARIES. All of the Subsidiaries of Company as of the Closing Date and their jurisdictions of organization are identified in Schedule 4.1 annexed hereto. The Capital Stock of Company and each of its Subsidiaries identified in Schedule 4.1 annexed hereto is duly authorized, validly issued, fully paid and nonassessable and none of such Capital Stock constitutes Margin Stock. CEA, Company and each of its Subsidiaries identified in Schedule 4.1 annexed hereto is a corporation, partnership, trust or limited liability company duly organized, validly existing and in good standing under the laws of its respective jurisdiction of organization set forth therein, has all requisite power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted, and is qualified to do business and in good standing in every jurisdiction necessary to carry out its business and operations, in each case except where failure to be so qualified or in good standing or a lack of such power and authority has not had and could not reasonably be expected to have a Material Adverse Effect. Schedule 4.1 annexed hereto correctly sets forth, as of the Closing Date, the ownership interest of CEA, Company and each of its Subsidiaries in Company and each of its Subsidiaries identified therein.
4.2 AUTHORIZATION OF BORROWING, ETC.
A. AUTHORIZATION OF BORROWING. The execution, delivery and performance of the Loan Documents have been duly authorized by all necessary action on the part of each Loan Party that is a party thereto.
B. NO CONFLICT. The execution, delivery and performance by Loan Parties of the Loan Documents to which they are parties and the consummation of the transactions contemplated by the Loan Documents do not and will not (i) violate any provision of any law or any governmental rule or regulation applicable to CEA, Company or any of its Subsidiaries, the Organizational Documents of CEA, Company or any of its Subsidiaries or any order, judgment or decree of any court or other Government Authority binding on CEA, Company or any of its Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of CEA, Company or any of its Subsidiaries, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of Covanta or any of its Subsidiaries (other than any Liens created under any of the Loan Documents in favor of Collateral Agent on behalf of Secured Parties), or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual
Obligation of Covanta or any of its Subsidiaries, except for (x) such approvals or consents which will be obtained on or before the Closing Date and disclosed in writing to Lenders.
C. GOVERNMENTAL CONSENTS. The execution, delivery and performance by Loan Parties of the Loan Documents to which they are parties and the consummation of the transactions contemplated by the Loan Documents do not and will not require any Governmental Authorization, except for the entry of the Confirmation Order and except for filings expressly contemplated by the Loan Documents and those Governmental Authorizations which have been obtained.
D. BINDING OBLIGATION. Each of the Loan Documents has been duly executed and delivered by each Loan Party that is a party thereto and is the legally valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability.
E. RESTRICTIONS ON TRANSFER. There are no restrictions on Company or any of its Subsidiaries which prohibit or otherwise restrict the transfer of cash or other assets from one Borrower to another, other than (i) prohibitions or restrictions existing under or by reason of (a) this Agreement and the other Loan Documents, (b) applicable law, (c) customary non-assignment provisions entered into in the ordinary course of business and consistent with past practices, and (d) any documents or instruments governing the terms of any Indebtedness or other obligations secured by Liens permitted by subsection 6.2A, provided that such prohibitions or restrictions apply only to the assets subject to such Liens, and (ii) restrictions described in clauses (a) through (d) of subsection 6.2D.
4.3 FINANCIAL CONDITION.
Company has heretofore delivered to Lenders, pursuant to subsection 3.1G, (i) statements of income, balance sheets and statements of cash flows with respect to Company and its Subsidiaries for the Fiscal Year ended December 31, 2002 and (ii) statements of income, balance sheets and statements of cash flows with respect to Company and its Subsidiaries for the Fiscal Quarters ended March 31, 2003, June 30, 2003 and September 30, 2003. All such statements were prepared in conformity with GAAP and fairly present, in all material respects, the financial position (on a consolidated and, where applicable, consolidating basis) of the entities described in such financial statements as at the respective dates thereof and the results of operations and cash flows (on a consolidated and, where applicable, consolidating basis) of the entities described therein for each of the periods then ended, subject, in the case of any such unaudited financial statements, to changes resulting from audit and normal year-end adjustments. No Borrower has, as of the Closing Date, any Contingent Obligation, contingent liability or unusual long-term commitment that is not reflected in the foregoing financial statements or the notes thereto and, as of any date subsequent to the Closing Date, is not reflected in the most recent financial statements delivered to Lenders pursuant to subsection 5.1 or the notes thereto (other than (a) those liabilities reflected on the Schedules to this Agreement and (b) Performance Guaranties and Contingent Obligations that are permitted to be incurred under subsection 6.4)
and that, in any such case, is material in relation to the business, operations, properties, assets or financial condition of Company or any of its Subsidiaries taken as a whole.
4.4 NO MATERIAL ADVERSE CHANGE; NO RESTRICTED PAYMENTS.
Since December 31, 2002, no event or change has occurred (other than as disclosed in reports delivered pursuant to subsection 6.1(i) of the DIP Credit Agreement) that has resulted in or evidences, either in any case or in the aggregate, a Material Adverse Effect. Since the Petition Date, neither Company nor any of its Subsidiaries has directly or indirectly declared, ordered, paid or made, or set apart any sum or property for, any Restricted Payment or agreed to do so except (i) as permitted by subsection 6.5, and (ii) as was permitted by subsection 7.5 of the DIP Credit Agreement.
4.5 TITLE TO PROPERTIES; LIENS; REAL PROPERTY; INTELLECTUAL PROPERTY.
A. TITLE TO PROPERTIES; LIENS. Company and its Subsidiaries have (i) good, sufficient and legal title to (in the case of fee interests in real property), (ii) valid leasehold interests in (in the case of leasehold interests in real or personal property), or (iii) good title to (in the case of all other personal property), all of their respective material properties and assets reflected in the financial statements referred to in subsection 4.3 or in the most recent financial statements delivered pursuant to subsection 5.1, in each case except for assets disposed of since the date of such financial statements in the ordinary course of business or as otherwise permitted under subsection 6.7. Except as permitted by this Agreement, all such properties and assets are free and clear of Liens.
B. REAL PROPERTY. As of the Closing Date, Schedule 4.5B annexed hereto contains a true, accurate and complete list of (i) all fee interests in any Real Property Assets and (ii) all leases, subleases or assignments of leases (together with all amendments, modifications, supplements, renewals or extensions of any thereof) affecting each Real Property Asset, regardless of whether a Borrower is the landlord or tenant (whether directly or as an assignee or successor in interest) under such lease, sublease or assignment. As of the Closing Date, except as specified in Schedule 4.5B annexed hereto, each agreement listed in clause (ii) of the immediately preceding sentence is in full force and effect and no Borrower has knowledge of any material default that has occurred and is continuing thereunder, and each such agreement constitutes the legally valid and binding obligation of each applicable Borrower, enforceable against such Borrower in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles.
C. INTELLECTUAL PROPERTY. As of the Closing Date, Schedule 4.5C annexed hereto contains a true, accurate and complete list of all material Intellectual Property. Each of Company and its Subsidiaries owns or has the right to use all material Intellectual Property used in the conduct of its business, and none of such Intellectual Property conflicts with a right of any other Person to the extent such conflict could reasonably be expect to result in a Material Adverse Effect.
4.6 LITIGATION; ADVERSE FACTS.
Except as set forth in Schedule 4.6 annexed hereto, there are no Proceedings (whether or not purportedly on behalf of Company or any of its Subsidiaries) at law or in equity, or before or by any court or other Government Authority (including any Environmental Claims) that are pending or, to the knowledge of any Borrower, threatened against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries and that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. Neither Company nor any of its Subsidiaries (i) is in violation of any applicable laws (including Environmental Laws) that, individually or in the aggregate (together with all such Proceedings with respect to substantially similar or related matters), would reasonably be expected to result in a Material Adverse Effect, or (ii) is subject to or in default with respect to any final judgments, writs, injunctions, decrees, rules or regulations of any court or other Government Authority that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.
4.7 PAYMENT OF TAXES.
Except to the extent permitted by subsection 5.3, all material tax returns and reports of Company and its Subsidiaries required to be filed by any of them have been timely filed, and all taxes shown on such tax returns to be due and payable (other than taxes represented by the Tax Note) and all assessments, fees and other governmental charges upon Company and its Subsidiaries and upon their respective properties, assets, income, businesses and franchises that are due and payable have been paid when due and payable. No Borrower knows of any proposed tax assessment against Company or any of its Subsidiaries, that Company or its Subsidiaries dispute or disagree with, that is not being actively contested by Company or such Subsidiary in good faith and by appropriate proceedings; provided that such reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made or provided therefor.
4.8 PERFORMANCE OF AGREEMENTS; MATERIAL CONTRACTS.
A. Except as set forth on Schedule 4.8A annexed hereto, after giving effect to the Approved Plan of Reorganization, neither Company nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any of its Contractual Obligations, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default except where the consequences, direct or indirect, of such default or defaults, if any, could not reasonably be expected to have a Material Adverse Effect.
B. Neither Company nor any of its Subsidiaries is a party to or is otherwise subject to (i) any agreements or instruments, the performance of which, in the ordinary course, would reasonably be expected to result in a Material Adverse Effect, or (ii) any charter or other internal restrictions which, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.
C. Schedule 4.8C contains a true, correct and complete list of all the Material Contracts in effect on the Closing Date after giving effect to the Approved Plan of Reorganization.
4.9 GOVERNMENTAL REGULATION.
Neither Company nor any of its Subsidiaries is subject to regulation under (i) the Public Utility Holding Company Act of 1935 ("PUHCA") (other than as an "exempt wholesale generator" or as a "foreign utility company", as such terms are defined in PUHCA), (ii) the Federal Power Act (other than as a "qualifying small power production facility", as such term is defined in PURPA), (iii) the Interstate Commerce Act, (iv) the Investment Company Act of 1940, or (v) any other federal or state statute or regulation which may limit its ability to incur Indebtedness or which may otherwise render all or any portion of the Obligations unenforceable.
4.10 SECURITIES ACTIVITIES.
A. Neither CEA nor Company nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock.
B. Following the application of the proceeds of each Loan, not more than 25% of the value of the assets (either of Company only or of Company and its Subsidiaries on a consolidated basis) subject to the provisions of subsection 6.2 or 6.7 or subject to any restriction contained in any agreement or instrument, between Company and any Lender or any Affiliate of any Lender, relating to Indebtedness and within the scope of subsection 7.2, will be Margin Stock.
4.11 EMPLOYEE BENEFIT PLANS.
A. Company, each of its Subsidiaries and, with respect to Pension Plans and Multiemployer Plans, each of their respective ERISA Affiliates are in material compliance with all applicable provisions and requirements of ERISA, the regulations and published interpretations thereunder and other applicable law with respect to each Employee Benefit Plan, and have performed all of their material obligations under each Employee Benefit Plan. Company and each of its Subsidiaries are in material compliance with all applicable laws and orders of foreign Government Authorities with respect to each of its pension plans and employee benefit plans for foreign employees, and have performed all of their material obligations under each such pension plan and employee benefit plan. Each Employee Benefit Plan that is intended to qualify under Section 401(a) of the Internal Revenue Code has received, or has timely taken all action necessary to receive, a favorable determination letter from the Internal Revenue Service to such effect and no event has occurred (other than the enactment of legislation for which the remedial amendment period has not expired) that would reasonably be expected to affect adversely such Plan's qualification.
B. No ERISA Event has occurred or is reasonably expected to occur.
C. Except to the extent required under Section 4980B of the Internal Revenue Code or except as set forth in Schedule 4.11 annexed hereto or in the financial statements
delivered to Lenders pursuant to subsection 3.1 or 5.1 hereof, as applicable, no Employee Benefit Plan provides health or welfare benefits (through the purchase of insurance or otherwise) for any retired or former employee of Company or any of its Subsidiaries.
D. As of January 1 of each year (based on, with respect to each Pension Plan, the actuarial valuation as of such January 1, or if no such valuation was performed as of such January 1 but was performed within the preceding 12 months, the date as of which the valuation was so performed), the amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA, but determined on the basis of the actuarial assumptions used for funding purposes with respect to a Pension Plan (as set forth in Section 412 of the Internal Revenue Code, including where applicable, the interest rate assumptions set forth in Section 412(l) of the Internal Revenue Code)), in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities), does not exceed (i) $20,000,000, in the event the applicable law (including statutorily prescribed actuarial assumptions) used in determining such unfunded benefit liabilities (the "ASSUMPTIONS") is generally as favorable as the Assumptions used in the 2003 plan year valuations with respect to such Pension Plans, or (ii) $26,000,000 in the event the Assumptions are generally less favorable than the Assumptions used in the 2003 plan year valuations with respect to such Pension Plans.
E. To each Borrower's knowledge, as of the most recent valuation date for each Multiemployer Plan for which the actuarial report (or an estimate provided pursuant to Section 4221(e) of ERISA) is reasonably available to Company, the potential withdrawal liability of Company, its Subsidiaries and their respective ERISA Affiliates for a complete withdrawal from such Multiemployer Plan (within the meaning of Section 4203 of ERISA), when aggregated with the potential liability for a complete withdrawal from all other Multiemployer Plans for which such actuarial report (or an estimate provided pursuant to Section 4221(e) of ERISA) is reasonably available to Company, based on the information contained in such reports, would not reasonably be expected to exceed $7,500,000.
F. Neither Company nor any Subsidiary has incurred or is reasonably expected to incur any material liability pursuant to Title IV of ERISA with respect to any employee benefit plan of an entity that was formerly an ERISA Affiliate of Company or any of its Subsidiaries or with respect to any employee benefit plan that was previously maintained by Company or any of its Subsidiaries.
4.12 CERTAIN FEES.
No broker's or finder's fee or commission will be payable with respect to this Agreement or any of the transactions contemplated hereby, and each Borrower hereby indemnifies Lenders against, and agrees that it will hold Lenders harmless from, any claim, demand or liability for any such broker's or finder's fees alleged to have been incurred in connection herewith or therewith and any expenses (including reasonable fees, expenses and disbursements of counsel) arising in connection with any such claim, demand or liability.
4.13 ENVIRONMENTAL PROTECTION.
A. Except as set forth in Schedule 4.13 annexed hereto, neither Company nor any of its Subsidiaries nor any of their respective Facilities or operations are subject to any outstanding written order, consent decree or settlement agreement with any Person relating to (a) any Environmental Law, (b) any Environmental Claim, or (c) any Hazardous Materials Activity that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or impose liability on any Lender or Agent;
B. Except as set forth in Schedule 4.13 annexed hereto, neither Covanta nor any of its Subsidiaries has received any letter or request for information under Section 104 of CERCLA or any comparable state law regarding any condition, occurrence or activity that could reasonably be expected to form the basis of an Environmental Claim against Company or any of its Subsidiaries that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or impose liability on any Lender or Agent;
C. Except as set forth in Schedule 4.13 annexed hereto, there are and, to Company's knowledge, have been no conditions, occurrences, or Hazardous Materials Activities that could reasonably be expected to form the basis of an Environmental Claim against Company or any of its Subsidiaries that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or impose liability on any Lender or Agent;
D. Except as set forth in Schedule 4.13 annexed hereto, (i) neither Covanta nor any of its Subsidiaries nor, to Company's knowledge, any predecessor of Covanta or any of its Subsidiaries has filed any notice under any Environmental Law indicating past or present treatment of Hazardous Materials at any Facility, (ii) none of Company's or any of its Subsidiaries' Facilities constitute facilities for the treatment, storage or disposal of Hazardous Materials under RCRA or any state equivalent, and (iii) none of Company's or any of its Subsidiaries' operations involves the generation, transportation, treatment, storage or disposal of hazardous waste in violation of RCRA or any state equivalent that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or impose liability on any Lender or Agent; and
E. Compliance with all current requirements pursuant to or under Environmental Laws would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect or impose liability on any Lender or Agent.
4.14 EMPLOYEE MATTERS.
Except as described in Schedule 4.14 annexed hereto with respect to the Bataan Project, there is no strike or work stoppage in existence or threatened involving Company or any of its Subsidiaries that would reasonably be expected to have a Material Adverse Effect.
4.15 MATTERS RELATING TO COLLATERAL.
A. CREATION, PERFECTION AND PRIORITY OF LIENS. The execution and delivery of the Collateral Documents by Loan Parties, together with (x) the actions taken on or prior to the date hereof pursuant to subsections 3.1M, 3.1N, 5.8, 5.9 and 5.11 and (y) the delivery to
Collateral Agent of any Pledged Collateral of the Loan Parties not delivered to Collateral Agent at the time of execution and delivery of the applicable Collateral Document (all of which Pledged Collateral has been so delivered) are effective to create in favor of Collateral Agent, for the benefit of Secured Parties, a Lien on all of the Collateral of the Loan Parties (which Lien has priority over any other Lien on such Collateral, subject to Permitted Encumbrances and Liens permitted under subsection 6.2A), and all filings and other actions necessary or desirable to perfect and maintain the perfection and such priority of such Liens have been duly made or taken and remain in full force and effect, other than the filing of any UCC financing statements delivered to Collateral Agent for filing (but not yet filed) and the periodic filing of UCC continuation statements in respect of UCC financing statements filed by or on behalf of Collateral Agent.
B. GOVERNMENTAL AUTHORIZATIONS. No authorization, approval or
other action by, and no notice to or filing with, any Government Authority is
required for either (i) the pledge or grant by any Loan Party of the Liens
purported to be created in favor of Collateral Agent pursuant to any of the
Collateral Documents or (ii) the exercise by Collateral Agent of any rights or
remedies in respect of any Collateral (whether specifically granted or created
pursuant to any of the Collateral Documents or created or provided for by
applicable law), except (a) for filings or recordings contemplated by subsection
4.15A, (b) as may be required, in connection with the disposition of any Pledged
Collateral, by laws generally affecting the offering and sale of securities, and
(c) authorizations and approvals in respect of the exercise of rights or
remedies as to any collateral of any Loan Party which is subject to regulation
under the Federal Power Act pursuant to Section 210(e)(2) of PURPA.
C. ABSENCE OF THIRD-PARTY FILINGS. Except such as may have been filed in favor of Collateral Agent as contemplated by subsection 4.15A and to evidence Liens permitted pursuant to subsection 6.2, (i) no effective UCC financing statement, fixture filing or other instrument similar in effect covering all or any part of the Collateral is on file in any filing or recording office, and (ii) no effective filing covering all or any part of the IP Collateral is on file in the PTO.
D. MARGIN REGULATIONS. The pledge of the Pledged Collateral pursuant to the Collateral Documents does not violate Regulation T, U or X of the Board of Governors of the Federal Reserve System.
E. INFORMATION REGARDING COLLATERAL. All information supplied to Collateral Agent or Administrative Agent by any Loan Party (including its officers, employees, agents, advisors, representatives or counsel) with respect to any of the Collateral (in each case taken as a whole with respect to any particular Collateral) is accurate and complete in all material respects.
4.16 DISCLOSURE.
No representation or warranty of Company or any of its Subsidiaries contained in any Loan Document or in any other certificate or written statement (excluding the projections, pro forma financial statements and forward looking statements contained therein and the estimates contained in such projections, pro forma financial statements and forward looking statements) furnished to Lenders by Covanta or any of its Subsidiaries, including any such
Person's officers, employees, agents, advisors, representatives or counsel, for use in connection with the transactions contemplated by this Agreement, contained as of the date such representation or warranty was made any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements contained herein or therein not misleading in any material respect in light of the circumstances in which the same were made and in light of such representations and warranties and all such prior representations and warranties, taken as a whole. Any projections and pro forma financial information contained in such materials are based upon good faith estimates and assumptions believed by each Borrower to be reasonable at the time made, it being recognized by Lenders that such projections as to future events are subject to significant business, economic, regulatory and competitive uncertainties and contingencies, and, accordingly, no assurances are given and no representations or warranties are made by Company or any of its Subsidiaries that any of the estimates and assumptions are correct, that the projections will be achieved or that the forward looking statements expressed in such information will correspond to actual results.
4.17 CASH MANAGEMENT SYSTEM.
The summary of the Cash Management System attached hereto as Schedule 3.1P is accurate and complete in all material respects as of the Closing Date and does not omit to state any material fact necessary to make the statements set forth therein not misleading. No Borrower has any Deposit Account which is not described in Schedule 3.1P other than Deposit Accounts permitted to be owned after the Closing Date pursuant to subsection 5.10. There has been no change to the Cash Management System since the Closing Date except such changes as are permitted under subsection 5.10 and such other changes as have been disclosed to Lenders in writing and approved by Administrative Agent.
4.18 MATTERS RELATING TO LOAN PARTIES.
A. LOAN PARTIES. Neither Company nor any of its Subsidiaries owns any interest in any Domestic Subsidiary which is not a Borrower.
B. DOMESTIC SUBSIDIARY ASSETS. Each Domestic Subsidiary has granted a Lien in favor of Collateral Agent on substantially all of its property pursuant to the Collateral Documents.
C. DOMESTIC SUBSIDIARY CAPITAL STOCK. The Capital Stock of each Domestic Subsidiary which is directly owned by any Loan Party has been pledged to Collateral Agent pursuant to the Collateral Documents, except for the Capital Stock of those Domestic Subsidiaries (other than Borrowers) (i) which is subject to a Lien permitted under subsection 6.2A securing Indebtedness permitted under subsection 6.1, or (ii) the pledge of which would constitute a material violation of (a) a valid and enforceable Contractual Obligation in favor of or for the benefit of a Person other than Company or any of its Subsidiaries and their respective Affiliates for which the required consents have not been obtained or (b) applicable law affecting such Loan Party or such Domestic Subsidiary.
D. FOREIGN SUBSIDIARY CAPITAL STOCK. 65% of the Capital Stock of each Foreign Subsidiary which is a Material Subsidiary and is directly owned by Borrowers (or such
lesser percentage as is owned by Borrowers ) has been pledged to Administrative
Agent pursuant to the Collateral Documents except for the Capital Stock of those
Foreign Subsidiaries the pledge of which would constitute a material violation
of (a) a valid and enforceable Contractual Obligation in favor of or for the
benefit of a Person other than Company or any of its Subsidiaries and their
respective Affiliates for which the required consents have not been obtained or
(b) applicable law affecting such Borrower or such Foreign Subsidiary.
E. COMPANY CAPITAL STOCK. The outstanding common stock of Company has been pledged to Collateral Agent pursuant to the CEA Stock Pledge Agreement. No Contractual Obligations are in effect which would be violated by a pledge of the common stock of Company pursuant to the CEA Stock Pledge Agreement.
Notwithstanding the foregoing, the failure to grant a Lien after the Closing Date on assets of Company and its Subsidiaries or to pledge Capital Stock of a Subsidiary shall not constitute a breach of the representations and warranties contained in subsections 4.18B, 4.18C and 4.18D above on any date after the Closing Date if, at the time of the making of such representation or warranty on any such date, Borrowers are not otherwise in default of their obligations under subsection 5.8 and have commenced and are diligently pursuing appropriate actions to create such Lien or pledge to the extent such Lien or pledge is required under such subsection; provided, however, that nothing in this sentence shall be construed as waiving any of the conditions contained in subsection 3.1.
4.19 INVESTIGATION.
All obligations in existence immediately after the Closing Date (other than obligations that do not, in the aggregate, exceed $2,000,000) to extend credit or credit support or obtain the extension of credit or credit support or to make investments or expenditures with respect to existing or future Projects of any Borrower or any Subsidiary of any Borrower that are contained in Contractual Obligations or of which Borrowers are otherwise aware have been disclosed to Administrative Agent and the DIP Lenders prior to the Closing Date. Borrowers have made such inquiry and investigation as is necessary to enable Borrowers to make the representation contained in the preceding sentence.
4.20 MATTERS RELATING TO BANKRUPTCY PROCEEDINGS.
A. PLAN OF REORGANIZATION. As of the Closing Date, there have been no material modifications, amendments revisions or restatements of the Approved Plan of Reorganization. Any representation and warranty made by Covanta or any of its Subsidiaries in the Approved Plan of Reorganization is accurate, true and correct in all material respects as of the Closing Date (or, to the extent such representations and warranties specifically relate to an earlier date, that such representations and warranties were accurate, true and correct in all material respects as of such earlier date).
B. CONFIRMATION ORDER. The Confirmation Order has been entered by the Bankruptcy Court at least 11 days prior to the Closing Date. The Confirmation Order has not been stayed pending any appeal or petition for review or for rehearing.
4.21 SUBORDINATED INDEBTEDNESS.
The Obligations constitute senior indebtedness that is entitled to the benefits of the subordination provisions, if any, of all Indebtedness of Company and its Subsidiaries under the Unsecured Creditor Notes.
4.22 REPORTING TO IRS.
Company does not intend to treat the Loans and related transactions as being a "reportable transaction" (within the meaning of Treasury Regulation section 1.6011-4). In the event Company determines to take any action inconsistent with such intention, it will promptly notify Administrative Agent thereof. Company acknowledges that one or more Lenders may treat their Loans as part of a transaction that is subject to Treasury Regulation section 1.6011-4 or section 301.6112-1, and Administrative Agent and such Lender or Lenders, as applicable, may file such IRS forms or maintain such lists and other records as they may determine is required by such Treasury Regulations.
SECTION 5. COMPANY'S AFFIRMATIVE COVENANTS
Borrowers covenant and agree that, so long as any of the Commitments hereunder shall remain in effect and until payment in full of all Obligations, unless Requisite Lenders shall otherwise give prior written consent, Borrowers shall perform, and shall cause each of their Subsidiaries to perform, all covenants in this Section 5.
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS.
Borrowers will maintain, and cause each of their respective Subsidiaries to maintain, a system of accounting established and administered in accordance with sound business practices to permit preparation of financial statements in conformity with GAAP. Borrowers will deliver to Administrative Agent (and, except as expressly provided below, promptly after receipt thereof Administrative Agent will deliver a copy to each Lender):
(i) Budget Report; Budget and Asset Sale Update: as soon as available and in any event no later than the 15th Business Day of each month commencing with the 15th Business Day of April 2004, (a) for the month most recently ended, a report in form satisfactory to Administrative Agent reflecting the actual cash receipts and disbursements of Company and its Subsidiaries for the preceding month with respect to each line item described in the Budget for the current Fiscal Year and the percentage and dollar variance of such amounts from the projected amounts therefor set forth in (x) such Budget and (y) the Budget for the current Fiscal Year as delivered pursuant to subsection 5.1(xvi), accompanied by an Officer's Certificate from the chief financial officer of Company certifying that such report accurately presents, in all material respects, cash receipts and cash expenditures of Company and its Subsidiaries for the periods indicated, (b) a supplement to the Budget for the current Fiscal Year, in the form of such Budget, reflecting projected cash receipts and disbursements of Company and its Subsidiaries for each month and each Fiscal Quarter remaining in the current Fiscal Year with respect to each line item described in such Budget, which supplement shall be accompanied by an Officer's Certificate from the chief financial officer of Company certifying that the
projections contained in such supplement are based upon good faith estimates and assumptions believed by Company to be reasonable at the time made, and (c) a report on all Asset Sales consummated prior to such date, describing in reasonable detail the properties sold, the consideration received and the expenses deducted from Gross Receipts therefor to calculate Net Asset Sale Proceeds, together with a progress report in reasonable detail describing efforts being made to sell additional assets of Company and its Subsidiaries (such progress report described in this clause (c) to be provided solely to Administrative Agent);
(ii) Events of Default, etc.: promptly upon any Officer of Company obtaining knowledge (a) of any condition or event that constitutes an Event of Default or Potential Event of Default, or becoming aware that any Lender has given any notice (other than to Administrative Agent) or taken any other action with respect to a claimed Event of Default or Potential Event of Default, (b) that any Person has given any notice to Company or any of its Subsidiaries or taken any other action with respect to a claimed default or event or condition of the type referred to in subsection 7.2, (c) of any condition or event that would be required to be disclosed in a current report filed by Company with the Securities and Exchange Commission on Form 8-K if Company were required to file such reports under the Exchange Act, or (d) of the occurrence of any event or change that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect, an Officer's Certificate specifying the nature and period of existence of such condition, event or change, or specifying the notice given or action taken by any such Person and the nature of such claimed Event of Default, Potential Event of Default, default, event or condition, and what action Company has taken, is taking and proposes to take with respect thereto;
(iii) Quarterly Financials: as soon as available and in any event within 45 days after the end of each of the first three Fiscal Quarters of each Fiscal Year, the consolidated balance sheet of Company and its Subsidiaries as at the end of such Fiscal Quarter and the related consolidated statement of income of Company and its Subsidiaries for such Fiscal Quarter and the related consolidated statements of stockholders' equity and cash flows of Company and its Subsidiaries for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter, setting forth in each case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year, all in reasonable detail and certified by the chief financial officer of Company that they fairly present, in all material respects, the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments; provided, however, that so long as Covanta files a quarterly report on Form 10Q with the Securities and Exchange Commission for any Fiscal Quarter containing consolidating financial statements for Company and its Subsidiaries, Borrowers shall be required to deliver a copy of such quarterly report in lieu of the financial statements described in this subsection 5.1(iii);
(iv) Year-End Financials: as soon as available and in any event within 90 days after the end of each Fiscal Year, (a) the consolidated balance sheet of Company and its Subsidiaries as at the end of such Fiscal Year and the related consolidated and
consolidating statements of income, stockholders' equity and cash flows of Company and its Subsidiaries for such Fiscal Year, setting forth in each case in comparative form the corresponding figures for the previous Fiscal Year, all in reasonable detail and certified by the chief financial officer of Company that they fairly present, in all material respects, the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, and (b) an audit report thereon of independent certified public accountants of recognized national standing selected by Company and satisfactory to Administrative Agent, which report shall (with respect to the audits for all Fiscal Years after 2003) be unqualified, shall express no doubts, assumptions or qualifications concerning the ability of Company and its Subsidiaries to continue as a going concern, and shall (with respect to the audits for all Fiscal Years including 2003) state that in the opinion of such certified public accountants such consolidated financial statements fairly present, in all material respects, the consolidated financial position of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated in conformity with GAAP and that the audit by such accountants in connection with such consolidated financial statements has been made in accordance with auditing standards generally accepted in the United States; provided, however, that so long as Covanta files an annual report on Form 10K with the Securities and Exchange Commission containing consolidating financial statements for Company and its Subsidiaries, Borrowers shall be required to deliver a copy of such annual report in lieu of the financial statements described in clause (a);
(v) Compliance Certificates: together with each delivery
of financial statements of Company and its Subsidiaries pursuant to
subdivisions (iii) and (iv) above, (a) an Officer's Certificate of
Company stating that the signers have reviewed the terms of this
Agreement and have made, or caused to be made under their supervision,
a review in reasonable detail of the transactions and condition of
Company and its Subsidiaries during the accounting period covered by
such financial statements and that such review has not disclosed the
existence during or at the end of such accounting period, and that the
signers do not have knowledge of the existence as at the date of such
Officer's Certificate, of any condition or event that constitutes an
Event of Default or Potential Event of Default, or, if any such
condition or event existed or exists, specifying the nature and period
of existence thereof and what action Company has taken, is taking and
proposes to take with respect thereto; (b) a Compliance Certificate
demonstrating in reasonable detail compliance during and at the end of
the applicable accounting periods with the restrictions contained in
Section 6, in each case to the extent compliance with such restrictions
is required to be tested at the end of the applicable accounting
period; and (c) a certificate of the chief financial officer of Company
stating that Company and its Subsidiaries have transferred to Deposit
Accounts of Company located in the United States in the Cash Management
System all funds of Company and its Subsidiaries on deposit in accounts
located outside the United States that are required to be transferred
pursuant to subsection 5.10B;
(vi) Reconciliation Statements: other than the fresh start adjustments required under SOP 90-7, if, as a result of any change in accounting principles and policies from those used in the preparation of the audited financial statements referred to in
subsection 4.3, the consolidated financial statements of Company and its Subsidiaries delivered pursuant to subdivisions (iii) or (iv) of this subsection 5.1 will differ in any material respect from the consolidated financial statements that would have been delivered pursuant to such subdivisions had no such change in accounting principles and policies been made, then (a) together with the first delivery of financial statements pursuant to subdivision (iii) or (iv) of this subsection 5.1 following such change, consolidated financial statements of Company and its Subsidiaries for (y) the current Fiscal Year to the effective date of such change and (z) the two full Fiscal Years immediately preceding the Fiscal Year in which such change is made, in each case prepared on a pro forma basis as if such change had been in effect during such periods, and (b) together with each delivery of financial statements pursuant to subdivision (iii) or (iv) of this subsection 5.1 following such change, if required pursuant to subsection 1.2, a written statement of the chief accounting officer or chief financial officer of Company setting forth the differences (including any differences that would affect any calculations relating to the financial covenants set forth in subsection 6.6) which would have resulted if such financial statements had been prepared without giving effect to such change;
(vii) Accountants' Certification: together with each delivery of consolidated financial statements of Company and its Subsidiaries pursuant to subdivision (iv) above, a written statement by the independent certified public accountants giving the report thereon stating that in connection with their audit, nothing came to their attention that caused them to believe that Company failed to comply with the terms, provisions or conditions of subsection 6.6, insofar as they relate to financial and accounting matters, or, if such a failure to comply has come to their attention, specifying the nature and period of existence thereof (it being understood that their audit is not directed primarily toward obtaining knowledge of non-compliance and that such accountants shall not be liable by reason of any failure to obtain knowledge of any such non-compliance that would not be disclosed in the course of their audit);
(viii) Accountants' Reports: promptly upon request of Agent (unless restricted by applicable professional standards), copies of all reports submitted to Company by independent certified public accountants in connection with each annual, interim or special audit of the financial statements of Company and its Subsidiaries made by such accountants, including any comment letter submitted by such accountants to management in connection with their annual audit;
(ix) SEC Filings and Press Releases: promptly upon their
becoming available, copies of (a) all financial statements, reports,
notices and proxy statements sent or made available generally by
Company to its security holders or by any Subsidiary of Company to its
security holders other than Company or another Subsidiary of Company,
(b) all regular and periodic reports and all registration statements
(other than on Form S-8 or a similar form) and prospectuses, if any,
filed by Covanta or any of its Subsidiaries with any securities
exchange or with the Securities and Exchange Commission or any
governmental or private regulatory authority, and (c) all press
releases and other statements made available generally by Covanta or
any of its Subsidiaries to the public concerning material developments
in the business of Company or any of its Subsidiaries;
(x) Litigation or Other Proceedings: (a) promptly upon any officer of Company obtaining knowledge of (1) the institution of, or non-frivolous threat of, any Proceeding against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries not previously disclosed in writing by Company to Lenders or (2) any material development in any Proceeding that, in the case of both clauses (1) and (2):
(I) if adversely determined, has a reasonable possibility after giving effect to the coverage and policy limits of insurance policies issued to Company and its Subsidiaries of giving rise to a Material Adverse Effect; or
(II) seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, or to contest or challenge the legality, validity or enforceability of, the transactions contemplated hereby;
written notice thereof together with such other information as may be reasonably available to Company to enable Lenders and their counsel to evaluate such matters; and (b) within twenty days after the end of each Fiscal Quarter, a schedule of all Proceedings involving an alleged liability of, or claims against or affecting, an Borrower equal to or greater than $1,000,000, and promptly after request by Administrative Agent such other information as may be reasonably requested by Administrative Agent to enable Administrative Agent and its counsel to evaluate any of such Proceedings;
(xi) ERISA Events: with reasonable promptness upon becoming aware of the occurrence of or forthcoming occurrence of (a) any ERISA Event or (b) any event that would constitute an ERISA Event but for the requirements (in order for such event to constitute an ERISA Event) that a Lien or liability imposed as a result thereof be material, that the error giving rise thereto be in bad faith, and/or that such event would reasonably be expected to result in a Material Adverse Effect, a written notice specifying the nature thereof, what action Company, any of its Subsidiaries or any of their respective ERISA Affiliates has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened in writing by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto;
(xii) ERISA Notices: with reasonable promptness, copies of
(a) all notices received by Company, any of its Subsidiaries or any of
their respective ERISA Affiliates from a Multiemployer Plan sponsor
concerning an ERISA Event; and (b) copies of such other documents or
governmental reports or filings relating to any Employee Benefit Plan
as Administrative Agent shall reasonably request (it being agreed that
commencing on the Closing Date, on an annual basis Borrowers shall
request information from each Multiemployer Plan in accordance with
section 4221 of ERISA to determine the potential withdrawal liability
of Company, its Subsidiaries and their respective ERISA Affiliates for
a complete withdrawal from such Multiemployer Plan);
(xiii) Insurance: as soon as practicable after any material change in insurance coverage maintained by Company and its Subsidiaries notice thereof to Administrative Agent specifying the changes and reasons therefor;
(xiv) Governing Body: with reasonable promptness, written notice of any change in the Governing Body of Company;
(xv) Material Contracts: promptly, and in any event within 10 Business Days after any Material Contract of Company or any of its Subsidiaries is terminated or amended in a manner that is materially adverse to Company or such Subsidiary, as the case may be, or any new Material Contract is entered into, a written statement describing such event with copies of such material amendments or new contracts, and an explanation of any actions being taken with respect thereto;
(xvi) Budget: no later than the 15th day of December of each year commencing with December 15, 2004, a budget for the next Fiscal Year, in the form of the Budget for the current Fiscal Year, reflecting (a) projected cash receipts and disbursements of Company and its Subsidiaries for each month and each Fiscal Quarter in the next Fiscal Year and (b) projected net cash flows of Company and its Subsidiaries for each Fiscal Year following the next Fiscal Year and ending with 2007, in each case with respect to each line item described in the Budget for the current Fiscal Year, which budget shall be accompanied by an Officer's Certificate from the chief financial officer of Company certifying that the projections contained in such budget are based upon good faith estimates and assumptions believed by Company to be reasonable at the time made;
(xvii) Other Information: with reasonable promptness, such other information and data with respect to Company or any of its Subsidiaries as from time to time may be reasonably requested by Agent or Requisite Lenders (or by any Lender so long as such request is made through Administrative Agent (and Administrative Agent shall be required to request from Borrowers any such information and data reasonably requested by a Lender)); and
(xviii) Notices from Holders of Subordinated Indebtedness:
promptly, upon receipt, copies of all notices from holders of
Subordinated Indebtedness or a trustee, agent or other representative
of such a holder.
5.2 EXISTENCE, ETC.
Except as permitted under subsection 6.7, Company will, and will cause each of its Subsidiaries to, at all times preserve and keep in full force and effect its existence and all rights and franchises material to its business; provided, however that neither Company nor any of its Subsidiaries shall be required to preserve the existence of any such Subsidiary or any such right or franchise if the management or Governing Body of Company or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of Company or such Subsidiary, as the case may be, and the loss thereof could not reasonably be expected to have a Material Adverse Effect.
5.3 PAYMENT OF TAXES AND CLAIMS; TAX.
A. Company will, and will cause each of its Subsidiaries to,
pay all taxes, assessments and other governmental charges imposed upon it or any
of its properties or assets or in respect of any of its income, businesses or
franchises before any material penalty accrues thereon, and all claims
(including claims for labor, services, materials and supplies) for material sums
that have become due and payable and that by law have or may become a Lien upon
any of its properties or assets, prior to the time when any penalty or fine
shall be incurred with respect thereto; provided that no such tax, assessment,
charge or claim need be paid if it is being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted, so long as
(i) such reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor and (ii) in the case of a
tax, assessment, charge or claim which has or may become a Lien against any of
the Collateral, such proceedings conclusively operate to stay the sale of any
portion of the Collateral to satisfy such charge or claim.
B. Borrowers will not file or consent to the filing of any consolidated income tax return with any Person (other than Company or any of its Subsidiaries).
5.4 MAINTENANCE OF PROPERTIES; INSURANCE; APPLICATION OF NET INSURANCE/ CONDEMNATION PROCEEDS.
A. MAINTENANCE OF PROPERTIES. Company will, and will cause each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition, ordinary wear and tear excepted, all material properties used or useful in the business of Company and its Subsidiaries (including all Intellectual Property) and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof, except that Company and its Subsidiaries shall not be required to perform the foregoing obligations (i) with respect to Subsidiaries or assets to which Persons other than Company and its Subsidiaries have recourse under Non Recourse Debt owed to such Persons or (ii) to the extent that failure to perform such obligations would not reasonably be expected to have a Material Adverse Effect.
B. INSURANCE. Company will maintain or cause to be maintained, with financially sound and reputable insurers, such public liability insurance, third party property damage insurance, business interruption insurance and casualty insurance with respect to liabilities, losses or damage in respect of the assets, properties and businesses of Company and its Subsidiaries as may customarily be carried or maintained under similar circumstances by corporations of established reputation engaged in similar businesses, in each case in such amounts (giving effect to self-insurance), with such deductibles, covering such risks and otherwise on such terms and conditions as shall be customary for corporations similarly situated in the industry. Without limiting the generality of the foregoing, Company will maintain or cause to be maintained (i) flood insurance with respect to each Flood Hazard Property that is located in a community that participates in the National Flood Insurance Program, in each case in compliance with any applicable regulations of the Board of Governors of the Federal Reserve System, and (ii) replacement value casualty insurance on the Collateral under such policies of insurance, with such insurance companies, in such amounts, with such deductibles, and covering such risks as are at all times satisfactory to Administrative Agent in its commercially reasonable
judgment. Unless prohibited by contractual or other legal requirement, such policy of insurance shall (a) name Collateral Agent for the benefit of Secured Parties as an additional insured thereunder as its interests may appear and (b) in the case of each business interruption and casualty insurance policy, contain a loss payable clause or endorsement, satisfactory in form and substance to Administrative Agent, that names Collateral Agent for the benefit of Secured Parties as the loss payee thereunder for any covered loss in excess of $1,000,000 and provides for at least 30 days prior written notice to Collateral Agent of any modification or cancellation of such policy. As soon as practicable after the Closing Date, Company shall deliver to Administrative Agent a certificate from Borrowers' insurance broker(s) or other evidence satisfactory to it that all insurance required to be maintained pursuant to this subsection 5.4 is in full force and effect and that Collateral Agent on behalf of Secured Parties has been named as additional insured and/or loss payee thereunder to the extent required under this subsection 5.4.
C. APPLICATION OF NET INSURANCE/CONDEMNATION PROCEEDS.
(i) Business Interruption Insurance. Upon receipt by
Company or any of its Subsidiaries of any business interruption
insurance proceeds constituting Net Insurance/Condemnation Proceeds,
(a) so long as no Event of Default or Potential Event of Default shall
have occurred and be continuing, Company or such Subsidiary may retain
and apply such Net Insurance/Condemnation Proceeds for working capital
purposes or any other purposes not prohibited under this Agreement, and
(b) if an Event of Default or Potential Event of Default shall have
occurred and be continuing, Company shall apply an amount equal to such
Net Insurance/Condemnation Proceeds as provided in subsection 2.4A.
(ii) Net Insurance/Condemnation Proceeds Received by Company. Upon receipt by Company or any of its Subsidiaries of any Net Insurance/Condemnation Proceeds other than from business interruption insurance, (a) so long as no Event of Default or Potential Event of Default shall have occurred and be continuing, Company shall, or shall cause one or more of its Subsidiaries to, promptly and diligently apply such Net Insurance/Condemnation Proceeds to pay or reimburse the costs of repairing, restoring or replacing the assets in respect of which such Net Insurance/Condemnation Proceeds were received or, to the extent not so applied, as provided in subsection 2.4A, and (b) if an Event of Default or Potential Event of Default shall have occurred and be continuing (unless Company is otherwise required to use funds by law or contract), Company shall apply an amount equal to such Net Insurance/Condemnation Proceeds as provided in subsection 2.4A.
(iii) Net Insurance/Condemnation Proceeds Received by Administrative Agent or Collateral Agent. Upon receipt by Administrative Agent or Collateral Agent, as the case may be, of any Net Insurance/Condemnation Proceeds as loss payee, (a) if and to the extent Company would have been required to apply such Net Insurance/Condemnation Proceeds (if it had received them directly) Administrative Agent or Collateral Agent, as the case may be, shall, and Company hereby authorizes Administrative Agent or Collateral Agent, as the case may be, to, apply such Net Insurance/Condemnation Proceeds as provided in subsection 2.4A, and (b) to the extent the foregoing clause (a) does not apply Administrative Agent or Collateral Agent, as the case may be, shall
deliver such Net Insurance/Condemnation Proceeds to Company, and (1)
Company and its Subsidiaries may retain and apply any portion thereof
that is business interruption insurance proceeds for working capital
purposes or any other purposes not prohibited under this Agreement and
(2) Company shall, or shall cause one or more of its Subsidiaries to,
promptly apply such Net Insurance/Condemnation Proceeds that are not
business interruption insurance proceeds to the costs of repairing,
restoring, or replacing the assets in respect of which such Net
Insurance/Condemnation Proceeds were received; provided, however that
if at any time Administrative Agent reasonably determines (A) that
Company or such Subsidiary is not proceeding diligently with such
repair, restoration or replacement or that such repair, restoration or
replacement cannot be completed within 180 days after the receipt by
Administrative Agent or Collateral Agent, as the case may be of such
Net Insurance/Condemnation Proceeds, Administrative Agent or Collateral
Agent, as the case may be, shall, and Company hereby authorizes
Administrative Agent or Collateral Agent, as the case may be, to, apply
such Net Insurance/Condemnation Proceeds as provided in subsection
2.4A.
Notwithstanding the foregoing, no Net Insurance/Condemnation Proceeds shall be required to be applied as provided in subsection 2.4A to the extent such application would constitute a material violation of (1) a valid Contractual Obligation (in effect on the Closing Date or arising under the documentation for Non Recourse Debt permitted to be incurred under this Agreement) in favor of or for the benefit of a Person other than Company or any of its Subsidiaries or their respective Affiliates for which the required consents have not been obtained or (2) applicable law affecting Company and its Subsidiaries. Notwithstanding anything in this Agreement to the contrary, in the event of any conflict or inconsistency between subsection 5.4C and the terms of the Intercreditor Agreement, the terms of the Intercreditor Agreement shall prevail.
5.5 INSPECTION RIGHTS; LENDER MEETING.
A. INSPECTION RIGHTS. Borrowers shall, and shall cause each of their respective Subsidiaries to, permit any authorized representatives designated by any Lender, at such Lender's expense, to visit and inspect any of the properties of such Borrower or of any of its Subsidiaries, to inspect, copy and take extracts from its and their financial and accounting records, and to discuss its and their affairs, finances and accounts with its and their officers and independent public accountants (provided that Company may, if it so chooses, be present at or participate in any such discussion), all upon reasonable notice and at such reasonable times during normal business hours and as often as may reasonably be requested; provided that, at any time after the occurrence and during the continuance of an Event of Default, Borrowers shall, and shall cause each of their respective Subsidiaries to, permit such additional visits, inspections, and audits as Administrative Agent or Requisite Lenders may deem necessary or advisable, at any time from time to time, all at Borrowers' expense.
B. LENDER MEETING. Company will, upon the request of Administrative Agent or Requisite Lenders, participate in a meeting of Administrative Agent and Lenders once during each Fiscal Year to be held at Company's corporate offices (or at such other location as may be agreed to by Company and Administrative Agent) at such time as may be agreed to by Company and Administrative Agent.
5.6 COMPLIANCE WITH LAWS, ETC.
Borrowers shall comply, and shall cause each of their Subsidiaries to comply, with the requirements of all applicable laws, rules, regulations and orders of any Government Authority (including all Environmental Laws), noncompliance with which could reasonably be expected to cause, individually or in the aggregate, a Material Adverse Effect.
5.7 ENVIRONMENTAL MATTERS.
A. ENVIRONMENTAL DISCLOSURE. Company will deliver to Administrative Agent:
(i) Environmental Audits and Reports. As soon as practicable following receipt thereof, copies of all environmental audits, investigations, analyses and reports of any kind or character (excluding writings which are protected by attorney-client privilege or the work-product doctrine or confidential self-evaluative writings), whether prepared by personnel of Company or any of its Subsidiaries or by independent consultants, governmental authorities or any other Persons, with respect to significant environmental matters at any Facility that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect or impose liability on any Lender or Agent or with respect to any Environmental Claims that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect or impose liability on any Lender or Agent;
(ii) Notice of Certain Releases, Remedial Actions, Etc.
Promptly upon the occurrence thereof, written notice describing in
reasonable detail (a) any Release required to be reported to any
federal, state or local governmental or regulatory agency under any
applicable Environmental Laws that could reasonably be expected to have
a Material Adverse Effect or impose liability on any Lender or Agent,
(b) any remedial action taken by Company or any other Person in
response to (1) any Hazardous Materials Activities the existence of
which could reasonably be expected to result in one or more
Environmental Claims having, individually or in the aggregate, a
Material Adverse Effect or imposing liability on any Lender or Agent,
or (2) any Environmental Claims that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect or
impose liability on any Lender or Agent;
(iii) Written Communications Regarding Environmental Claims, Releases, Etc. As soon as practicable following the sending or receipt thereof by Company or any of its Subsidiaries, a copy of any and all written communications (excluding writings which are protected by attorney-client privilege or the work-product doctrine or confidential self-evaluative writings), with respect to (a) the commencement or the threat to commence a proceeding regarding any Environmental Claims that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect or impose liability on any Lender or Agent, (b) any Release required to be reported to any federal, state or local governmental or regulatory agency that could reasonably be expected to have a Material Adverse Effect or impose liability on any Lender or Agent, and (c) any request for information from any governmental agency that suggests such agency is investigating whether Company or any of its Subsidiaries may be potentially responsible for any
Hazardous Materials Activity that could reasonably be expected to have a Material Adverse Effect or impose liability on any Lender or Agent;
(iv) Notice of Certain Proposed Actions Having
Environmental Impact. Prompt written notice describing in reasonable
detail (a) any proposed acquisition of stock, assets, or property by
Company or any of its Subsidiaries that could reasonably be expected to
(1) expose Company or any of its Subsidiaries to, or result in,
Environmental Claims that could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect or impose
liability on any Lender or Agent or (2) affect the ability of Company
or any of its Subsidiaries to maintain in full force and effect all
Governmental Authorizations required under any Environmental Laws for
their respective operations except to the extent the failure to
maintain such Governmental Authorizations could not reasonably be
expected to have a Material Adverse Effect or impose liability on any
Lender or Agent and (b) any proposed action to be taken by Company or
any of its Subsidiaries to commence manufacturing or other industrial
operations or to modify current operations in a manner that could
reasonably be expected to subject Company or any of its Subsidiaries to
any additional obligations or requirements under any Environmental Laws
that could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect or impose liability on any Lender
or Agent; and
(v) Certain Communications. With respect to documents
which would have been required to be provided to Administrative Agent
pursuant to paragraph (i) or (iii) but for the parenthetical in those
paragraphs, Company shall promptly upon receiving such documents
provide a list identifying generally the documents not disclosed and
summarizing the information contained in such documents to the extent
consistent with not waiving any privilege with respect thereto. If the
privilege prevents Company from summarizing the information contained
in such documents Company (a) shall nevertheless advise Administrative
Agent that a matter, the nature of which cannot be disclosed without
waiving the applicable privilege, exists with respect to a specified
Facility or Environmental Claim that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect and
(b) shall provide such other information to Administrative Agent,
consistent with not waving the privilege, that Administrative Agent may
reasonably request.
B. COMPANY'S ACTIONS REGARDING ENVIRONMENTAL CLAIMS AND VIOLATIONS OF ENVIRONMENTAL LAWS. Company shall promptly take, and shall cause each of its Subsidiaries promptly to take, any and all actions necessary to (i) cure any violation of applicable Environmental Laws by Company or its Subsidiaries that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and (ii) make an appropriate response to any Environmental Claim against Company or any of its Subsidiaries and discharge any obligations it may have to any Person thereunder where failure to do so could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect (except if Company and its Subsidiaries do not have standing to contest or respond to such Environmental Claim); provided, however, that Company may, without breaching the requirements of this subsection 5.7B, contest an alleged violation of Environmental Laws or an Environmental Claim in good faith by appropriate proceedings promptly instituted and diligently conducted so long as
during such contest the failure to cure such violation or to respond to such Environmental Claim or discharge the obligations thereunder could not reasonably be expected to result in a Material Adverse Effect.
5.8 EXECUTION OF THE PERSONAL PROPERTY COLLATERAL DOCUMENTS AFTER THE CLOSING DATE.
A. FOREIGN PLEDGE AGREEMENTS. As soon as practicable (but not more than 90 days, unless rendered impracticable by events or by action or inaction of foreign Governmental Authorities in each case beyond the control of Borrowers (as determined in the reasonable judgment of Administrative Agent)) after the Closing Date (to the extent not completed on or prior to the Closing Date), Borrowers shall cause Foreign Pledge Agreements to be executed and delivered to Administrative Agent with respect to 65% of the Capital Stock of all Foreign Subsidiaries which are Material Subsidiaries and are directly owned by any Borrower (other than to the extent a pledge of such Capital Stock under the Collateral Documents would constitute a material violation of (1) a valid Contractual Obligation in favor of or for the benefit of a Person other than Company or any of its Subsidiaries for which the required consents have not been obtained or (2) applicable law affecting such Borrower or such Foreign Subsidiary), shall take all such other actions under the laws of such jurisdictions as Administrative Agent may deem necessary or advisable to perfect or otherwise protect the Liens purported to be created in such Capital Stock under the Collateral Documents, and shall deliver to Administrative Agent an opinion of counsel (which counsel shall be reasonably satisfactory to Administrative Agent) under the laws of each jurisdiction in which (i) any Borrower holding stock of the relevant Foreign Subsidiary is organized with respect to the due authorization, execution and delivery of such Foreign Pledge Agreement by such Borrower, and (ii) such Foreign Subsidiary is organized with respect to customary matters regarding enforceability, validity and perfection of such pledge.
B. RELEASE OF RESTRICTIONS. Borrowers shall use their good faith, commercially reasonable efforts to obtain all necessary consents from all Persons in whose favor or for whose benefit Contractual Obligations are in effect which would be violated by a pledge of the Capital Stock of any Subsidiary of a Borrower. The foregoing efforts shall be exercised so as to obtain such consents as soon as practicable but no later than 90 days after the Closing Date.
5.9 MATTERS RELATING TO REAL PROPERTY COLLATERAL.
From and after the Closing Date, in the event that any Borrower acquires any fee interest in real property or any Material Leasehold Property, such Borrower shall, as soon as practicable after such Person acquires such real property or Material Leasehold Property, execute, acknowledge, file, record, do and deliver all and any further acts, deeds, conveyances, mortgages, hypothecations, pledges, charges, assignments, financing statements and continuations thereof, notices of assignment, transfers, certificates, assurances and other instruments, opinions, appraisals, title insurance and environmental reports as Administrative Agent may reasonably request to perfect and maintain the Liens created by the Collateral Documents, including, without limitation, deliver to Collateral Agent in proper form for recording in all appropriate places in all applicable jurisdictions, encumbering the interest of such Borrower in such mortgaged property; and such opinions, appraisal, documents, title
insurance, environmental reports and other documents as Administrative Agent may reasonably request, in each case in form and substance reasonably satisfactory to Administrative Agent, and to assure, convey, assign, transfer and confirm unto Collateral Agent, for the benefit of the Secured Parties, the property and rights thereby conveyed and assigned or intended to now or hereafter be conveyed or assigned or that any Borrower may be or may hereafter become bound to convey or to assign to Administrative Agent.
5.10 DEPOSIT ACCOUNTS; REPATRIATION OF FOREIGN CASH.
A. DOMESTIC DEPOSIT ACCOUNTS. Borrowers shall, and shall cause each of their Subsidiaries to, maintain the Cash Management System as described in Schedule 3.1P, as said Schedule 3.1P may be supplemented from time to time pursuant to clause (c) below, and Company and its Subsidiaries shall not open or close Deposit Accounts in the United States or make other changes to the Cash Management System in the United States without the written consent of Administrative Agent, except that Company and its Subsidiaries may open and maintain funds in Deposit Accounts with Collateral Agent or other depository institutions after the Closing Date so long as (a) concurrently with the opening of any such account with a depository institution other than Collateral Agent, Borrowers shall deliver to Administrative Agent a Control Agreement with respect to such account (unless after giving effect to such opening Borrowers would not be in breach of the requirement set forth in clause (b)), (b) the aggregate amount on deposit at any time in all Deposit Accounts in the United States maintained with depository institutions other than Collateral Agent for which Control Agreements have not been delivered to Administrative Agent shall not exceed $50,000, and (c) concurrently with the opening of any such account, Borrowers shall deliver to Administrative Agent a written notice setting forth the account number and the name of the relevant depository institution (it being understood that such written notice shall be deemed to supplement Schedule 3.1P annexed hereto for all purposes of this Agreement) and, if applicable, the Project to which such account relates and the primary purpose of such account.
B. REPATRIATION OF FOREIGN CASH. At all times Company shall, and shall cause each of its Subsidiaries to, transfer to Deposit Accounts of Company located in the United States in the Cash Management System all funds of Company and its Subsidiaries on deposit in accounts located outside the United States that can be so transferred, to the extent such transfer (i) would not constitute a violation of (a) a valid Contractual Obligation in favor of or for the benefit of a Person other than Company or any of its Subsidiaries for which the required consents have not been obtained or (b) applicable law affecting the relevant Foreign Subsidiary or Project, and (ii) would not result in material adverse tax liabilities for Company and its Subsidiaries; provided, however, that Company and its Subsidiaries may maintain funds that would otherwise be required to be transferred pursuant to the foregoing provision so long as (1) such funds so maintained are applied to working capital, capital expenditure, maintenance, operation, payroll and other liquidity requirements in the ordinary course of business and (2) the aggregate amount of such funds so maintained at any time does not exceed $2,000,000 in the aggregate.
5.11 FURTHER ASSURANCES.
A. ASSURANCES. Without expense or cost to Administrative Agent or Lenders, each Borrower shall from time to time hereafter execute, acknowledge, file, record, do and
deliver all and any further acts, deeds, conveyances, mortgages, deeds of trust, deeds to secure debt, security agreements, hypothecations, pledges, charges, assignments, financing statements and continuations thereof, notices of assignment, transfers, certificates, assurances and other instruments as Administrative Agent may from time to time reasonably request and that do not involve a material expansion of Borrowers' obligations or liabilities hereunder in order to carry out more effectively the purposes of this Agreement, the other Loan Documents and the Confirmation Order, including to subject any Collateral, intended to now or hereafter be covered, to the Liens created by the Collateral Documents and the Confirmation Order, to perfect and maintain such Liens, and to assure, convey, assign, transfer and confirm unto Collateral Agent the property and rights thereby conveyed and assigned or intended to now or hereafter be conveyed or assigned or that any Borrower may be or may hereafter become bound to convey or to assign to Collateral Agent or for carrying out the intention of or facilitating the performance of the terms of this Agreement, any other Loan Documents or the Confirmation Order, registering or recording this Agreement or any other Loan Document. Without limiting the generality of the foregoing, Borrowers shall deliver to Collateral Agent, promptly upon receipt thereof, all instruments received by Borrowers after the Closing Date and take all actions and execute all documents necessary or reasonably requested by Collateral Agent to perfect Collateral Agent's Liens in any such instrument or any other Investment acquired by any Borrower.
B. FILING AND RECORDING OBLIGATIONS. Each Borrower shall jointly and severally pay all filing, registration and recording fees and all expenses incident to the execution and acknowledgement of any Mortgage or other Loan Document, including any instrument of further assurance described in subsection 5.11A, and shall pay all mortgage recording taxes, transfer taxes, general intangibles taxes and governmental stamp and other taxes, duties, imposts, assessments and charges arising out of or in connection with the execution, delivery, filing, recording or registration of any Mortgage or other Loan Document, including any instrument of further assurance described in subsection 5.11A, or by reason of its interest in, or measured by amounts payable under, the Notes, the Mortgages or any other Loan Document, including any instrument of further assurance described in subsection 5.11A, (excluding income, franchise and doing business Taxes), and shall pay all stamp Taxes and other Taxes required to be paid on the Notes or any other Loan Document; provided, however, that such Borrower may contest in good faith and through appropriate proceedings, any such Taxes, duties, imposts, assessments and charges; provided further, however, that such Borrower shall pay all such Taxes, duties, imposts and charges when due to the appropriate taxing authority during the pendency of any such proceedings if required to do so to stay enforcement thereof. If any Borrower fails to make any of the payments described in the preceding sentence within 10 days after notice thereof from Administrative Agent (or such shorter period as is necessary to protect the loss of or diminution in value of any Collateral by reason of tax foreclosure or otherwise, as determined by Administrative Agent) accompanied by documentation verifying the nature and amount of such payments, Administrative Agent may (but shall not be obligated to) pay the amount due and Borrowers shall jointly and severally reimburse all amounts in accordance with the terms hereof.
C. COSTS OF DEFENDING AND UPHOLDING THE LIEN. Administrative Agent may, upon at least five days' prior notice to Borrowers, (i) appear in and defend any action or proceeding, in the name and on behalf of Agent, Lenders or any Borrower, in which Agent or any Lender is named or which Administrative Agent in its sole discretion determines is reasonably likely to materially adversely affect any Mortgaged Property, any other Collateral,
any Mortgage, the Lien thereof or any other Loan Document and (ii) institute any action or proceeding which Administrative Agent reasonably determines should be instituted to protect the interest or rights of Administrative Agent and Lenders in any Mortgaged Property or other Collateral or under this Agreement or any other Loan Document. Borrowers, jointly and severally, agree that all reasonable costs and expenses expended or otherwise incurred pursuant to this subsection (including reasonable attorneys' fees and disbursements) by Administrative Agent shall be paid pursuant to subsection 9.2 hereof.
5.12 MOST FAVORED NATIONS PAYMENTS.
Company shall, and shall cause each of its Subsidiaries to, extend any fees or pricing increases, to the extent such fees or pricing increases are the direct obligation of Company or its Subsidiaries, resulting from the amendment, waiver or modification, after the Closing Date, of the CPIH Term Loan Documents, on an equivalent basis (based in the case of fees on the respective amounts of Loan Exposure outstanding (on one hand) and the credit exposure under the CPIH Term Loan Documents (on the other hand)) to the Lenders regardless of whether a particular Lender has participated in or consented to a corresponding amendment, waiver or modification (if any) of the Loan Documents, and any such payment of equivalent fees shall be paid in cash concurrently with the fees giving rise to such equivalent fees.
SECTION 6. BORROWERS' NEGATIVE COVENANTS
Borrowers covenant and agree that, so long as any of the Commitments hereunder shall remain in effect and until payment in full of all Obligations unless Requisite Lenders shall otherwise give prior written consent, Borrowers shall perform, and shall cause each of their Subsidiaries to perform, all covenants in this Section 6.
6.1 INDEBTEDNESS.
Borrowers shall not, and shall not permit their respective Subsidiaries to, directly or indirectly, create, incur or assume, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except:
(i) Borrowers may become and remain liable with respect to the Obligations and obligations under the CPIH Term Loan Agreement;
(ii) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations and Performance Guaranties permitted by subsection 6.4 and, upon any matured obligations actually arising pursuant thereto, any Indebtedness created as a result thereof;
(iii) Borrowers may become and remain liable with respect to Indebtedness to any other Borrowers; provided that all such intercompany Indebtedness shall be evidenced by the Intercompany Master Note;
(iv) Subsidiaries of Company may, after the Closing Date, become and remain liable with respect to Indebtedness to Company or any Subsidiary of Company so long as the proceeds of such Indebtedness are applied to Investments permitted under subsection
6.3(vi) to be made by Company or any of its Subsidiaries in the Subsidiaries incurring such Indebtedness; provided that (a) no such Indebtedness may be incurred to make capital expenditures if after giving effect to such expenditures Borrowers would not be in pro forma compliance with subsection 6.6D, and (b) any such Indebtedness to any Borrower shall be evidenced by the Intercompany Master Note;
(v) Company and its Subsidiaries, as applicable, may remain liable with respect to Indebtedness outstanding on the Closing Date and described in Schedule 6.1(v);
(vi) Subsidiaries of Company may become and remain liable with respect to Indebtedness consisting of a converted equity Investment by Company or another Subsidiary of Company in such Subsidiaries, provided that the underlying equity Investment was permitted under this Agreement at the time of such conversion;
(vii) Any Subsidiary of Company may become and remain liable with respect to Indebtedness incurred to refinance, replace, renew or extend, in whole or in part, Indebtedness of such Subsidiary permitted to remain outstanding under subsection 6.1(v); provided, that in each case (a) the terms (excluding the interest rate and fees payable with respect thereto, so long as such interest and fees on such Indebtedness are not borne directly or indirectly by Company or any of its Subsidiaries, whether through an offset to or deduction against service or operating agreement fees to Company or its Subsidiaries or otherwise) of such Indebtedness as refinanced, replaced, renewed or extended, taken as a whole (considering the economic benefits and disadvantages to Company and its Subsidiaries from such refinancing, replacement, renewal or extension, as well as the economic benefits and disadvantages to Company and its Subsidiaries of the Project to which such Indebtedness relates), shall not be more disadvantageous in any material respect to Company and its Subsidiaries and the Lenders than the Indebtedness so refinanced, replaced, renewed or extended, (b) the principal amount of the Indebtedness as refinanced, replaced, renewed or extended shall not exceed 110% of the principal amount of the Indebtedness so refinanced, replaced, renewed or extended (provided that such limitation shall not apply with respect to Indebtedness that an existing client (if such client is a Government Authority) of a Project undertakes to service through the principal lease, service or operating agreement of the applicable Project), (c) no obligee or beneficiary of such Indebtedness after such refinancing, replacement, renewal or extension shall have greater recourse to Persons for the payment or collection of such Indebtedness than the oblige or beneficiary of the Indebtedness so refinanced, replaced, renewed or extended had immediately prior to such transaction, and (d) Company shall provide to Administrative Agent reasonable prior advance written notice of such proposed refinancing, replacement, renewal or extension and copies of all material contracts or other agreements being entered into in connection therewith;
(viii) Company may become and remain liable with respect to Indebtedness consisting solely of its obligations under Insurance Premium Financing Arrangements, which obligations shall not exceed at any time $5,000,000 in the aggregate;
(ix) Borrowers may become and remain liable with respect their obligations to pay for services rendered to them and certain payments made by Covanta and its Subsidiaries (other than Company and its Subsidiaries), in each case under and in accordance with the Management Services and Reimbursement Agreement; and
(x) Company and its Subsidiaries may, after the Closing Date, become and remain liable with respect to Indebtedness to any Subsidiary so long as the proceeds of such Indebtedness are applied to make Investments permitted under subsection 6.3(ix); provided that all such intercompany Indebtedness shall be evidenced by the Intercompany Master Note.
6.2 LIENS AND RELATED MATTERS.
A. PROHIBITION ON LIENS. Borrowers shall not, and shall not permit their respective Subsidiaries to, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset of any kind (including any document or instrument in respect of goods or accounts receivable) of Borrowers or any of their respective Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom, or file or authorize the filing of, or permit to remain in effect, any effective financing statement or other similar notice of any Lien with respect to any such property, asset, income or profits under the UCC or under any similar recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) subject to the provisions of the Intercreditor Agreement, Liens granted pursuant to the Collateral Documents to secure the Obligations, the obligations of Borrowers under the CPIH Term Loan Agreement and the obligations to the cash management bank with respect to the Cash Management System;
(iii) Liens existing on the Closing Date and described in Schedule 6.2 annexed hereto;
(iv) Liens on assets of Company or any Subsidiary of Company securing refinancing Indebtedness permitted by subsection 6.1(vii), provided that in each case the Liens securing such refinancing Indebtedness shall attach only to the assets that were subject to Liens securing the Indebtedness so refinanced and, if applicable, assets the acquisition of which was financed with the proceeds of such refinancing Indebtedness permitted by subsection 6.1(vii);
(v) Liens on cash collateral of Subsidiaries of Company securing Contingent Obligations permitted under subsection 6.4(v), so long as such cash is provided from funds that would not otherwise be available (due to prohibitions in the underlying agreements relating to Projects) for making dividends and distributions to Company and its other Subsidiaries;
(vi) Liens on cash collateral of Company securing insurance deductibles or self-insurance retentions required by third party insurers in connection with insurance
arrangements entered into by Company and its Subsidiaries with such insurers in compliance with subsection 5.4B;
(vii) Liens securing debt service reserve funds, completion obligations and similar accounts and obligations (other than Indebtedness) of Subsidiaries of Company to Persons other than Company and its Subsidiaries and their respective Affiliates, so long as (a) each such obligation is associated with a Project, (b) such Lien is limited to (1) assets associated with such Project (which in any event shall not include assets held by any Borrower other than a Borrower whose sole business is the ownership and/or operation of such Project and substantially all of whose assets are associated with such Project) and/or (2) the equity interests in such Subsidiary, but in the case of clause (2) only if such Subsidiary's sole business is the ownership and/or operation of such Project and substantially all of such Subsidiary's assets are associated with such Project, and (c) such obligation is otherwise permitted under this Agreement;
(viii) Liens created pursuant to Insurance Premium Financing Arrangements otherwise permitted under this Agreement, so long as such Liens attach only to gross unearned premiums for the insurance policies;
(ix) Liens on cash collateral of Subsidiaries of Company securing Contingent Obligations permitted under subsection 6.4(iv), so long as such cash is provided from funds that would not otherwise be available (due to prohibitions in the underlying agreements relating to Projects) for making dividends and distributions to Company and its other Subsidiaries; and
(x) Other Liens on assets of any Subsidiary of Company securing Indebtedness in an aggregate amount not exceeding $1,000,000.
B. EQUITABLE LIEN IN FAVOR OF LENDERS. If any Borrowers or any of its Subsidiaries shall create or assume any Lien upon any of its properties or assets, whether now owned or hereafter acquired, other than Liens excepted by the provisions of subsection 6.2A and Liens created or assumed on properties or assets on which First Priority Liens created under the Collateral Documents are attached and perfected at the time of such creation or assumption, the Borrowers hereby agree that (i) they will be deemed to have automatically and without further action secured the Obligations with such Lien equally and ratably with any and all other Indebtedness, Contingent Obligations or any other obligations or debt (as defined in the Bankruptcy Code) secured thereby, and (ii) they shall take or cause to be taken such actions as Administrative Agent or Requisite Lenders deem necessary or advisable to evidence such equal and ratable Lien; provided that, notwithstanding the foregoing, this covenant shall not be construed as a consent by Requisite Lenders to the creation or assumption of any such Lien not permitted by the provisions of subsection 6.2A, and the creation or assumption of any such Lien not permitted by the provisions of subsection 6.2A shall constitute an Event of Default.
C. NO FURTHER NEGATIVE PLEDGES. Neither Company nor any of its Subsidiaries shall enter into any agreement (other than this Agreement, the Loan Documents and the CPIH Term Loan Documents) on or after the Closing Date prohibiting the creation or assumption of any Lien upon any of its properties or assets, whether now owned or hereafter acquired, except
with respect to (i) specific property encumbered by a Lien permitted hereunder to secure payment of particular Indebtedness permitted to be incurred under subsection 6.1(vii) (but only to the extent that the Indebtedness being refinanced was subject to a negative pledge on the same assets), or by a Lien permitted under subsection 6.2A(v), 6.2A(vi), 6.2A(vii) or 6.2A(ix), or by a Lien permitted under subsection 6.2A(x) to the extent such Lien secures obligations incurred to finance the acquisition of such specific property, (ii) specific property to be sold pursuant to an executed agreement with respect to an Asset Sale which is permitted hereunder, (iii) specific property that is leased pursuant to a lease permitted hereunder, and (iv) provisions in the principal lease, service and operating agreements pertaining to Projects, or the partnership and financing agreements relating to Projects, so long as in each case such lease, service, operating, partnership or financing agreement is an extension, renewal or replacement of such agreement in effect as of the Closing Date, is otherwise permitted to be entered into hereunder and contains no more restrictive provisions relating to prohibiting the creation or assumption of any Lien upon the properties or assets of the relevant Subsidiary than the lease, service, operating, partnership or financing agreement so extended, renewed or replaced.
D. NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO COMPANY OR
OTHER SUBSIDIARIES. Company will not, and will not permit any of its
Subsidiaries to, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any such Subsidiary to (i) pay dividends or make any other distributions on
any of such Subsidiary's capital stock owned by Company or any other Subsidiary
of Company, (ii) repay or prepay any Indebtedness owed by such Subsidiary to
Company or any other Subsidiary of Company, (iii) make loans or advances to
Company or any other Subsidiary of Company, or (iv) transfer any of its property
or assets to Company or any other Subsidiary of Company, except (a) as provided
in this Agreement or the other Loan Documents, (b) those encumbrances or
restrictions applicable to Subsidiaries of Company to the extent created under
documentation in existence on the Closing Date or under the CPIH Term Documents,
(c) as may be provided in an executed agreement with respect to an Asset Sale
which is permitted hereunder, and (d) provisions in the principal lease, service
or operating agreements, partnership agreements and financing agreements
pertaining to Projects, so long as such lease, service or operating agreements,
partnership agreements and financing agreements are extensions, renewals or
replacements of such agreements in effect as of the Closing Date, are otherwise
permitted to be entered into hereunder and in each case contain no more
restrictive provisions relating to the ability of the relevant Subsidiary to
take the actions described in clauses (i) through (iv) than the agreement so
extended, renewed or replaced.
6.3 INVESTMENTS; ACQUISITIONS.
Borrowers shall not, and shall not permit their respective Subsidiaries to, directly or indirectly, make or own any Investment in any Person, including any Joint Venture, or acquire, by purchase or otherwise, all or substantially all the business, property or fixed assets of, or capital stock or other ownership interest of any Person, or any division or line of business of any Person except:
(i) Company and its Domestic Subsidiaries may make and own Investments in Domestic Cash Equivalents and in such investments as are permitted or imposed under the terms of any cash collateral or debt service reserve agreement (including pursuant to
the terms of any Project bond indenture) permitted hereunder; and Company's Foreign Subsidiaries may make and own Investments in Foreign Cash Equivalents to the extent permitted under subsection 5.10;
(ii) Borrowers may make and own additional equity Investments in other Borrowers, so long as no such Investment shall be made by one Borrower in another Borrower if (a) the latter is subject to restrictions of the type described in subsection 6.2D more adverse than restrictions of such type that are applicable to the Borrower making such Investment, or (b) such Investment shall result in the obligee or beneficiary of any Indebtedness or Contingent Obligation (other than the Obligations) having greater recourse to assets for the payment or collection of such Indebtedness or Contingent Obligation than such obligee or beneficiary had immediately prior to such Investment;
(iii) Company and its Subsidiaries may make intercompany loans to the extent permitted under subsection 6.1(iii);
(iv) Company and its Subsidiaries may make Consolidated Facilities Capital Expenditures permitted by subsection 6.6D;
(v) Company and its Subsidiaries may continue to own the Investments owned by them on the Closing Date and described in Schedule 6.3(v) annexed hereto;
(vi) (a) Company may make and own Investments consisting of intercompany loans to its Subsidiaries (to the extent such Subsidiaries are in existence on the Closing Date) in an aggregate amount not in excess of $1,000,000 outstanding at any time and (b) Subsidiaries may make and own Investments consisting of intercompany loans to other Subsidiaries (in each case to the extent such Subsidiaries are in existence on the Closing Date), so long as the proceeds of such loans are applied to working capital, capital expenditure, maintenance and payroll requirements in the ordinary course of business of such Subsidiaries (provided that the aggregate amount of loans outstanding pursuant to this clause (b) shall not at any time exceed $2,000,000);
(vii) Borrowers and their Subsidiaries may own Investments in the form of non-cash consideration received in connection with (a) Asset Sales permitted under subsection 6.7(iii) or 6.7(iv) or (b) settlements of disputes, to the extent such settlements occur in the ordinary course of business;
(viii) Subject to the Intercreditor Agreement, Borrowers may make payments under the Management Services and Reimbursement Agreement to the extent contractually obligated pursuant to the terms thereof; and
(ix) Company and its Subsidiaries may make and own Investments consisting of cash equity contributions made after the Closing Date (a) in the aggregate amount of approximately $360,000 (it being understood that such amount is the approximate Dollar equivalent of an estimate as of November 15, 2003 of the required foreign currency contribution, and thus may change based on fluctuations in currency exchange rates) in the Madurai Project, (b) in an aggregate amount not to exceed $130,000 in the Samalpatti Project, and (c) in an aggregate amount not to exceed $1,600,000 in the Trezzo waste-to-
energy Project, in each case so long as (1) such contributions are required to be made pursuant to the terms of a binding Contractual Obligation of Company and its Subsidiaries in effect on the Closing Date, and (2) any Capital Stock resulting from such contributions and held directly by any Borrower shall be pledged as Collateral under the Collateral Documents.
6.4 CONTINGENT OBLIGATIONS; PERFORMANCE GUARANTIES.
Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create or become or remain liable with respect to any Contingent Obligation or Performance Guaranty, and shall not create or become or remain liable with respect to any obligation to incur a subsequent Contingent Obligation or to post cash collateral to secure any obligation, except:
(i) Borrowers may become and remain liable (a) with
respect to Contingent Obligations in respect of the Obligations, and
(b) with respect to Contingent Obligations under the Management
Services and Reimbursement Agreement;
(ii) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations in respect of customary and appropriate indemnification and purchase price adjustment obligations incurred in connection with Asset Sales or other sales of assets to the extent such Asset Sales and sales are permitted under this Agreement;
(iii) Company and its Subsidiaries, as applicable, may become and remain liable with respect to (a) Contingent Obligations in existence on the Closing Date and described in Schedule 6.4(iii) annexed hereto, and (b) Contingent Obligations replacing, renewing or extending Contingent Obligations described in clause (a); provided that no such replacement, renewed or extended Contingent Obligation, taken as a whole, shall be more disadvantageous in any material respect to Company and its Subsidiaries than the Contingent Obligations so replaced, renewed or extended;
(iv) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations consisting of long-term or forward purchase contracts and option contracts to buy, sell or exchange commodities and similar agreements or arrangements, so long as such contracts, agreements or arrangements do not constitute Commodities Agreements;
(v) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations constituting Hedge Agreements;
(vi) Company and its Subsidiaries may become and remain liable with respect to usual and customary Contingent Obligations incurred in connection with insurance deductibles or self-insurance retentions required by third party insurers in connection with insurance arrangements entered into by Company and its Subsidiaries with such insurers in compliance with subsection 5.4B; and
(vii) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations under the Management Services and Reimbursement Agreement.
6.5 RESTRICTED PAYMENTS.
Borrowers shall not, and shall not permit their respective Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum for any Restricted Payment; provided, however, that (i) Subsidiaries of Company may make payments of principal, interest and other amounts in respect of Indebtedness permitted under subsections 6.1(v) and 6.1(vii) related to Projects, in accordance with the terms of, and only to the extent required by, the indentures or other agreements pursuant to which such Indebtedness was issued, as such indentures or other agreements may be amended from time to time to the extent permitted hereunder, provided, however, that during the continuance of an Event of Default, notwithstanding anything to the contrary in this Agreement, neither Company nor any Subsidiary shall fund, contribute or otherwise advance amounts for payment of Indebtedness permitted under subsections 6.1(v) and 6.1(vii) related to Projects unless it has an irrevocable Contractual Obligation to make such payments; (ii) so long as no Event of Default shall have occurred and be continuing, Subsidiaries of Company may, at the time Indebtedness is refinanced or replaced as permitted under subsection 6.1 by other Indebtedness permitted under such subsection, pay principal, accrued interest and other amounts owing on such refinanced Indebtedness at such time, provided that such payments may be made with respect to Non Recourse Debt during the continuance of an Event of Default so long as such payments are from the proceeds of Non Recourse Debt permitted to be incurred hereunder and such proceeds are required to be applied to make such payments under a binding Contractual Obligation to a third party; (iii) Company and its Subsidiaries may pay any fees required to be paid to the Administrative Agent and Lenders hereunder; and (iv) Company and its Subsidiaries may make payments under and in accordance with the terms of, and only to the extent required by, the Management Services and Reimbursement Agreement and the Tax Sharing Agreement.
In addition, in any case where a Borrower or Subsidiary is a Joint Venture, Borrowers shall not, and shall not permit their respective Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum for (a) any dividend or other distribution, direct or indirect, on account of any shares of Capital Stock of such Joint Venture held by Persons other than Borrowers or any Subsidiaries of Borrowers, except a dividend payable solely in shares of that class of stock to the holders of that class, (b) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of Capital Stock of such Joint Venture held by Persons other than Borrowers or any Subsidiaries of Borrowers, or (c) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of Capital Stock of such Joint Venture held by Persons other than Borrowers or any Subsidiaries of Borrowers, except in each case to the extent the relevant action described in clause (a), (b) or (c) is required pursuant to a binding Contractual Obligation in effect as of the Closing Date or pursuant to an extension, renewal or replacement of such a Contractual Obligation so long as such extension, renewal or replacement is otherwise permitted to be entered into hereunder and contains provisions no less favorable to Company and its Subsidiaries than the relevant Contractual Obligations so extended, renewed or replaced.
6.6 FINANCIAL COVENANTS.
A. MINIMUM INTEREST COVERAGE RATIO. Company shall not permit the ratio of (i) Adjusted EBITDA to (ii) Consolidated Cash Interest Expense, in each case for any four-Fiscal Quarter period ending at the end of any Fiscal Quarter commencing after March 31, 2004 to be less than 3.00:1.00.
B. MAXIMUM CONSOLIDATED LEVERAGE RATIO. Company shall not permit the Consolidated Leverage Ratio as at any date on or after June 30, 2004 to exceed 5.00:1.00.
C. [INTENTIONALLY OMITTED].
D. CONSOLIDATED FACILITIES CAPITAL EXPENDITURES. Borrowers shall not, and shall not permit their respective Subsidiaries to, make or incur Consolidated Facilities Capital Expenditures after the Closing Date if the aggregate amount of such expenditures financed by contributions, loans or advances from Company would exceed $1,000,000 in the aggregate.
E. CERTAIN CALCULATIONS. Notwithstanding any provision of this
Agreement to the contrary, (i) for purposes of calculating Adjusted EBITDA for
any four-Fiscal Quarter period ending prior to the first Fiscal Quarter of 2005,
Adjusted EBITDA for the third and fourth Fiscal Quarters of 2003 and the first
Fiscal Quarter of 2004 shall be deemed to be equal to the correlative amounts
set forth opposite such Fiscal Quarters on Schedule 6.6E annexed hereto; and
(ii) for purposes of determining compliance with subsection 6.6A for any
four-Fiscal Quarter period ending prior to the last Fiscal Quarter of 2004,
Consolidated Cash Interest Expense shall equal the product of (a) actual
Consolidated Cash Interest Expense during the period from the Closing Date to
the end of such four-Fiscal Quarter period multiplied by (b) the ratio of (1)
365 divided by (2) the number of days in such period.
6.7 RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES.
Borrowers shall not, and shall not permit their respective Subsidiaries to, alter the legal form of organization of Company or any of its Subsidiaries, or enter into any transaction of merger or consolidation, or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor or sublessor), transfer or otherwise dispose of (including by discount or compromise), in one transaction or a series of transactions, all or any part of its business, property or assets (including its notes or receivables and Capital Stock of a Subsidiary, whether newly issued or outstanding) or its interests in or claims against any Project, in each case whether now owned or hereafter acquired, except:
(i) any Borrower may be merged with or into a Borrower, or be liquidated, wound up or dissolved, or all or any part of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of, in one transaction or a series of transactions, to a Borrower; provided that, no such transaction shall result in the obligee or beneficiary of any Indebtedness or Contingent Obligation (other than the Obligations) having greater recourse to assets or Persons for the payment or collection of such Indebtedness or Contingent Obligation than such obligee or beneficiary had immediately prior to such transaction;
(ii) any Subsidiary of Company that is not a Borrower may be merged with or into any other Subsidiary of Company that is not a Borrower, or be liquidated, wound up or dissolved, or all or any part of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of, in one transaction or a series of transactions, to another Subsidiary that is not a Borrower; provided further, that, no such transaction shall result in the obligee or beneficiary of any Indebtedness or Contingent Obligation (other than the Obligations) having greater recourse to assets or Persons for the payment or collection of such Indebtedness or Contingent Obligation than such obligee or beneficiary had immediately prior to such transaction;
(iii) Company and its Subsidiaries may sell or otherwise dispose of assets in transactions that do not constitute Asset Sales; provided that the consideration received for such assets shall be in an amount at least equal to the fair market value thereof;
(iv) Company and its Subsidiaries may make Asset Sales,
provided that (a) the consideration received for such assets shall be
in an amount at least equal to the fair market value thereof; (b) not
less than 90% of the consideration received (other than any
consideration consisting of the assumption of liabilities related to
such assets) in any such Asset Sale shall be cash (it being agreed that
cash the receipt of which may by the relevant terms of such Asset Sale
be deferred more than six months after the date of consummation of such
Asset Sale shall not be considered cash for purposes of this clause
(b)); (c) not more than 10% of the cash consideration received by
Company and its Subsidiaries in any such Asset Sale shall be received
after the date of consummation of such Asset Sale; (d) any non-cash
consideration received shall be reasonably satisfactory to
Administrative Agent; (e) the principal documentation for each such
Asset Sale shall have been delivered in advance to Administrative
Agent; (f) upon consummation of each such Asset Sale, neither Company
nor any of its Subsidiaries shall have any debts or obligations,
contingent or otherwise, relating to the sold entities or assets (other
than customary indemnification obligations and purchase price
adjustment obligations incurred in connection with such Asset Sale);
(g) any Indebtedness in relation to such assets shall be repaid and the
related letters of credit shall be cancelled and returned to the
issuers thereof; (h) any Asset Sale or series of related Asset Sales
(1) in which the consideration to be received (other than the
assumption of liabilities related to such assets) exceeds $15,000,0000
shall require the prior written consent of the Requisite Lenders, (2)
of the Quezon Project or involving any assets or property comprising
the Quezon Project shall require the prior written consent of Requisite
Lenders and (3) in which the consideration to be received (other than
the assumption of liabilities related to such assets) exceeds
$5,000,000 shall require the delivery no later than 30 days prior to
the consummation of such Asset Sale or Asset Sales of an independent
appraisal of the fair market value of such assets subject thereto which
appraisal shall be performed by an appraiser satisfactory to
Administrative Agent and shall be in form and substance satisfactory in
all respects to Administrative Agent and (i) the Net Asset Sale
Proceeds of such Asset Sales shall be applied as Mandatory Payments to
the extent required under subsection 2.4A;
(v) Any Subsidiary of Company may, if its Board of Directors determines that doing so is in the best interests of such Subsidiary, change its legal form of organization
to a limited liability company, a corporation or a limited partnership; provided that (a) (1) if such Subsidiary is a Borrower, such Subsidiary shall have executed such documents as Administrative Agent reasonably deems necessary to ensure that such Subsidiary continues to be bound as a Borrower under the Loan Documents after such change and (2) if all or any portion of the equity interests of such Subsidiary are subject to Liens created under the Collateral Documents prior to such change, the same percentage of the equity interests of such Subsidiary shall continue to be subject to Liens under the Collateral Documents after such change, with such Liens being of equal or higher priority than before such change and, if perfected prior to such change, perfected, and (b) Company and its Subsidiaries shall have complied with the provisions of the Collateral Documents applicable to such change of legal form; and
(vi) Covanta Energy India (Balaji) Ltd. may sell approximately 372,860 shares held by it on the Closing Date in the Madurai Project entity, Madurai Power Corp. Pvt. Ltd. (the "MADURAI PROJECT ENTITY"), to the Indian local partner with respect to the Madurai Project for approximately $575,000 (it being understood that such amount is the approximate Dollar equivalent of an estimate as of November 15, 2003 of the proceeds from such sale, and thus may change based on fluctuations in currency exchange rates), to the extent such local partner requires such sale so that such local partner will hold, after giving effect to such sale, up to 25.2% of the issued and outstanding Capital Stock of the Madurai Project Entity.
6.8 TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES.
Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any holder of 5% or more of any class of equity Securities of Company or with any Affiliate of Company or of any such holder, on terms that are less favorable to Company or that Subsidiary, as the case may be, than those that might be obtained at the time from Persons who are not such a holder or Affiliate; provided that the foregoing restriction shall not apply to (i) any Indebtedness permitted under subsection 6.1 among Company and its Subsidiaries or among Subsidiaries of Company, (ii) reasonable and customary salaries and fees paid to current officers and members of the Governing Bodies of Company and its Subsidiaries, provided that such salary and fee arrangements are entered into at arms' length and on terms that are no less favorable to Company or that Subsidiary, as the case may be, than those that would have been obtained at the relevant time from Persons who are not such a holder or Affiliate, (iii) reasonable and customary indemnifications and insurance arrangements for the benefit of Persons that are officers or members of the Governing Bodies of Company and its Subsidiaries on or after the Closing Date, whether such Persons are current or former officers or members at the time such indemnifications or arrangements are entered into, provided that such indemnifications and arrangements are entered into at arms' length and on terms that are no less favorable to Company or that Subsidiary, as the case may be, than those that would have been obtained at the relevant time from Persons who are not such a holder or Affiliate, (iv) the Employment Agreements in effect on the Closing Date, and any other employment agreements or benefits arrangements entered into on or after the Closing Date by Company and its Subsidiaries with employees at arms' length and on terms that are no less favorable to Company or that Subsidiary, as the case
may be, than those that would have been obtained at the relevant time from Persons who are not such a holder or Affiliate, (v) payments (and other transactions) made in accordance with the terms of the Management Services and Reimbursement Agreement, the Tax Sharing Agreement and the other Related Agreements, (vi) transactions occurring on the Closing Date and described on Schedule 6.8 annexed hereto, (vii) services rendered by certain Subsidiaries for the benefit of other Subsidiaries pursuant to the terms of the intercompany service agreements described on Schedule 6.8 annexed hereto, and (viii) the payment of reasonable legal fees and expenses incurred by law firms in which Directors of Company are affiliated for services rendered to Company and its Subsidiaries.
6.9 RESTRICTION ON LEASES.
Borrowers shall not, and shall not permit any of their Subsidiaries to, become liable in any way, whether directly by assignment or as a guarantor or other surety, for the obligations of the lessee under any lease for equipment (other than intercompany leases between Borrowers), unless, immediately after giving effect to the incurrence of liability with respect to such lease, the aggregate amount of all rents paid or payable by Company and its Subsidiaries on a consolidated basis under all such leases entered into after the Closing Date at the time in effect during the then current Fiscal Year or any future period of 12 consecutive calendar months shall not exceed $1,000,000; provided, however, that this subsection 6.9 shall not prohibit Company or its Subsidiaries from incurring obligations pursuant to the renewal, extension or replacement of leases in effect at the Closing Date so long as such leases as renewed, extended or replaced are not more disadvantageous in any material respect to Company and its Subsidiaries and the Lenders than the leases so renewed, extended or replaced.
6.10 [INTENTIONALLY OMITTED].
6.11 CONDUCT OF BUSINESS.
From and after the Closing Date, Company shall not, and shall not permit any of its Subsidiaries, to engage in any business other than the energy and waste management businesses of the type in which they are engaged on the Closing Date and other activities to the extent incidental or reasonably related to such businesses.
6.12 AMENDMENTS TO RELATED AGREEMENTS, DEBT DOCUMENTATION AND ORGANIZATIONAL DOCUMENTS.
Company shall not, and shall not permit any of its
Subsidiaries to, amend, restate, modify or waive (or make any payment consistent
with an amendment, restatement, modification or waiver of) any material
provision of any of (i) the Management Services and Reimbursement Agreement or
the other Related Agreements (other than the CPIH Term Loan Documents), in each
case if the effect of such amendment, restatement, modification or waiver,
together with all other amendments, restatements, modifications or waivers made,
(a) is to impose additional material obligations on, or confer additional
material rights to the holders thereof (or to other obligees with respect
thereto) against, Company or any of its Subsidiaries, or (b) is otherwise
adverse to the interests of the Lenders in a manner deemed material in the
judgment of Administrative Agent or Requisite Lenders so notifying Agent or
Company; (ii) the
Organizational Documents of Company and its Subsidiaries, if the effect of such
amendment, restatement, modification or waiver, together with all other
amendments, restatements, modifications or waivers made, is adverse to the
interests of the Lenders in a manner deemed material in the judgment of
Administrative Agent or Requisite Lenders; (iii) the Subordinated Indebtedness,
if the effect thereof would be to (a) change to earlier dates the dates on which
any payments of principal or interest are due thereon, (b) increase the interest
rate, or the portion thereof payable on a current basis in cash, applicable
thereto, (c) change any event of default with respect thereto in any manner
adverse to the interests of the Lenders, (d) change the redemption, prepayment
or defeasance provisions thereof, (e) change the subordination provisions
thereof (or of any guaranty thereof or intercreditor arrangement with respect
thereto), (f) change any collateral therefor (other than to release such
collateral), or (g) change any other term or provision thereof, if the effect of
such change, together with all other changes made, is to increase materially the
obligations of the obligor thereunder or to confer any additional rights on the
holders of such Indebtedness that would be materially adverse (in the judgment
of Administrative Agent or Requisite Lenders so notifying Agent or Company) to
Company, Administrative Agent or the Lenders, without the prior written consent
of Requisite Lenders; (iv) the principal documents relating to Non Recourse Debt
with respect to a Project if such amendment, restatement, modification or
waiver, together with all other amendments, restatements, modifications and
waivers made, would reasonably be expected to have a Material Adverse Effect or
(v) the CPIH Term Loan Documents, unless (a) the terms of the CPIH Term Loan
Documents as so amended, restated, modified or waived are not more
disadvantageous to Company and its Subsidiaries and the Lenders (in a manner
deemed material by Administrative Agent or Requisite Lenders so notifying
Administrative Agent or Company) than the CPIH Term Loan Documents in effect on
the Closing Date (it being understood and agreed that any amendment,
restatement, modification or waiver having the effect of increasing the amount
of, or reducing, delaying or waiving any otherwise required reduction in the
amount of, any commitment to extend loans under the CPIH Term Loan Documents
shall be deemed to be more disadvantageous for purposes of this clause (a)
without further notice or other action by Agent or Requisite Lenders), (b) the
aggregate amount of Indebtedness outstanding, and additional commitments to
extend credit, if any, under the CPIH Term Loan Documents as so amended,
restated, modified or waived, do not exceed the aggregate amount of the
commitments to extend credit in effect under the CPIH Term Loan Documents on the
Closing Date, (c) the obligations under (and the Liens securing) such CPIH Term
Loan Documents as so amended, restated, modified or waived are subject to the
Intercreditor Agreement on terms substantively identical to the terms applicable
to the obligations in effect under the CPIH Term Loan Documents on the Closing
Date, and (d) Company provides to Administrative Agent reasonable prior advance
written notice of such proposed amendment, restatement, modification or waiver
and copies of all material contracts or other agreements being entered into in
connection therewith).
6.13 END OF FISCAL YEARS; FISCAL QUARTERS.
Company shall not, and shall not permit any of its Subsidiaries to change the end of the Fiscal Year of Company or any of its Subsidiaries from December 31st.
6.14 AMENDMENT TO PENSION PLANS.
Borrowers shall not amend or modify any Pension Plan after the Closing Date in any manner that results in or would reasonably be expected to result in an increase in the amount of unfunded benefit liabilities (as such unfunded benefit liabilities are determined in accordance with subsection 4.11D hereof), unless such amendment or modification is required under applicable law.
SECTION 7. EVENTS OF DEFAULT
If any of the following conditions or events ("EVENT OF DEFAULT") shall occur:
7.1 FAILURE TO MAKE PAYMENTS WHEN DUE.
Failure by Borrowers to pay any installment of principal of any Loan when due, whether at stated maturity, by acceleration, by notice of voluntary prepayment, by mandatory prepayment or otherwise; failure by Borrowers to pay any Mandatory Payment when due; or failure by Borrowers to pay any interest or any fee or any other amount due under this Agreement within five days after the date due; or
7.2 DEFAULT IN OTHER AGREEMENTS.
(i) Failure of Company or any of its Subsidiaries (other
than the Magellan Subsidiary) to pay when due any principal of or
interest on or any other amount payable in respect of (a) the CPIH Term
Loan Documents, (b) Management Services and Reimbursement Agreement,
(c) any one or more items of Indebtedness (other than Indebtedness
referred to in subsection 7.1 or in clause (a) above or clause (d)
below) or Contingent Obligations or Performance Guaranties, in each
case in the principal amount of $2,000,000 or more, individually or in
the aggregate, or (d) Non Recourse Debt of Subsidiaries of Company in
the principal amount of $6,000,000 or more, individually or in the
aggregate (provided that Non Recourse Debt incurred in connection with
one or more Projects to which less than $2,000,000 in the aggregate of
the operating income of Company and its Subsidiaries (on a consolidated
basis) is attributable for the 12-month period immediately preceding
the failure to pay such interest, principal or other amounts shall not
be considered Indebtedness or Non Recourse Debt solely for purposes of
this clause (d)), in each case beyond the end of any grace period
provided therefor; or
(ii) breach or default by Company or any of its
Subsidiaries with respect to any other material term of (a) the CPIH
Term Loan Documents or Management Services and Reimbursement Agreement,
(b) one or more items of Indebtedness (other than Non Recourse Debt) or
Contingent Obligations in the individual or aggregate principal amounts
referred to in clause (i) above or (c) any loan agreement, mortgage,
indenture or other agreement relating to such item(s) of Indebtedness
or Contingent Obligation(s), if the effect of such breach or default is
to cause, or to permit the holder or holders of that Indebtedness or
Contingent Obligation(s) (or a trustee on behalf of such holder or
holders) to cause, that Indebtedness or Contingent Obligation(s) to
become or be declared
due and payable prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be (upon the giving or receiving of notice, lapse of time, both, or otherwise), or
7.3 BREACH OF CERTAIN COVENANTS.
Failure of any Borrower to perform or comply with any term or condition contained in subsection 2.5 or 5.2 or Section 6 of this Agreement; or
7.4 BREACH OF WARRANTY.
Any representation, warranty, certification or other statement made by CEA or Company or any of its Subsidiaries in any Loan Document or in any statement or certificate at any time given by CEA or Company or any of its Subsidiaries in writing pursuant hereto or thereto or in connection herewith or therewith shall be false in any material respect on the date as of which made; or
7.5 OTHER DEFAULTS UNDER LOAN DOCUMENTS.
Any Loan Party shall default in the performance of or
compliance with any term contained in this Agreement or any of the other Loan
Documents, other than any such term referred to in any other subsection of this
Section 7, and such default shall not have been remedied or waived within 30
days after the earlier of (i) an Officer of Company or such Loan Party becoming
aware of such default or (ii) receipt by Company or such Loan Party of notice
from Administrative Agent or any Lender of such default; or
7.6 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) A court having jurisdiction in the premises shall enter a decree or order for relief in respect of CEA or Company or any of its Subsidiaries (other than the Magellan Subsidiary) in an involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, which decree or order is not stayed; or any other similar relief shall be granted under any applicable federal or state law; or
(ii) an involuntary case shall be commenced against CEA or Company or any of its Subsidiaries (other than the Magellan Subsidiary) under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over CEA or Company or any of its Subsidiaries (other than the Magellan Subsidiary), or over all or a substantial part of its property, shall have been entered; or there shall have occurred the involuntary appointment of an interim receiver, trustee or other custodian of CEA or Company or any of its Subsidiaries (other than the Magellan Subsidiary) for all or a substantial part of its property; or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of CEA or Company or any of its Subsidiaries (other than the
Magellan Subsidiary), and any such event described in this clause (ii) shall continue for 60 days unless dismissed, bonded or discharged; or
7.7 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) CEA or Company or any of its Subsidiaries (other than the Magellan Subsidiary) shall have an order for relief entered with respect to it or commence a voluntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or CEA or Company or any of its Subsidiaries (other than the Magellan Subsidiary) shall make any assignment for the benefit of creditors; or
(ii) CEA or Company or any of its Subsidiaries (other than the Magellan Subsidiary) shall be unable, or shall fail generally, or shall admit in writing its inability, to pay its debts as such debts become due; or the Governing Body of Company or any of its Subsidiaries (other than the Magellan Subsidiary) (or any committee thereof) shall adopt any resolution or otherwise authorize any action to approve any of the actions referred to in clause (i) above or this clause (ii); or
7.8 JUDGMENTS AND ATTACHMENTS.
Any money judgment, writ or warrant of attachment or similar process involving (a) in any individual case an amount in excess of $2,000,000 or (b) in the aggregate at any time an amount in excess of $2,000,000 (in either case not adequately covered by insurance as to which a solvent and unaffiliated insurance company has acknowledged coverage) shall be entered or filed against Company or any of its Subsidiaries (other than the Magellan Subsidiary) or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of 60 days (or in any event later than five days prior to the date of any proposed sale thereunder); or
7.9 DISSOLUTION.
Any order, judgment or decree shall be entered against CEA or Company or any of its Material Subsidiaries decreeing the dissolution or split up of CEA or Company or that Subsidiary and such order shall remain undischarged or unstayed for a period in excess of 30 days; or
7.10 EMPLOYEE BENEFIT PLANS.
There shall occur one or more ERISA Events that individually or in the aggregate result in or are reasonably be expected to result in liability of Company, any of its Subsidiaries or any of their respective ERISA Affiliates in excess of $5,000,000 during the term of this Agreement; or there shall exist as of January 1 of any year (based on, with respect to each Pension Plan, the actuarial valuation as of such January 1, or if no such valuation was performed as of such January 1 but was performed within the preceding 12 months, the date as of which the
valuation was so performed), unfunded benefit liabilities (as defined in Section
4001(a)(18) of ERISA, but determined on the basis of the actuarial assumptions
used for funding purposes with respect to a Pension Plan (as set forth in
Section 412 of the Internal Revenue Code, including where applicable, the
interest rate assumptions set forth in Section 412(l) of the Internal Revenue
Code)), in the aggregate for all Pension Plans (excluding for purposes of such
computation any Pension Plans with respect to which assets exceed benefit
liabilities), in excess of (i) $20,000,000 in the event the Assumptions are
generally as favorable as the Assumptions used in the 2003 plan year valuations
with respect to such Pension Plans, or (ii) $26,000,000 in the event the
Assumptions are generally less favorable than the Assumptions used in the 2003
plan year valuations with respect to such Pension Plans; or
7.11 MATERIAL ADVERSE EFFECT.
Any event or change shall occur after the date of this Agreement that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect; or
7.12 CHANGE IN CONTROL.
A Change in Control shall have occurred; or
7.13 INVALIDITY OF INTERCREDITOR AGREEMENT; FAILURE OF SECURITY; REPUDIATION OF OBLIGATIONS.
At any time after the execution and delivery thereof, (i) the Intercreditor Agreement for any reason, other than the satisfaction in full of all Obligations, shall cease to be in full force and effect (other than in accordance with its terms) or shall be declared to be null and void, (ii) any Collateral Document (with respect to the obligations thereunder of CEA, Company or any Material Subsidiary of Company) shall cease to be in full force and effect (other than by reason of a release of Collateral thereunder in accordance with the terms hereof or thereof, the satisfaction in full of the Secured Obligations or any other termination of such Collateral Document in accordance with the terms hereof or thereof) or shall be declared null and void, or Collateral Agent shall not have or shall cease to have a valid and perfected Lien (with the priority set forth in subsection 4.15A) in any Collateral purported to be covered thereby, in each case for any reason other than the failure of Collateral Agent or any Lender to take any action within its control, or (iii) any Loan Party shall contest the validity or enforceability of any Loan Document in writing or deny in writing that it has any further liability, including with respect to future advances by Lenders, under any Loan Document to which it is a party; or
7.14 TERMINATION OF MATERIAL CONTRACTS.
Any Material Contract of the type described in clause (i) of the definition of Material Contract, or any power purchase agreement to which Company or any of its Subsidiaries is a party relating to a Project (other than the power purchase agreement relating to the Magellan Project unless the termination of such agreement would result in a Material Adverse Effect), shall be terminated by Company or any of its Subsidiaries or by the counterparty or counterparties thereto, if such termination is enforceable by Company, such Subsidiary, or such counterparty or counterparties, unless such Material Contract is replaced within ten (10) days after such termination with a contract that is reasonably acceptable to the
Requisite Lenders and on substantially the same economic terms as the relevant Material Contract being terminated; or
7.15 DEFAULT UNDER EXISTING IPP INTERNATIONAL PROJECT GUARANTIES.
Failure by Covanta or any of its Subsidiaries to pay when due any principal of, interest on or any other amount payable in respect of any Existing IPP International Project Guaranty (other than the failure to pay amounts that are being actively contested by such Person in good faith by appropriate proceedings, so long as the beneficiary of such Existing IPP International Project Guaranty has not exercised any remedy against Company or any of its Subsidiaries thereunder, under applicable law or otherwise as a result of such failure:
THEN (i) upon the occurrence of any Event of Default described in subsection 7.6 or 7.7, each of (a) the unpaid principal amount of and accrued interest on the Loans, and (b) all other Obligations shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by each Borrower, and the obligation of each Lender to make any Loan shall thereupon terminate, and (ii) upon the occurrence and during the continuation of any other Event of Default, Administrative Agent shall, upon the written request or with the written consent of Requisite Lenders, by written notice to Borrowers, declare all or any portion of the amounts described in clauses (a) through (c) above to be, and the same shall forthwith become, immediately due and payable, and the obligation of each Lender to make any Loan hereunder shall thereupon terminate.
Any amounts described in clause (b) above, when received by Collateral Agent, shall be held by Collateral Agent pursuant to the terms of the Security Agreement and shall be applied as therein provided (subject to the terms of the Intercreditor Agreement).
Further upon the occurrence and during the continuance of any Event of Default, subject to the Intercreditor Agreement, Administrative Agent and Collateral Agent may, and upon the written request of Requisite Lenders shall, (i) exercise all rights and remedies of Administrative Agent or Collateral Agent set forth in any of the Collateral Documents, in addition to all rights and remedies allowed by, the United States and of any state thereof, including but not limited to the UCC, and (ii) revoke Borrowers' rights to use cash collateral in which Administrative Agent or Collateral Agent has an interest. The enumeration of the foregoing rights and remedies is not intended to be exhaustive and the exercise of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative and not alternative.
SECTION 8. ADMINISTRATIVE AGENT
8.1 APPOINTMENT.
A. APPOINTMENT OF ADMINISTRATIVE AGENT. Deutsche Bank is hereby appointed Administrative Agent under the other Loan Documents. Each Lender hereby authorizes each Agent to act as its agent in accordance with the terms of this Agreement and the other Loan Documents. Each Agent agrees to act upon the express conditions contained in this Agreement and the other Loan Documents, as applicable. The provisions of this Section 8 are solely for the
benefit of Administrative Agent and Lenders and no Loan Party shall have rights as a third party beneficiary of any of the provisions thereof. In performing its functions and duties under this Agreement, Administrative Agent (other than as provided in subsection 2.1C) shall act solely as an agent of Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for any Borrower or any other Loan Party.
B. CONTROL. Each Lender and Administrative Agent hereby appoint each other Lender as agent for the purpose of perfecting Collateral Agent's security interest in assets that, in accordance with the UCC, can be perfected by possession or control.
8.2 POWERS AND DUTIES; GENERAL IMMUNITY.
A. POWERS; DUTIES SPECIFIED. Each Lender irrevocably authorizes each Agent to take such action on such Lender's behalf and to exercise such powers, rights and remedies hereunder and under the other Loan Documents as are specifically delegated or granted to such Agent by the terms hereof and thereof, together with such powers, rights and remedies as are reasonably incidental thereto. An Agent shall have only those duties and responsibilities that are expressly specified in this Agreement and the other Loan Documents. Each Agent may exercise such powers, rights and remedies and perform such duties by or through its Affiliates, agents or employees. No Agent shall have, by reason of this Agreement or any of the other Loan Documents, a fiduciary relationship in respect of any Lender or any Borrower; and nothing in this Agreement or any of the other Loan Documents, expressed or implied, is intended to or shall be so construed as to impose upon Agent any obligations in respect of this Agreement or any of the other Loan Documents except as expressly set forth herein or therein.
B. NO RESPONSIBILITY FOR CERTAIN MATTERS. No Agent shall be responsible to any Lender for the execution, effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement or any other Loan Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by such Agent to Lenders or by or on behalf of any Borrower to such Agent or any Lender in connection with the Loan Documents and the transactions contemplated thereby or for the financial condition or business affairs of Borrowers or any other Person liable for the payment of any Obligations, nor shall such Agent be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Loan Documents or as to the use of the proceeds of the Loans or as to the existence or possible existence of any Event of Default or Potential Event of Default. Anything contained in this Agreement to the contrary notwithstanding, Administrative Agent shall not have any liability arising from confirmations of the amount of outstanding Loans or the component amounts thereof.
C. EXCULPATORY PROVISIONS. No Agent or any of its officers, directors, employees or agents shall be liable to Lenders for any action taken or omitted by such Agent under or in connection with any of the Loan Documents except to the extent caused by such Agent's gross negligence or willful misconduct. An Agent shall be entitled to refrain from any act or the taking of any action (including the failure to take an action) in connection with this
Agreement or any of the other Loan Documents or from the exercise of any power, discretion or authority vested in it hereunder or thereunder unless and until such Agent shall have received instructions in respect thereof from Requisite Lenders (or such other Lenders as may be required to give such instructions under subsection 9.6) and, upon receipt of such instructions from Requisite Lenders (or such other Lenders, as the case may be), such Agent shall be entitled to act or (where so instructed) refrain from acting, or to exercise such power, discretion or authority, in accordance with such instructions. Without prejudice to the generality of the foregoing, (i) each Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for Company and its Subsidiaries), accountants, experts and other professional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever against Agent as a result of such Agent acting or (where so instructed) refraining from acting under this Agreement or any of the other Loan Documents in accordance with the instructions of Requisite Lenders (or such other Lenders as may be required to give such instructions under subsection 9.6).
D. ADMINISTRATIVE AGENT ENTITLED TO ACT AS LENDER. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, Agent in its individual capacity as a Lender hereunder. With respect to its participation in the Loans, Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not performing the duties and functions delegated to it hereunder, and the term "Lender" or "Lenders" or any similar term shall, unless the context clearly otherwise indicates, include each Agent in its individual capacity. An Agent and its Affiliates may accept deposits from, lend money to, acquire equity interests in and generally engage in any kind of commercial banking, investment banking, trust, financial advisory or other business with Company or any of its Affiliates as if it were not performing the duties specified herein, and may accept fees and other consideration from any Borrower for services in connection with this Agreement and otherwise without having to account for the same to Lenders. The Lenders acknowledge that, pursuant to such activities, Deutsche Bank or its respective Affiliates may receive information regarding a Borrower or its Affiliates (including information that may be subject to confidentiality obligations in favor of such Borrower or such Affiliate) and acknowledge that Administrative Agent shall be under no obligation to provide such information to them.
8.3 INDEPENDENT INVESTIGATION BY LENDERS; NO RESPONSIBILITY FOR APPRAISAL OF CREDITWORTHINESS.
Each Lender agrees that it has made its own independent investigation of the financial condition and affairs of Company and its Subsidiaries in connection with the making of the Loans hereunder and that it has made and shall continue to make its own appraisal of the creditworthiness of Company and its Subsidiaries. No Agent shall have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of Lenders or to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter, and no Agent shall have any responsibility with respect to the accuracy of or the completeness of any information provided to Lenders.
8.4 RIGHT TO INDEMNITY.
Each Lender, in proportion to its Pro Rata Share, severally agrees to indemnify Administrative Agent and the officers, directors, employees, agents, attorneys, professional advisors and affiliates of each of them to the extent that any such Person shall not have been reimbursed by Borrowers, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements and fees and disbursements of any financial advisor engaged by Administrative Agent) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against Agent or and other such Persons in exercising the powers, rights and remedies of Agent or performing duties of Agent hereunder or under the other Loan Documents or otherwise in its capacity as Agent in any way relating to or arising out of this Agreement or the other Loan Documents; provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of Agent resulting from such Agent's gross negligence or willful misconduct. If any indemnity furnished to Agent or any other such Person for any purpose shall, in the opinion of such Agent, be insufficient or become impaired, such Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished.
8.5 SUCCESSOR AGENTS.
Agent may resign at any time by giving 30 days' prior written notice thereof to Lenders and Borrowers, and Agent may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to Borrowers and Agent and signed by Requisite Lenders. Upon any such notice of resignation or any such removal, Requisite Lenders shall have the right, upon five Business Days' notice to Borrowers, to appoint a successor to Agent. If, within 30 days after the date of the Agent's notice of its intention to resign, no successor to Agent shall have been so appointed by Requisite Lenders, then the Agent's resignation shall become effective on such date without the need for any further action and the Lenders shall be deemed to have been appointed as successor to Agent hereunder and shall thereafter perform all the duties of the Agent hereunder and/or under any other Loan Document until the appointment by Requisite Lenders of some other successor to Agent. Upon the acceptance of any appointment as Agent hereunder by a successor to Agent, including, the Lenders as successor to Agent (who shall be deemed to have accepted such appointment pursuant to this subsection 8.5), such successor to Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Agent and the retiring or removed Agent shall be discharged from its duties and obligations under this Agreement. After any retiring or removed Agent's resignation or removal hereunder as Agent, the provisions of this Section 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement and the other Loan Documents.
8.6 COLLATERAL DOCUMENTS AND INTERCREDITOR AGREEMENT.
Each Lender hereby further authorizes Administrative Agent, on behalf of and for the benefit of Lenders, to enter into and to be the agent for and representative of Lenders under the Intercreditor Agreement, and each Lender agrees to be bound by the terms of the
Intercreditor Agreement; provided that Administrative Agent shall not (i) enter into or consent to any material amendment, modification, termination or waiver of any provision contained in the Intercreditor Agreement or (ii) release any Collateral (except as otherwise expressly permitted or required pursuant to the terms of this Agreement or the applicable Collateral Document), in each case without the prior consent of Requisite Lenders (or, if required pursuant to subsection 9.6, all Lenders). Anything contained in any of the Loan Documents to the contrary notwithstanding, each Borrower, Administrative Agent and each Lender hereby agree that (1) no Lender shall have any right individually to realize upon any of the Collateral under any Collateral Document, it being understood and agreed that all powers, rights and remedies under the Collateral Documents may be exercised solely by Collateral Agent for the benefit of Lenders in accordance with the terms thereof and of the Intercreditor Agreement, and (2) in the event of a foreclosure by Collateral Agent on any of the Collateral pursuant to a public or private sale, Administrative Agent or any Lender may be the purchaser of any or all of such Collateral at any such sale and Administrative Agent, as agent for and representative of Lenders (but not any Lender or Lenders in its or their respective individual capacities unless Requisite Lenders shall otherwise agree in writing) shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Obligations as a credit on account of the purchase price for any Collateral payable by Administrative Agent at such sale.
8.7 ADMINISTRATIVE AGENT MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to Company or any of the Subsidiaries of Company, Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether Administrative Agent shall have made any demand on Borrowers) shall be entitled and empowered, by intervention in such proceeding or otherwise
(i) to file and prove a claim for the whole amount of principal and interest owing and unpaid in respect of the Loans and any other Obligations that are owing and unpaid and to file such other papers or documents as may be necessary or advisable in order to have the claims of Lenders and Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of Lenders and Administrative Agent and their agents and counsel and all other amounts due Lenders and Administrative Agent under subsections 2.3 and 9.2) allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to Administrative Agent and, in the event that Administrative Agent shall consent to the making of such payments directly to Lenders, to pay to Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of Administrative Agent and
their agents and counsel, and any other amounts due Administrative Agent under subsections 2.3 and 9.2.
Nothing herein contained shall be deemed to authorize Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lenders or to authorize Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.
SECTION 9. MISCELLANEOUS
9.1 SUCCESSORS AND ASSIGNS; ASSIGNMENTS AND PARTICIPATIONS IN LOANS.
A. GENERAL. This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of Lenders (it being understood that Lenders' rights of assignment are subject to the further provisions of this subsection 9.1). Neither any Borrower's rights or obligations hereunder nor any interest therein may be assigned or delegated by any Borrower without the prior written consent of all Lenders (and any attempted assignment or transfer by any Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Affiliates of each of Administrative Agent and Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. No Lender shall be permitted to assign any portion of its rights or obligations hereunder to any other Person if, upon giving effect to such assignment, Borrowers would be obligated to pay such assignee amounts greater than the amounts, if any, which Borrowers would have been required to pay such assigning Lender under subsection 2.6 or 2.7 if such assignment did not occur.
B. ASSIGNMENTS.
(i) Amounts and Terms of Assignments. Any Lender may
assign to one or more Eligible Assignees all or any portion of its
rights and obligations under this Agreement; provided that (a) except
(1) in the case of an assignment of the entire remaining amount of the
assigning Lender's rights and obligations under this Agreement or (2)
in the case of an assignment to a Lender or an Affiliate of a Lender or
an Approved Fund of a Lender, the aggregate amount of the Loan Exposure
of the assigning Lender and the assignee subject to each such
assignment shall not be less than $5,000,000, determined as of the date
the Assignment Agreement with respect to such assignment is delivered
to Administrative Agent or, if a trade date is specified in the
Assignment Agreement, as of such trade date, unless Administrative
Agent otherwise consents, such consent not to be unreasonably withheld
or delayed, (b) the parties to each assignment shall execute and
deliver to Administrative Agent an Assignment Agreement, together with
a processing and recordation fee of $5,000, and the Eligible Assignee,
if it shall not be a Lender prior to such assignment, shall deliver to
Administrative Agent a counterpart to the Intercreditor Agreement and
such documents and information reasonably requested by Administrative
Agent, including such forms, certificates or other evidence, if any,
with respect to United States federal income tax withholding matters as the assignee under such Assignment Agreement may be required to deliver to Administrative Agent pursuant to subsection 2.6B(iii), and no such assignment shall be effective unless and until such Assignment Agreement is accepted by Administrative Agent and recorded in the Register as provided in subsection 9.1B(ii), (c) except in the case of an assignment to another Lender, Administrative Agent shall have consented thereto (which consent shall not be unreasonably withheld or delayed (it being understood that nothing in this clause (c) shall affect the requirement that the relevant assignee meet the requirements in the definition of Eligible Assignee and any other applicable requirements of this Agreement)), and (d) no assignment by a Defaulting Lender shall be permitted unless such Defaulting Lender or assignee has funded such Defaulting Lender's defaulted funding obligations with respect to Loans. Upon such execution, delivery and consent, from and after the effective date specified in such Assignment Agreement, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment Agreement, shall have the rights and obligations of a Lender hereunder, (y) the assignee shall be a party to the Intercreditor Agreement and, to the extent that rights and obligations have been assigned to it pursuant to such Assignment Agreement, shall have the rights and obligations of a "Creditor Party" thereunder (as such term is defined in the Intercreditor Agreement) and (z) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment Agreement, relinquish its rights (other than any rights which survive the termination of this Agreement under subsection 9.9B) and be released from its obligations under this Agreement and the Intercreditor Agreement (and, in the case of an Assignment Agreement covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of subsection 9.9). The assigning Lender of any Commitments and/or Loans shall, upon the effectiveness of such assignment or as promptly thereafter as practicable, surrender its Notes, if any, to Administrative Agent for cancellation, and thereupon new Notes shall, if so requested by the assignee and/or the assigning Lender in accordance with subsection 2.1D, be issued to the assignee and/or to the assigning Lender, substantially in the form of Exhibit I annexed hereto, as the case may be, with appropriate insertions, to reflect the new outstanding Loans, as the case may be, of the assignee and/or the assigning Lender. Other than as provided in subsection 9.5, any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection 9.1B shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection 9.1C. Except as otherwise provided in this subsection 9.1, no Lender shall, as between Borrowers and such Lender, or as between Administrative Agent and such Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment or transfer of, or any granting of participations in, all or any part of its Commitments or Loans, or the other Obligations owed to such Lender.
(ii) Acceptance by Administrative Agent; Recordation in Register. Upon its receipt of an Assignment Agreement executed by an assigning Lender and an assignee representing that it is an Eligible Assignee and the processing and recordation fee referred to in subsection 9.1B(i) and any forms, certificates or other evidence with respect
to United States federal income tax withholding matters that such assignee may be required to deliver to Administrative Agent pursuant to subsection 2.6B(iii), Administrative Agent shall, if Administrative Agent has consented to the assignment evidenced thereby (to the extent such consent is required pursuant to subsection 9.1B(i)), (a) accept such Assignment Agreement by executing a counterpart thereof as provided therein (which acceptance shall evidence any required consent of Administrative Agent to such assignment), (b) record the information contained therein in the Register, and (c) give prompt notice thereof to Company. Administrative Agent shall maintain a copy of each Assignment Agreement delivered to and accepted by it as provided in this subsection 9.1B(ii).
C. PARTICIPATIONS. Any Lender may, without the consent of, or notice to, any Borrower or Administrative Agent, sell participations to one or more Persons (other than a natural Person or any Borrower or any of its Affiliates) in all or a portion of such Lender's rights and/or obligations under this Agreement; provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) Borrowers, Administrative Agent and Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver directly affecting (i) the extension of the Maturity Date or (ii) a reduction of the principal amount of or the rate of interest payable on any Loan allocated to such participation. Subject to the further provisions of this subsection 9.1C, each Borrower agrees that each Participant shall be entitled to the benefits of subsection 2.6 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection 9.1B. To the extent permitted by law, each Participant also shall be entitled to the benefits of subsection 9.4 as though it were a Lender; provided that such Participant agrees to be subject to subsection 9.5 as though it were a Lender. A Participant shall not be entitled to receive any greater payment under subsection 2.6 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant unless the sale of the participation to such Participant is made with Borrowers' prior written consent. A Participant that would be a Non-US Lender if it were a Lender shall not be entitled to the benefits of subsection 2.6.
D. PLEDGES AND ASSIGNMENTS. Any Lender may at any time pledge or assign a security interest in all or any portion of its Loans, and the other Obligations owed to such Lender, to secure obligations of such Lender, including any pledge or assignment to secure obligations to any Federal Reserve Bank; provided that (i) no Lender shall be relieved of any of its obligations hereunder as a result of any such assignment or pledge and (ii) in no event shall any assignee or pledgee be considered to be a "Lender" or be entitled to require the assigning Lender to take or omit to take any action hereunder.
E. INFORMATION. Each Lender may furnish any information concerning Company and its Subsidiaries in the possession of that Lender from time to time to assignees and participants (including prospective assignees and participants), subject to subsection 9.20.
F. AGREEMENTS OF LENDERS. Each Lender listed on the signature pages hereof hereby agrees, and each Lender that becomes a party hereto pursuant to an Assignment Agreement shall be deemed to agree, (i) that it is an Eligible Assignee described in clause (i) of the definition thereof; (ii) that it has experience and expertise in the making of or purchasing loans such as the Loans; and (iii) that it will make or purchase Loans for its own account in the ordinary course of its business and without a view to distribution of such Loans within the meaning of the Securities Act or the Exchange Act or other federal securities laws (it being understood that, subject to the provisions of this subsection 9.1, the disposition of such Loans or any interests therein shall at all times remain within its exclusive control).
G. ASSIGNMENTS TO FEDERAL RESERVE BANKS. In addition to the assignments and participations permitted under the foregoing provisions of this subsection 9.1, any Lender may assign and pledge all or any portion of the Loans or any other Obligations owed to such Lender hereunder, and its one or more Notes to any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any operating circular issued by such Federal Reserve Bank; provided that (i) no Lender shall, as between Company and such Lender, be relieved of any of its obligations hereunder as a result of any such assignment and pledge and (ii) in no event shall such Federal Reserve Bank be considered to be a "Lender" or be entitled to require the assigning Lender to take or omit to take any action hereunder.
9.2 EXPENSES.
Whether or not the transactions contemplated hereby shall be consummated, Borrowers agree, jointly and severally, to pay promptly (i) all the actual and reasonable costs and expenses of negotiation, preparation and execution of the Loan Documents and any consents, amendments, waivers or other modifications thereto; (ii) all the costs of furnishing all opinions by counsel for Loan Parties (including any opinions requested by Administrative Agent or Lenders as to any legal matters arising hereunder) and of Borrowers' performance of and compliance with all agreements and conditions on their part to be performed or complied with under this Agreement and the other Loan Documents including with respect to confirming compliance with environmental and insurance requirements; (iii) the reasonable fees, expenses and disbursements of advisors and counsel to Administrative Agent (including O'Melveny & Myers LLP, counsel to Administrative Agent, and Ernst & Young Corporate Finance LLC) in connection with the negotiation, preparation, execution, interpretation or administration of the Loan Documents and any proposed consents, amendments, waivers or other modifications thereto and any other documents or matters requested by any Borrower; (iv) all the actual costs and reasonable expenses of creating and perfecting Liens in favor of Collateral Agent on behalf of Secured Parties pursuant to any Collateral Document, including filing and recording fees, expenses and taxes, stamp or documentary taxes, search fees, title insurance premiums, and reasonable fees, expenses and disbursements of counsel to Administrative Agent and Collateral Agent and of counsel providing any opinions that Administrative Agent or Requisite Lenders may request in respect of the Collateral Documents or the Liens created pursuant thereto; (v) all the actual costs and reasonable fees, expenses and disbursements of any auditors, accountants or appraisers and any environmental or other consultants, advisors and agents (including Ernst & Young Corporate Finance LLC) employed or retained by Administrative Agent or their counsel; (vi) all the actual costs and reasonable expenses incurred in connection with the custody or
preservation of any of the Collateral; (vii) all other actual and reasonable costs and expenses incurred by Administrative Agent in connection with the syndication of the Commitments; and (viii) all the actual costs and reasonable expenses, including reasonable attorneys' fees and costs of settlement, incurred by Administrative Agent and Lenders in enforcing any Obligations of or in collecting any payments due from any Loan Party hereunder or under the other Loan Documents (including in connection with the sale of, collection from, or other realization upon any of the Collateral) or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a "work-out" or pursuant to the Chapter 11 Cases or any other insolvency or bankruptcy proceedings.
9.3 INDEMNITY.
In addition to the payment of expenses pursuant to subsection 9.2, whether or not the transactions contemplated hereby shall be consummated, Borrowers jointly and severally agree to defend (subject to Indemnitees' selection of counsel), indemnify, pay and hold harmless Administrative Agent and Lenders, and the officers, directors, employees, agents and affiliates of Administrative Agent and Lenders (collectively called the "INDEMNITEES"), from and against any and all Indemnified Liabilities (as hereinafter defined); provided that Borrowers shall not have any obligation to any Indemnitee hereunder with respect to any Indemnified Liabilities to the extent such Indemnified Liabilities arise solely from the gross negligence or willful misconduct of that Indemnitee as determined by a final judgment of a court of competent jurisdiction.
As used herein, "INDEMNIFIED LIABILITIES" means, collectively, any and all liabilities, obligations, losses, damages (including natural resource damages), penalties, actions, judgments, suits, claims (including Environmental Claims), costs (including the costs of any investigation, study, sampling, testing, abatement, cleanup, removal, remediation or other response action necessary to remove, remediate, clean up or abate any Hazardous Materials Activity), expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened by any Person, whether or not any such Indemnitee shall be designated as a party or a potential party thereto, and any fees or expenses incurred by Indemnitees in enforcing this indemnity), whether direct, indirect or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or regulations and Environmental Laws), on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of (i) this Agreement or the other Loan Documents and the Chapter 11 Cases (it being understood that such Indemnified Liabilities arising out of the Chapter 11 Cases shall apply solely to Indemnitiees in their capacities as Administrative Agent and Lenders or officers, directors, employees, agents and affiliates of Administrative Agent or Lenders, and not in any other capacities) or the transactions contemplated hereby or thereby (including Lenders' agreement to make the Loans hereunder or the use or intended use of the proceeds thereof, or any enforcement of any of the Loan Documents (including any sale of, collection from, or other realization upon any of the Collateral), (ii) the statements contained in the commitment letter delivered by any Lender with respect thereto, or (iii) any Environmental Claim or any Hazardous Materials Activity relating to or arising from, directly or indirectly, any past or present activity, operation, land ownership, or practice of Company or any of its Subsidiaries.
To the extent that the undertakings to defend, indemnify, pay and hold harmless set forth in this subsection 9.3 may be unenforceable in whole or in part because they are violative of any law or public policy, Borrowers shall contribute the maximum portion that they are permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of them.
9.4 SET-OFF.
In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence and during the continuance of any Event of Default each Lender is
hereby authorized by each Borrower at any time or from time to time, without
notice to any Borrower or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, including Indebtedness evidenced by certificates
of deposit, whether matured or unmatured, but not including trust accounts) and
any other Indebtedness at any time held or owing by that Lender or any Affiliate
of such Lender to or for the credit or the account of any Borrower or any other
Loan Party against and on account of the obligations and liabilities of any
Borrower or any other Loan Party to that Lender (or any Affiliate of such
Lender) or to any other Lender (or any Affiliate of any other Lender) under this
Agreement, and the other Loan Documents, including all claims of any nature or
description arising out of or connected with this Agreement, or any other Loan
Document, irrespective of whether or not (i) Agent or any Lender shall have made
any demand hereunder or (ii) the principal of or the interest on the Loans or
any other amounts due hereunder shall have become due and payable pursuant to
Section 7 and although said obligations and liabilities, or any of them, may be
contingent or unmatured. Each Borrower hereby further grants to Administrative
Agent and each Lender a security interest in all deposits and accounts
maintained with Administrative Agent or such Lender as security for the
Obligations.
9.5 RATABLE SHARING.
A. Subject at all times to their obligations under the Intercreditor Agreement, Lenders hereby agree among themselves that if any of them shall, whether by voluntary or involuntary payment or mandatory payment (other than a payment or prepayment of Loans made and applied in accordance with the terms of this Agreement), by realization upon security, through the exercise of any right of set-off or banker's lien, by counterclaim or cross action or by the enforcement of any right under the Loan Documents or otherwise, or as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code, receive payment or reduction of a proportion of the aggregate amount of principal, interest, amounts payable in respect of Loans, fees and other amounts then due and owing to that Lender hereunder or under the other Loan Documents with respect to Obligations (collectively, the "AGGREGATE AMOUNTS DUE" to such Lender) that is greater than the proportion received by any other Lender in respect of the Aggregate Amounts Due to such other Lender, then the Lender receiving such proportionately greater payment shall, unless such proportionately greater payment is required by the terms of this Agreement (i) notify Administrative Agent and each other Lender of the receipt of such payment and (ii) apply a portion of such payment to purchase assignments (which it shall be deemed to have purchased from each seller of an assignment simultaneously upon the receipt by such seller of its portion of such payment) of the Aggregate Amounts Due to the other Lenders
so that all such recoveries of Aggregate Amounts Due shall be shared by all Lenders in proportion to the Aggregate Amounts Due to them; provided that if all or part of such proportionately greater payment received by such purchasing Lender is thereafter recovered from such Lender, those purchases shall be rescinded and the purchase prices paid for such assignments shall be returned to such purchasing Lender ratably to the extent of such recovery, but without interest. Each Borrower expressly consents to the foregoing arrangement and agrees that any purchaser of an assignment so purchased may exercise any and all rights of a Lender as to such assignment as fully as if that Lender had complied with the provisions of subsection 9.1B with respect to such assignment. In order to further evidence such assignment (and without prejudice to the effectiveness of the assignment provisions set forth above), each purchasing Lender and each selling Lender agree to enter into an assignment agreement at the request of a selling Lender or a purchasing Lender, as the case may be, in form and substance reasonably satisfactory to each such Lender and to Administrative Agent.
B. COSTS OF COLLECTION. Notwithstanding anything in this
subsection 9.5 to the contrary, in the event any one or more Lenders (for
purposes of this subsection 9.5B, "ENFORCING LENDERS") receives any amounts that
are subject to the sharing provisions of subsection 9.5A as a result of such
Enforcing Lender or Enforcing Lenders, but not Administrative Agent or all
Lenders, commencing Proceedings to recover such amounts, no Lender that is not
an Enforcing Lender shall be entitled to the benefits of subsection 9.5A with
respect to the amounts received by such Enforcing Lenders (i) unless and until
such Lender has paid its Pro Rata Share of the out-of-pocket costs and expenses
(including legal fees and expenses of counsel to such Enforcing Lenders)
incurred by such Enforcing Lenders in connection with such Proceedings or (ii)
in any greater amount at any time than such Lender would be entitled to receive
under such subsections if all Lenders paid their Pro Rata Shares of such costs
and expenses.
9.6 AMENDMENTS AND WAIVERS.
No amendment, modification, termination or waiver of any provision of this Agreement or of the Notes or the Loan Documents, and no consent to any departure by any Borrower therefrom, shall in any event be effective without the written concurrence of Requisite Lenders; provided that no such amendment, modification, termination, waiver or consent shall, without the consent of: (a) each Lender with Obligations directly affected (whose consent shall be required for any such amendment, modification, termination or waiver in addition to that of Requisite Lenders) (1) reduce the principal amount of any Loan, (2) increase the maximum aggregate amount of such Lender's Commitment, (3) postpone the scheduled final maturity date of the Loans, (4) postpone the date on which any interest or any fees are payable, (5) decrease the interest rate borne by any Loan (other than any waiver of any increase in the interest rate applicable to any of the Loans pursuant to subsection 2.2C) or the amount of any fees payable hereunder, or (6) change in any manner or waive the provisions contained in subsection 7.1; (b) each Lender, (1) change in any manner the definition of "Pro Rata Share" or the definition of "Requisite Lenders" (except for any changes resulting solely from an increase in Commitments approved by Requisite Lenders), (2) change in any manner any provision of this Agreement that, by its terms, expressly requires the approval or concurrence of all Lenders, (3) release any Lien granted in favor of Administrative Agent or Collateral Agent with respect to all or substantially all of the Collateral (except that such Lien may be released on all or substantially all Collateral to the extent such release is required in connection with an Asset Sale or Asset Sales permitted
under this Agreement), or release any substantial portion of Borrowers from their obligations under this Agreement (except that all or any number of Borrowers may be released from such obligations to the extent such release is required in connection with an Asset Sale or Asset Sales permitted under this Agreement), or (4) change in any manner or waive the provisions contained in subsection 9.6; (c) Administrative Agent, change in any manner the definition of "Eligible Assignee"; and (d) Administrative Agent, affect the rights or duties of Administrative Agent (in its capacity as Administrative Agent) under this Agreement or any other Loan Document.
In addition, (i) no amendment, modification, termination or waiver of any provision of any Note shall be effective without the written concurrence of the Lender which is the holder of that Note; and (ii) no amendment, modification, termination or waiver of any provision of Section 9 or of any other provision of this Agreement which, by its terms, expressly requires the approval or concurrence of Administrative Agent shall be effective without the written concurrence of Administrative Agent, as the case may be. Administrative Agent may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of that Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on any Borrower or Borrowers in any case shall entitle any Borrower or Borrowers to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this subsection 9.6 shall be binding upon each Lender at the time outstanding, each future Lender and, if signed by Borrowers, on Borrowers. Administrative Agent agrees that promptly after the effectiveness of any amendment, termination, supplement, waiver or other modification of this Agreement it shall provide, or cause to be provided, to each Lender a copy thereof to the extent such a copy is available to Administrative Agent.
9.7 INDEPENDENCE OF COVENANTS.
All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of an Event of Default or Potential Event of Default if such action is taken or condition exists.
9.8 NOTICES; EFFECTIVENESS OF SIGNATURES.
Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served, or sent by telefacsimile or United States mail or courier service or (subject to the following paragraphs in this subsection 9.8) electronic mail and shall be deemed to have been given (a) when delivered in person or by courier service, (b) upon receipt of telefacsimile in complete and legible form, (c) three Business Days after depositing it in the United States mail with postage prepaid and properly addressed, or (d) in the case of communications delivered by electronic mail to the extent provided in the following paragraph, as provided pursuant to such paragraph; provided that notices to Administrative Agent shall not be effective until received. For the purposes hereof, the address of each party hereto shall be as set forth under such party's name on the signature pages hereof or (i) as to Company and Administrative Agent, such other address as
shall be designated by such Person in a written notice delivered to the other parties hereto and (ii) as to each other party, such other address as shall be designated by such party in a written notice delivered to Administrative Agent.
Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by Administrative Agent, provided that the foregoing shall not apply to notices to any Lender pursuant to Section 2 hereof if such Lender has notified Administrative Agent that it is incapable of receiving notices under such Section by electronic communication. Administrative Agent or any Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.
Loan Documents and notices under the Loan Documents may be transmitted and/or signed by telefacsimile. The effectiveness of any such documents and signatures shall, subject to applicable law, have the same force and effect as an original copy with manual signatures and shall be binding on all Loan Parties, Administrative Agent and Lenders. Administrative Agent may also require that any such documents and signature be confirmed by a manually-signed copy thereof; provided, however, that the failure to request or deliver any such manually-signed copy shall not affect the effectiveness of any facsimile document or signature.
9.9 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
A. All representations, warranties and agreements made herein or in any other Loan Document shall survive the execution and delivery of this Agreement and the making of the Loans hereunder.
B. Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of Borrowers set forth in subsections 2.6, 9.2, 9.3, 9.4, 9.19 and 9.20 and the agreements of Lenders set forth in subsections 8.2C, 8.4, 9.5, 9.19 and 9.20 shall survive the payment of the Loans, and the termination of this Agreement (and the benefits to a Lender of such agreements of Borrowers shall survive such Lender's ceasing to be a party hereto pursuant to subsection 9.1B).
9.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of Agent or any Lender in the exercise of any power, right or privilege hereunder or under any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement and the other Loan Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available.
9.11 MARSHALLING; PAYMENTS SET ASIDE.
Neither Agent nor any Lender shall be under any obligation to marshal any assets in favor of Company or any other party or against or in payment of any or all of the Obligations. To the extent that Company makes a payment or payments to Administrative Agent or Lenders (or to Administrative Agent for the benefit of Lenders), or Administrative Agent or Lenders enforce any security interests or exercise their rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, any other state or federal law, common law or any equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor or related thereto, shall be revived and continued in full force and effect as if such payment or payments had not been made or such enforcement or setoff had not occurred.
9.12 SEVERABILITY.
In case any provision in or obligation under this Agreement or the Notes shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
9.13 OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS; DAMAGE WAIVER.
The obligations of Lenders hereunder are several and no Lender shall be responsible for the obligations or Commitments of any other Lender hereunder. Nothing contained herein or in any other Loan Document, and no action taken by Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders, or Lenders and Company, as a partnership, an association, a Joint Venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out of this Agreement and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose.
To the extent permitted by law, each Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with or as a result of this Agreement, any other Loan Document, any transaction contemplated by the Loan Documents, any Loan or the use of proceeds thereof.
9.14 RELEASE OF SECURITY INTEREST .
Upon the proposed sale or other disposition of any Collateral that is permitted by this Agreement and the Intercreditor Agreement or, subject to the Intercreditor Agreement, to which Requisite Lenders have otherwise consented, for which a Loan Party desires to obtain a security interest release from Collateral Agent, such Loan Party shall deliver to Administrative Agent and Collateral Agent an Officer's Certificate (i) stating that the Collateral subject to such
disposition is being sold or otherwise disposed of in compliance with the terms hereof and of the Loan Documents and (ii) specifying the Collateral being sold or otherwise disposed of in the proposed transaction. Upon the receipt of such Officer's Certificate, Collateral Agent shall, at such Loan Party's expense, so long as Collateral Agent (a) believes in good faith that the facts stated in such Officer's Certificate are true and correct and (b), if the sale or other disposition of such item of Collateral constitutes an Asset Sale, shall have received evidence satisfactory to it that arrangements satisfactory to it have been made for delivery of the Net Asset Sale Proceeds if and as required by subsection 2.4, execute and deliver such releases of its security interest in such Collateral, as may be reasonably requested by such Loan Party. In the event of any conflict or inconsistency between this subsection 9.14 and the terms of the Intercreditor Agreement, the terms of the Intercreditor Agreement shall prevail.
9.15 HEADINGS.
Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect.
9.16 APPLICABLE LAW.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER OR ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THAT WOULD REQUIRE APPLICATION OF ANOTHER LAW.
9.17 CONSTRUCTION OF AGREEMENT.
Each of the parties hereto acknowledges that it has been represented by counsel in the negotiation and documentation of the terms of this Agreement, that it has had full and fair opportunity to review and revise the terms of this Agreement, and that this Agreement has been drafted jointly by all of the parties hereto. Accordingly, each of the parties hereto acknowledges and agrees that the terms of this Agreement shall not be construed against or in favor of another party.
9.18 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK (AS ANY AGENT, AGENTS, LENDER OR LENDERS BRINGING SUCH ACTION MAY ELECT IN ITS OR THEIR SOLE DISCRETION). BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH BORROWER, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS (AND SUBMITS TO) GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO SUCH BORROWER AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SUBSECTION 9.8;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH BORROWER IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST SUCH BORROWER IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 9.18
RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO
THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW
SECTION 5-1402 OR OTHERWISE.
9.19 WAIVER OF JURY TRIAL.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR
THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this
waiver is intended to be all-encompassing of any and all disputes that may be
filed in any court and that relate to the subject matter of this transaction,
including contract claims, tort claims, breach of duty claims and all other
common law and statutory claims. Each party hereto acknowledges that this waiver
is a material inducement to enter into a business relationship, that each has
already relied on this waiver in entering into this Agreement, and that each
will continue to rely on this waiver in their related future dealings. Each
party hereto further warrants and represents that it has reviewed this waiver
with its legal counsel and that it knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING
(OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION
9.19 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.
9.20 CONFIDENTIALITY.
Each Lender shall hold all non-public information obtained pursuant to the requirements of this Agreement that has been identified as confidential by Company in accordance with such Lender's customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices, it being understood and agreed by Borrowers that in any event a Lender may make (a) disclosures to Affiliates and professional advisors of such Lender, (b) disclosures reasonably required by (i) any bona fide assignee, transferee or participant in connection with the contemplated assignment or transfer by such Lender of any Loans or any participations therein, or (ii) any direct or indirect contractual counterparties in swap agreements or such contractual counterparties' professional advisors provided that such assignee, transferee, participant, contractual counterparty or professional advisor agrees to keep such information confidential to the same extent required of Lenders hereunder, (c) disclosures to any court or tribunal (whether or not pursuant to subpoena) in connection with any action arising out of or related to this Agreement, or (d) disclosures required or requested by any Government Authority or representative thereof or pursuant to legal process; provided that, unless specifically prohibited by applicable law or court order, each Lender shall notify Company of any request by any Government Authority or representative thereof (other than any such request in connection with any examination of such Lender by such Government Authority) for disclosure of any such non-public information prior to disclosure of such information; and provided, further that in no event shall any Lender be obligated or required to return any materials furnished by Company or any of its Subsidiaries.
Notwithstanding anything herein to the contrary, information required to be treated as confidential by reason of the foregoing shall not include, and Administrative Agent, each Lender and the respective Affiliates of each of the foregoing (and the respective partners, directors, officers, employees, agents, advisors and other representatives of each of the foregoing and their respective Affiliates) (collectively, the "LENDER PARTIES") may disclose to any and all Persons, without limitation of any kind, (x) any information with respect to United States federal and state income tax treatment and United States federal income tax structure of the transactions contemplated hereby and any facts that may be relevant to understanding such tax treatment, which facts shall not include for this purpose the names of the parties or any other Person named herein, or information that would permit identification of the parties or such other Persons, or any pricing terms or other non-public business or financial information that is unrelated to such tax treatment or facts, and (y) all materials of any kind (including opinions or other tax analyses) relating to such tax treatment or facts that are provided to any of the Lender Parties.
9.21 RELEASE OF PARTIES; WAIVERS.
A. Each Borrower, on behalf of itself and each of its Subsidiaries (collectively, the "RELEASORS"), hereby releases, remises, acquits and forever discharges each Agent, each Lender (in its capacity as a Lender hereunder and as a lender, collateral agent or depository and
in any other capacity under or in connection with the Prepetition Credit Documents or the DIP Credit Documents), each other Prepetition Lender and DIP Lender (in its capacity as a lender, collateral agent or depository and in any other capacity under or in connection with the Prepetition Credit Documents or the DIP Credit Documents), and each of their respective employees, agents, representatives, consultants, attorneys, fiduciaries, servants, officers, directors, partners, predecessors, successors and assigns, subsidiary corporations, parent corporations, related corporate divisions, participants and assigns (all of the foregoing hereinafter called the "RELEASED PARTIES"), from any and all actions and causes of action, judgments, executions, suits, debts, claims, demands, liabilities, obligations, setoffs, recoupments, counterclaims, defenses, damages and expenses of any and every character, known or unknown, suspected or unsuspected, direct and/or indirect, at law or in equity, of whatsoever kind or nature, whether heretofore or hereafter arising, for or because of any matter or things done, omitted or suffered to be done by any of the Released Parties prior to and including the date of execution hereof, and in any way directly or indirectly arising out of or in any way connected to this Agreement, any of the other Loan Documents, the Prepetition Credit Documents, and DIP Credit Documents or the administration or enforcement of any of such documents (all of the foregoing hereinafter called the "RELEASED MATTERS"). Each Releasor acknowledges that the agreements in this subsection are intended to be in full satisfaction of all or any alleged injuries or damages suffered or incurred by such Releasor arising in connection with the Released Matters and constitute a complete waiver of any right of setoff or recoupment, counterclaim or defense of any nature whatsoever which arose prior to the Closing Date to payment or performance of the Obligations. Each Releasor represents and warrants that it has no knowledge of any claim by it against the Released Parties or of any facts, or acts or omissions of the Released Parties which on the date hereof would be the basis of a claim by the Releasors against the Released Parties which is not released hereby. Each Releasor represents and warrants that it has not purported to transfer, assign, pledge or otherwise convey any of its right, title or interest in any Released Matter to any other person or entity and that the foregoing constitutes a full and complete release of all Released Matters. Releasors have granted this release freely, and voluntarily and without duress.
9.22 NO FIDUCIARY DUTY.
No Agent nor any Lender has or shall have, by reason of this Agreement or any of the Loan Documents, a fiduciary relationship in respect of, or a fiduciary duty to, any Borrower, Borrowers, any other Loan Party or Loan Parties, and the relationship between Administrative Agent and Lenders, on one hand, and each Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor.
9.23 COUNTERPARTS; EFFECTIVENESS.
This Agreement and any amendments, waivers, consents or supplements hereto or in connection herewith may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This
Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto.
9.24 NO THIRD PARTY BENEFICIARIES
Nothing in this Agreement, express or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Indemnitees and Released Parties related to Administrative Agent, and Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.
[Remainder of page intentionally left blank]
BORROWERS:
COVANTA POWER INTERNATIONAL
HOLDINGS, INC., as a Borrower
By: _______________________________________
Name: Ashish D. Sarkar
Title: Authorized Officer
Notice Address for Borrower:
c/o Covanta Energy Corporation
40 Lane Road
Fairfield, NJ 07007
Attn: Timothy J. Simpson
COVANTA POWER DEVELOPMENT, INC.
COVANTA POWER DEVELOPMENT OF
BOLIVIA, INC.
COVANTA WASTE TO ENERGY OF ITALY, INC.
OPI QUEZON, INC., as Borrowers
By: _______________________________________
Name: Anthony Orlando
Title: Authorized Officer
Notice Address for Borrower:
c/o Covanta Energy Corporation
40 Lane Road
Fairfield, NJ 07007
Attn: Timothy J. Simpson
DEUTSCHE BANK AG, NEW YORK BRANCH
By: DB Service New Jersey, Inc.
as Administrative Agent and Lender
By: _______________________________________
Name:
Title:
By: _______________________________________
Name:
Title:
Notice Address:
Attention: Troy Ennico
Deutsche Bank AG, New York Branch
60 Wall Street
New York, NY 10005
EXECUTION COPY
EXHIBIT 10.30
MANAGEMENT SERVICES & REIMBURSEMENT AGREEMENT
THIS MANAGEMENT SERVICES & REIMBURSEMENT AGREEMENT (hereinafter, this "Agreement") is made and entered into as of March 10, 2004, among Covanta Energy Corporation, a Delaware corporation ("Covanta"), Covanta Energy Group, Inc., a Delaware corporation ("CEG"), Covanta Projects, Inc., a Delaware corporation ("CPI", and together with Covanta and CEG, the "Covanta Entities"), and Covanta Power International Holdings, Inc., a Delaware corporation ("CPIH"), and certain of its domestic subsidiaries listed on Schedule A hereto (together with CPIH, the "CPIH Entities"). Each of Covanta, the other Covanta Entities, CPIH and the other CPIH Entities are sometimes referred to herein individually as a "Party" and collectively as the "Parties".
RECITALS
WHEREAS, on April 1, 2002, the Parties filed in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court") voluntary petitions for reorganization under chapter 11 of the Bankruptcy Code and the Parties currently continue to operate their businesses as debtors-in-possession pursuant to sections 1107 and 1108 of the Bankruptcy Code;
WHEREAS, the Parties have proposed, their creditors have approved, and the Bankruptcy Court has confirmed a plan of reorganization (the "Plan");
WHEREAS, pursuant to the Plan, all entities that own or operate businesses located outside of the United States (the "International Businesses") will be direct or indirect subsidiaries of CPIH;
WHEREAS, CPIH will continue to be controlled by the Covanta Entities, which will be rendering certain management services to CPIH, contingent upon the covenants set forth herein;
WHEREAS, Bank One issued the letters of credit listed on Schedule B (except for the Haripur Letter of Credit, defined below) hereto under the Credit Agreement dated as of March 10, 2004 (as amended, supplemented or otherwise modified from time to time, the "Second Lien Credit Facility"), among the Covanta Entities, certain other domestic subsidiaries of Covanta, the lenders from time to time party thereto (the "Lenders"), and Bank One, NA, as administrative agent for the Lenders (the "Credit Agreement Letters of Credit");
WHEREAS, Citibank, N.A. ("Citibank") has issued the letter of credit listed on Schedule B hereto dated February 28, 1999 to secure an obligation of NEPC Consortium, Ltd. ("NEPC") (an entity in which a Covanta subsidiary has an ownership interest) under certain Haripur power project documents (the "Haripur Letter of Credit", together with the Credit Agreement Letters of Credit, the "Letters of Credit"), and Citibank has provided the Haripur Letter of Credit to Covanta, upon the terms and subject to the conditions specified therein,
including, but not limited to, Covanta's obligation to repay amounts funded under the Haripur Letter of Credit;
WHEREAS, the Covanta Entities have also made certain Parent Guarantees on behalf of certain subsidiaries of CPIH as listed on Schedule C hereto (the "Parent Guarantees");
WHEREAS, during such time as CPIH's financials will be consolidated with those of Covanta for external financial reporting, Covanta, as a reporting company under the Securities Exchange Act of 1934, as amended ("Exchange Act"), will incur certain expenses for or on behalf of the CPIH Entities;
WHEREAS, the CPIH Entities will enter into the CPIH Credit Agreement among CPIH, certain of its subsidiaries, the lenders from time to time party thereto, Bank of America, N.A. as administrative agent thereunder, and Deutsche Bank Securities, Inc., as documentation agent thereunder (as amended, supplemented or otherwise modified from time to time, the "CPIH Credit Agreement") and the CPIH Revolver Credit Agreement as such document is defined in the CPIH Credit Agreement (together with the CPIH Credit Agreement, the "CPIH Credit Facilities");
WHEREAS, the CPIH Entities, the Covanta Entities and certain other parties have entered into the Intercreditor Agreement as such document is defined in the CPIH Credit Agreement (the "Intercreditor Agreement");
WHEREAS, Covanta will be engaging auditors, tax advisors, lawyers and other such professionals in connection with the performance of obligations under the Second Lien Credit Facility and other exit financing facilities; and
WHEREAS, CPIH intends to pay or reimburse the applicable Covanta Entity for draws of the Letters of Credit, performance under the Parent Guarantees, and services provided or expenses incurred for or on behalf of the CPIH Entities, in compliance with the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the Parties agree as follows:
1. Management and Services. Covanta shall provide or cause to be provided, subject to payment as and when due of its invoices, to CPIH and the other CPIH entities the following administrative and management services (collectively the "Services") for the duration of this Agreement:
(a) The operational services listed and described on Schedule 1(a), attached hereto (the "Operational Services");
(b) The human resource services listed and described on Schedule
1(b), attached hereto (the "HR Services");
(c) The risk management services listed and described on Schedule
1(c), attached hereto (the "Risk Management Services");
(d) The legal services listed and described on Schedule 1(d), attached hereto (the "Legal Services");
(e) The information technology services listed and described on Schedule 1(e), attached hereto (the "IT Services");
(f) The accounting, treasury and cash management services listed and described on Schedule 1(f), attached hereto (the "Accounting/Treasury Services");
(g) Assisting with the preparation and submission of filings required by any applicable regulatory body;
(h) At CPIH's request or as reasonably necessary to prevent a draw on a Letter of Credit or a call on a Parent Guarantee, obtaining the services of and coordinating with professional advisors in connection with CPIH's business and any possible asset sales, including, without limitation, accountants, auditors, attorneys, brokers, advisors, consultants and banks; and
(i) Such other functions as may be requested and paid for by CPIH, from time to time, and agreed to by Covanta.
2. Flat Service Fee. So long as neither the Covanta Entities nor the CPIH Entities have terminated this Agreement pursuant to Section 10 hereof, CPIH shall pay a flat service fee of $1,000,000 per annum (the "Flat Fee"), for all management Services rendered by employees of the Covanta Entities, as identified in Schedules 1(a) through 1(f) as services covered by the Flat Fee, but excluding management Services provided by certain excluded employees that are ex-patriots or that devote 100% of their time to the International Businesses, as listed on Schedule 2, and excluding certain hourly services described on Schedule 1(a). Such Flat Fee shall be invoiced to, and payable by, CPIH in advance, on a monthly basis. To the extent the CPIH Entities' service requirements are substantially reduced as the result of assets being sold or otherwise (including, without limitation, as a result of a reduction in overhead and other needs), or increased as a result of unforeseen conditions, Covanta and CPIH will negotiate in good faith to adjust the Flat Fee to more accurately reflect the actual costs of the Covanta Entities.
3. Reimbursable Service Expenses of Covanta. Subject to reasonable documentation (including a reasonable description of the Services provided and the time spent therefor) and so long as neither the Covanta Entities nor the CPIH Entities have terminated this Agreement pursuant to Section 10 hereof, CPIH shall also reimburse Covanta for the actual costs and expenses (including third-party costs and expenses actually incurred) incurred by Covanta or another Covanta Entity in providing the Services ("Service Costs") that are not covered by the Flat Fee, including the costs of the employees on Schedule 2, and the hourly services listed on Schedule 1(a). Furthermore, CPIH shall reimburse Covanta for the actual costs of the following operating expenses incurred by Covanta or another Covanta Entity in connection with its operations for the benefit of the CPIH Entities or the International Businesses (collectively, with the Flat Fee and the Service Costs, the "Reimbursable Expenses"):
(a) All audit, legal, appraisal, engineering (excluding engineering audits), environmental, financial and other professional and/or consulting services
incurred by Covanta, including third-party costs in the ordinary course of business;
(b) All audit, legal, appraisal, engineering, environmental, financial and other professional and/or consulting services incurred by Covanta, including third-party costs, not in the ordinary course of business that are incurred only after approval from either the CEO or president of CPIH;
(c) All cash insurance premiums and related costs, expenses and indemnities (including deductibles and self-insured retentions incurred by Covanta on behalf of and in consultation with CPIH) incurred by Covanta on behalf of and in consultation with CPIH, whether originating from Covanta's corporate master programs, international project documents, or joint venture partners;
(d) Fees and expenses of CPIH meetings and travel of employees, directors and officers of Covanta or CPIH, including outside directors' fees, when traveling for the International Businesses;
(e) Temporary employees or independent contractors engaged to assist on CPIH matters, to the extent requested by CPIH, or to the extent required in Covanta's reasonable judgment, with consent from CPIH;
(f) Fees and expenses payable to regulatory agencies or rating agencies, if any;
(g) Printing fees associated with notices or other communications to holders of CPIH's securities and registration statements, reports, proxy statements and other reports filed with the Securities and Exchange Commission, if any;
(h) Income, sales, use, franchise and other taxes paid to Federal, state and local governments by Covanta on behalf of CPIH following tax deconsolidation from Covanta; and
(i) All such other out-of-pocket expenditures directly related to CPIH's activities and reasonably determined to be appropriate and advisable, and approved in advance, by the CEO or the president of CPIH.
4. Reimbursement.
(a) In exchange for performing the Services for CPIH, CPIH shall pay Covanta the Flat Fee monthly in advance, and reimburse Covanta on a monthly basis for all other Reimbursable Expenses that the Covanta Entities incur during the immediately preceding month. Covanta shall submit to CPIH for payment each month an invoice for amounts due pursuant to Sections 2 and 3 herein (an "Invoice"). All Invoices shall specify the Services provided to CPIH under the Agreement and the Reimbursable Expenses incurred for the invoiced month and the costs of the Covanta Entities therefor. CPIH shall pay all Invoices within thirty (30) Business Days of receipt thereof; provided that any amounts subject to
reasonable dispute shall be deemed payable only once such dispute is resolved pursuant to mutual agreement or section 16.
(b) In the event a payment shall be made by a Covanta Entity to reimburse any draw of the Letters of Credit or in the event a Covanta Entity shall have performed or made a payment under any Parent Guarantee, the CPIH Entities shall, subject to the Intercreditor Agreement and the CPIH Credit Facilities, reimburse such Covanta Entity for such payment and for any costs incurred in making such payment or performing under the Parent Guarantee, within thirty (30) calendar days after such Covanta Entity's first demand.
(c) Any payment made to a Covanta Entity for any Reimbursable Expense shall be deemed an operating expense of CPIH and thus necessarily senior to all other CPIH debt obligations. Any payment to be made to a Covanta Entity under this Agreement shall be made in lawful currency of the United States of America in immediately available funds to such account as such Covanta Entity shall direct by reasonable advance written notice to the CPIH Entities. In the event that the expiration of any time prior hereunder occurs on a day which is not a Business Day, the expiration of such time period shall be deemed to occur on the next succeeding Business Day with the same force and effect if such time period expired on the scheduled expiration date. A "Business Day" shall mean any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York or is a day on which banking institutions located in the State of New York are authorized or required by law or other governmental action to close. Payments to be made to a Covanta Entity under Section 4(b) of this Agreement that are not paid when due shall bear interest, payable on demand, subject to the terms of the Intercreditor Agreement, for each day from and including the day on which such payment became due until but not including the day paid at a rate per annum equal to the lower of (i) the sum of the prime rate of interest publicly announced by Bank of America from time to time as its prime rate plus 2.00% in each case for such day and (ii) the highest rate permitted by applicable law. Subject to the terms of the Intercreditor Agreement, any and all payments and other obligations of any CPIH Entity pursuant to this Agreement shall be senior and joint and several obligations of all CPIH Entities.
(d) Subject to the terms of the Intercreditor Agreement, any of the reimbursement obligations of the CPIH Entities under this Agreement are made without prejudice to any subrogation rights that the Covanta Entities may have against the CPIH Entities or any of the International Businesses.
5. Budget. If so requested by either Covanta or CPIH, Covanta and CPIH shall convene on a semi-annual basis to consult regarding the scope of Services to be provided and the costs of such Services. Covanta shall use its reasonable best efforts to provide CPIH with a non-binding cost budget for such Services, within fifteen (15) business days prior to such meeting.
6. [Intentionally Omitted]
7. Independent Contractor. Covanta shall serve as an independent contractor and the CPIH Entities shall have no control over the retention, terms of employment or discharge of Covanta's employees, provided that all third parties or other outside advisors and consultants shall be reasonably acceptable to CPIH, and further provided that the persons listed on Schedule 2 hereto shall not be considered Covanta employees for the purposes of this Section 7.
8. Covenants. The Covanta Entities and the CPIH Entities shall at all times while this Agreement is in effect observe and abide by the covenants contained in this Section 8, and in particular, any deviation from or waiver of any CPIH or Covanta negative covenant shall require the written consent of the other Party.
(a) (i) None of the CPIH Entities shall amend, supplement, modify or grant any release or relinquishment of any rights under, any contract, commitment, undertaking or other binding obligation relating to a Parent Guarantee or a Letter of Credit, unless such amendment, supplement, modification, release or relinquishment grants a full release of the relevant Covanta Entity from its Parent Guarantee, or cancels, undrawn, all Letters of Credit related to such amended documents or does not, in Covanta's reasonable judgment, impose any additional obligations on any of the Covanta Entities or otherwise impair their respective rights thereunder.
(ii) None of the Covanta Entities shall amend, supplement, modify or grant any release or relinquishment of any rights under, any Parent Guarantee or Letters of Credit or any other contracts, commitments, undertakings or other binding obligations relating thereto unless such amendment, supplement, modification, release or relinquishment does not, in CPIH's reasonable judgment, impose any additional obligations on any of the CPIH Entities or otherwise impair their respective rights.
(b) The CPIH Entities shall provide periodic reports no less often than monthly with respect to the plans and process proposed to be undertaken to sell the International Businesses of CPIH subsidiaries, individually or as a whole.
(c) The CPIH Entities shall not voluntarily sell, liquidate or
otherwise transfer all or any significant or material portion of
any International Business or subsidiary that is the primary
obligor of an undertaking which is the subject of a Parent
Guarantee or Letter of Credit unless the terms of any such sale,
liquidation or transfer provide that (i) the applicable Covanta
Entities be fully released from all existing and future liability
and obligations under all applicable Parent Guarantees directly
related to the assets being sold, liquidated or otherwise
transferred, (ii) all Letters of Credit directly related to the
assets being sold, liquidated or otherwise transferred be
returned, undrawn, and (iii) all amounts due Covanta pursuant to
Section 4(b) of this Agreement (subject to the terms of the
Intercreditor Agreement) shall be paid by the closing or
completion of such sale, liquidation or transfer.
(d) The CPIH Entities shall notify Covanta, promptly upon receiving notice or otherwise becoming aware of an imminent draw upon a Letter of Credit or a payment under a Parent Guarantee.
(e) The CPIH Entities shall adhere to and comply with Covanta's policy of business conduct as in effect from time to time as interpreted by Covanta and administered by its General Counsel (the "Business Conduct Policy"), including (at Covanta's sole expense) performing such training of their respective officers, directors, employees and agents as is reasonably directed by Covanta or is reasonably necessary to assure such adherence and compliance. The CPIH Entities shall refer to Covanta all matters relating to enforcement of the Business Conduct Policy by their officers, directors, employees and agents and Covanta shall have the sole right to determine and administer any disciplinary actions to be taken under the Business Conduct Policy with respect to such officers, directors, employees and agents; provided that the termination of any CPIH officer or director as a result of such officer breaching this Section 8(e) or Section 8(f) shall require the affirmative vote of a majority of Covanta's then-existing board members.
(f) The CPIH Entities shall adhere to and comply with all other applicable policies of Covanta as in effect from time to time (so long as such policies are set forth in writing and made available to CPIH, with reasonable prior notice in order to permit adequate implementation by CPIH), including, without limitation:
(1) Covanta Disclosure Controls and Policies (and in furtherance of such policies, CPIH's Chief Executive, Chief Financial and Chief Legal Officers shall be disclosure principals and shall conform to the rules and deadlines imposed on individuals so designated);
(2) Covanta's policy regarding the anonymous reporting of complaints to its Audit Committee;
(3) Covanta's policy regarding the retention of auditors to perform non-audit services;
(4) Covanta's policy on the Foreign Corrupt Practices Act of 1977 (as modified by The Omnibus Trade and Competitiveness Act of 1988);
(5) Covanta's policies regarding financial reporting and controls;
(6) Covanta's policies pursuant to 15 C.F.R. 205 (or any successor provision thereto) regarding up-the-ladder reporting by internal and external attorneys and the recognition that (i) the general counsel of Covanta is the relevant chief legal officer for the purposes of any provision of such policies involving reporting to (or action by) a chief legal officer; (ii) the chief executive officer of Covanta is the relevant chief executive officer for the purposes of any provision of such policies involving reporting to (or action by) a chief executive officer, and (iii) that if Covanta creates a
Qualified Legal Compliance Committee ("QLCC"), as defined in and pursuant to 15 C.F.R. 205.2 (or any successor provision thereto), that QLCC shall be the relevant QLCC of CPIH for the purposes of any provision of such policies involving reporting to (or action by) a QLCC; and
(7) such other policies of general application to Covanta as Covanta's Board of Directors determines to implement from time to time, so long as such policies are applicable to Covanta and are made available in writing to CPIH.
(g) No CPIH Entity shall change its accounting policies, fiscal year or auditors without Covanta's written consent. Furthermore, Covanta shall select and manage the auditor of the CPIH Entities, as part of the Services provided under this Agreement, to facilitate consolidated financial reporting.
(h) CPIH shall ensure that its Chief Executive Officer and Chief Financial Officer are subject to Covanta's senior executive code of ethics.
(i) At Covanta's sole cost, CPIH's executive officers shall attend meetings of Covanta's Board of Directors and Audit Committee as reasonably requested by such Board of Directors or Audit Committee, as the case may be, and promptly provide such materials as such Board or Directors or Audit Committee may request.
(j) No CPIH Entity shall take any action that binds, or purports to bind, any Covanta Entity under any contract, commitment, undertaking or other binding obligation.
(k) No Covanta Entity shall take any action that binds, or purports to bind, any CPIH Entity under any contract, commitment, undertaking or other binding obligation.
(l) Each CPIH Entity shall timely file its own forms, reports and documents with any governmental entities as required by applicable laws and regulations and shall timely provide all information that is reasonably requested in advance by Covanta in order for the Covanta Entities to complete their financial statements and complete and file, in a timely manner, any forms, reports and documents with the Securities and Exchange Commission and any other governmental entities as required by applicable laws and regulations.
(m) CPIH shall take all actions reasonably necessary or as may be reasonably requested by Covanta to preserve CPIH's and Covanta's respective status as exempt from utility regulations such as the Public Utility Holding Company Act.
(n) Each of the CPIH Entities shall comply in all material respects with laws and regulations applicable to it, including without limitation regulation FD under the Exchange Act of 1934 and the Sarbanes-Oxley Act of 2002, as applicable. In furtherance of this covenant, CPIH recognizes that Covanta's Audit Committee is and shall be CPIH's audit committee, and that CPIH must comply with Covanta
internal control requirements, so long as such requirements are set forth in writing and provided to CPIH with reasonable advance notice.
(o) CPIH shall take all reasonable actions so as not to violate any law, regulation, contract, commitment, undertaking or other binding obligation would reasonably be expected to have a material negative impact on any of the Covanta Entities.
In the event of a breach of the covenants contained in this Section 8, and in addition to the rights contained in Sections 9 and 10 herein, the Covanta Entities shall have the right, as applicable, to take any and all actions necessary to cause the CPIH Entities to comply with the covenants set forth in Sections 8(e), (f), (l), (m) and (n).
9. Release - Indemnification.
(a) Covanta shall provide CPIH the benefit of the same standard of judgment and effort in rendering the Services hereunder as Covanta applies to its own corporate functions and operations. However, the Covanta Entities and their affiliates and their respective officers, directors, members, affiliates, agents and employees (collectively, the "Covanta Indemnified Parties") shall not be liable to the CPIH Entities or to any other person for any act or omission in the course of performance of their duties hereunder except for their gross negligence or willful misconduct. In addition to all such rights of indemnity as the Covanta Indemnified Parties may have under applicable law, CPIH shall indemnify the Covanta Indemnified Parties from and against any and all liabilities, claims, damages, costs and expenses (including reasonable attorney's fees and amounts reasonably paid in settlement) (collectively, "Covanta Losses") incurred by reason of or arising out of the performance or nonperformance of its duties under or by reason of this Agreement; provided, however, there shall be no such indemnification for Covanta Losses incurred by any such person or entity by reason of their gross negligence or willful misconduct in the conduct of their duties under or by reason of this Agreement.
(b) The CPIH Entities and their affiliates and their respective officers, directors, members, affiliates, agents and employees (collectively, the "CPIH Indemnified Parties") shall not be liable to the Covanta Entities or to any other person for any act or omission in the course of performance of their duties hereunder except for their gross negligence or willful misconduct. In addition to all such rights of indemnity as the CPIH Indemnified Parties may have under applicable law, Covanta shall defend, indemnify and save harmless the CPIH Indemnified Parties from and against any and all liabilities, claims, damages, costs and expenses (including reasonable attorney's fees and amounts reasonably paid in settlement) (collectively, "CPIH Losses") incurred by reason of or arising out of the performance or nonperformance of its duties under or by reason of this Agreement; provided, however, there shall be no such indemnification for CPIH Losses incurred by any such person or entity by reason of their gross negligence or willful misconduct in the conduct of their duties under or by reason of this Agreement.
(c) In addition to all such rights of indemnity and subrogation as the Covanta Entities may have under applicable law, the CPIH Entities shall defend, indemnify and save harmless the Covanta Indemnified Parties from and against any and all Covanta Losses incurred by a Covanta Indemnified Party in connection with:
(1) such Covanta Indemnified Party's role as account party under any of the Letters of Credit, to the extent CPIH controls any litigation;
(2) such Covanta Indemnified Party's role as guarantor under any Parent Guarantee, to the extent CPIH controls any litigation; and
(3) the material breach by CPIH of a covenant contained in
Section 8 herein.
(d) In addition to all such rights of indemnity and subrogation as the CPIH Entities may have under applicable law, the Covanta Entities shall defend, indemnify and save harmless the CPIH Indemnified Parties from and against any and all CPIH Losses incurred by a CPIH Indemnified Party in connection with the material breach by Covanta of a covenant contained in Section 8.
(e) The Covanta Entities' and the CPIH Entities' indemnification and advancement of expenses obligations hereunder shall survive any termination of this Agreement, Section 10 notwithstanding.
10. Default and Termination. In the event of a material breach of a
covenant contained in Section 8 or any other material default (hereinafter a
"Default") under this Agreement, by Covanta or CPIH, the Party suffering from
such Default (hereinafter the "Non-Defaulting Party") shall serve written notice
to the Party in Default (hereinafter the "Defaulting Party") setting forth with
reasonable particularity the nature of the alleged Default, and the specific
remedy or performance sought by the Non-Defaulting Party (hereinafter the
"Default Notice") of the Defaulting Party to cure the Default. The Defaulting
Party shall have sixty (60) Business Days from its receipt of the Default
Notice, other than a payment default, to either cure the Default or, if the
Default is not capable of being cured within sixty (60) Business Days, to make
substantial efforts and progress towards curing the Default. In the event that
the Defaulting Party does not cure the Default or make substantial efforts and
progress towards curing the Default within sixty (60) Business Days of its
receipt of the Default Notice, then the Non-Defaulting Party may deliver a
second notice (hereinafter the "Notice of Service Termination") to the
Defaulting Party informing the Defaulting Party that this Agreement has been
terminated as of the Date of the Notice of Termination. Any notice served under
this section 10 shall require the approval of the Board of Directors of CPIH or
Covanta, as the applicable Non-Defaulting Party, and such approval shall be
attached to such notice. Notwithstanding the foregoing, in the event of a
payment default by the CPIH Entities, Covanta shall have the right to terminate
this Agreement in the event such payment default is not cured within fifteen
(15) days following delivery of the Default Notice to CPIH; provided that it is
expressly understood and agreed that CPIH's failure to reimburse any amounts
pursuant to this Agreement as a result of the proviso in Section 4(a) hereof, or
the provisions of the CPIH Credit Facilities and/or the Intercreditor Agreement
as in effect on the Effective Date shall not be deemed a Default
hereunder. In the event of the termination of this Agreement pursuant to Section 10 hereof, none of the Parties shall have any further rights, obligations or liabilities under this Agreement.
11. Binding Agreement; Assignments.
(a) Whenever in this Agreement any of the Parties hereto is referred to, such reference shall be deemed to include the successors and permitted assigns of such Party; and all covenants, promises and agreements by or on behalf of the Parties that are contained in this Agreement shall bind and inure to the benefit of their respective successors and permitted assigns.
(b) None of the Covanta Entities nor any of the CPIH Entities may
assign or transfer any of its rights or obligations hereunder
(and any such attempted assignment or transfer shall be void)
without the prior written consent of CPIH or Covanta,
respectively, provided that Covanta may assign this Agreement for
purposes of granting a security interest and may subcontract to
affiliated and unaffiliated entities, firms and organizations
(subject to the consent of CPIH for unaffiliated entities, firms
and organizations, which consent shall not be unreasonably
withheld), for those services Covanta reasonably deems necessary
or advisable to accomplish the Services specified above.
12. Severability. In case any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, no Party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The Parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
13. Notice. Whenever, under the terms of this Agreement, any notice is required or permitted to be served upon a Party, said notice may be served upon such Party by personal service, overnight carrier, or by certified mail. Any such notice shall be deemed given when personally received by the Party to whom the notice is directed; provided, however, in the event notice is mailed, such notice shall be deemed given when deposited in the United States Mail with postage prepaid. Notices shall be in writing and, until further notification in writing, shall be delivered to the following addresses:
To Covanta or any other Covanta Entity:
Covanta Energy Corporation
Attn: Timothy J. Simpson
40 Lane Road
Fairfield, New Jersey 07004
To CPIH or any other CPIH Entity:
Covanta Power International Holdings, Inc.
Attn: Ashish Sarkar/Walter Heiser
40 Lane Road
Fairfield, New Jersey 07004
14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, BUT WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS THEREOF.
15. WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 15 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
16. Arbitration. Any disputes arising under this Agreement shall be submitted exclusively to arbitration and such dispute shall be resolved fully and finally in New York, New York by an arbitration governed by the Commercial Arbitration Rules of the American Arbitration Association. The arbitration panel shall be composed of three arbitrators, with one arbitrator being selected by the Covanta Entities, one arbitrator being selected by the CPIH Entities and the third arbitrator being selected by the other two arbitrators. The arbitration panel shall resolve the dispute within 30 days after selection and judgment upon the award rendered by such arbitration panel shall be deemed final and binding on the parties and may be entered in any court of competent jurisdiction. The costs and expenses of such arbitration, the fees and expenses of the arbitration panel and all out-of-pocket costs and expenses shall be shared equally by the Covanta Entities and the CPIH Entities.
17. Validity. This Agreement sets forth the entire understanding of the Parties and has been duly executed and delivered on behalf of each of the Parties and constitutes the legal, valid, binding and enforceable obligation of each such Party.
18. Headings. The paragraph headings contained herein are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope or intent of this Agreement or in any way affect the terms and provisions hereof.
19. Counterparts. This Agreement may be executed in counterparts (and by different Parties hereto on different counterparts), each of which shall constitute an original, but all of which together shall constitute one and the same Agreement. Delivery of an executed signature
page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.
20. Entire Agreement; Amendments. This Agreement contains the entire agreement between the Parties pertaining to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings in connection therewith. There are no agreements, understandings, conditions, warranties, or representations, oral or written, express or implied, with reference to the subject matter hereof that are not merged herein or superseded by this Agreement. This Agreement may not be changed orally, and neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Covanta Entities and the CPIH Entities.
21. No Waiver. No failure on the part of a Party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy by the a Party preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law.
[SIGNATURES ON FOLLOWING PAGE]
IN WITNESS WHEREOF, each of the Parties hereto, intending to be legally bound hereby, have caused this Agreement to be executed by their duly authorized officers, on the day and year first above written.
COVANTA ENERGY CORPORATION
COVANTA ENERGY GROUP, INC.
COVANTA PROJECTS, INC.
COVANTA POWER INTERNATIONAL HOLDINGS, INC.
Each of the SUBSIDIARIES listed on Schedule A hereto:
Schedule A to the Management Services & Reimbursement Agreement
CPIH DOMESTIC SUBSIDIARIES
1. Covanta Waste To Energy of Italy, Inc.
2. Covanta Power Development, Inc.
3. Covanta Power Development of Bolivia, Inc.
4. OPI Quezon, Inc.
Schedule B to the Management Services & Reimbursement Agreement
LETTERS OF CREDIT
Entity/Project Issuer Amount
-------------- ------ ------
Covanta Energy Corporation (Haripur
Letter of Credit) Citibank, N.A. $2,630,232(1)
Quezon Debt Service Reserve Fund Bank One, N.A. $11,802,039
Haripur Performance Bond (2nd Letter
of Credit) Bank One, N.A. $676,500
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Schedule C to the Management Services & Reimbursement Agreement
PARENT GUARANTEE
Project Title of Parent Guarantee Guarantor
------- ------------------------- ---------
Haripur Guarantee of Plant Operation and Maintenance Agreement Covanta Energy Group
Haripur Guarantee of Participation Agreement, Shareholders Agreement
& Put-Call Agreement Covanta Energy Group
Quezon Operator Guarantee of Plant Operation and Maintenance
Agrement Covanta Projects, Inc.
Madurai Guarantee of Operation and Maintenance Agreement Covanta Energy Corporation
Madurai Share Retention & Financial Support Agreement Covanta Energy Corporation
Samalpatti Operation and Maintenance Guarantee Covanta Energy Group
Trezzo Ogden Equity Contribution Agreement Covanta Energy Group
Trezzo Ogden Guarantee of Services and Maintenance Agreement Covanta Energy Group
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Schedule 1(a) to the Management Services & Reimbursement Agreement
OPERATIONAL SERVICES
Flat Fee Services/Personnel:
B. Services provided:
Senior Management support relating to:
1. Maintenance repair and outages.
2. the Maximo system (maintenance management system)
3. Vendor support for US based suppliers (when needed).
4. Turbine outage.
5. Provide technical WTE expertise as required by Trezzo contract
6. Direct technical audits
C. Key Personnel:
1. Senior Managers:
(a) EVP of Operations
(b) Sr. VP of Engineering and Environmental
(c) Sr. VP of Technical Operations
(d) Sr. VP of Environmental Testing
Hourly Rate Services (it being understood that all non-ordinary course hourly fee expenditures shall be requested and approved in advance by CPIH):
A. Services Provided:
1. All operational services, technical services, engineering services, and environmental services.
2. All non-ordinary course expenditures, including, but not limited to:
(a) Repairs and outages.
(b) The Maximo system.
(c) Turbine outages.
B. Personnel:
1. Operational, Environmental and Technical Support Managers
and Staff that respond to support requests from Projects
(paid at hourly rates, as a Reimbursable Expense)
2. Personnel employed for flat-fee services performing non-ordinary course services.
3. Any necessary third party personnel.
Schedule 1(b) to the Management Services & Reimbursement Agreement
HR SERVICES
Flat Fee Services/Personnel:
C. Services Provided:
Includes oversight of HR activities, as has been customarily provided, primarily related to the following:
1. Payroll for Ex-Pats
2. Support services to Ex-Pats
3. Provide benefits and administer employee contracts for Ex-Pats (actual benefit costs will be allocated to CPIH and are excluded from the Flat Fee)
4. Monitor employee litigation
5. Administration of US based benefit Plans
D. Key Personnel included in Flat Fee:
1. SVP HR to oversee HR activities
Note: Any external/third-party HR expense, or non-ordinary course expense relating to CPIH that is requested and approved in advance by CPIH shall be reimbursed hourly or at cost, as applicable.
Schedule 1(c) to the Management Services & Reimbursement Agreement
RISK MANAGEMENT SERVICES
Flat Fee Services/Personnel
E. Services Provided:
As part of Flat Fee, the VP of Risk Management will:
1. Place Political Risk Insurance Policies for China, Bangladesh and Quezon.
2. Place property insurance for MCI, Bataan and in-country liability insurance policies as required by local statute for all international facilities in which Covanta has a controlling interest.
3. Obtain certificates of insurance on all of the facilities where our partners place the insurance and assist in placing the insurance for Bangladesh, Trezzo and Quezon.
4. Review insurance for adequacy and compliance with contracts.
5. Settle property and business interruption losses when they occur.
6. Support property loss control efforts.
7. Place the Kidnap and Ransom policy; place and maintain D&O Policy for CPIH Board and executives.
8. Manage Control Risk Groups call-in instructions and contract. (Crisis Management).
9. Provide risk advice and insurance evaluations as requested.
10. Place insurance policies described above and as may be required under international project documents, to the extent coverage is commercially reasonable and available, and within Covanta's control, contingent upon full cost reimbursement.
F. Key Personnel included in Flat Fee:
1. VP of Risk Management
Note: Any external/third-party Risk Management personnel expenses and non-ordinary course personnel expenses relating to CPIH as requested and approved by CPIH shall be reimbursed hourly or at cost.
Schedule 1(d) to the Management Services & Reimbursement Agreement
LEGAL SERVICES
Flat Fee Services/Personnel:
G. Services Provided:
All of Covanta's in-house legal staff are included in the Flat Fee with the following services anticipated to require a modest time commitment by the staff:
1. Contract administration oversight with respect to transactions in which Covanta has an ongoing role either as guarantor or L/C provider.
2. Administration of policy of business conduct, compliance issues.
3. Monitoring of environmental matters, and litigation, which may have long-term legal or reputational impact on Covanta.
4. Issue review as requested by the projects.
H. Key Personnel included in Flat Fee:
1. General Counsel
2. Other in-house lawyers as required
Hourly Rate/At-cost Services:
I. Services:
1. Any external/third-party legal services as requested and approved by CPIH.
2. Due diligence review of materials submitted for inclusion in Covanta's SEC reports or preparation of same, if CPIH fails to do so.
Note: Non-ordinary course legal services relating to CPIH shall be hired by CPIH.
Schedule 1(e) to the Management Services & Reimbursement Agreement
IT SERVICES
Flat Fee:
J. Services Provided:
1. MIS Standards - Information such as technology, best practices, policies, procedures, performance thresholds, and protocols.
2. Maintenance of existing domestic software and hardware to be compatible with existing international hardware and software.
3. Maintenance and support for integrated financial systems (PeopleSoft) to allow efficient consolidated financial reporting, and provision of any updated standard PeopleSoft reports.
4. Assistance with procurement of equipment for international facilities and offices.
K. Key Personnel:
1. VP MIS
2. Other MIS Staff as required
Hourly Rate/At-cost Services:
L. Services Provided, as requested and approved by CPIH:
1. Project management support as requested
2. International Server hardware and software configuration
3. International Network configuration and support
4. Customize PeopleSoft report generation
5. Any troubleshooting of international hardware or software, if requested
6. CPIH to pay directly for any software licenses, consistent with past practice.
7. Any outside services or non-ordinary course services requested by CPIH.
M. Key Personnel:
1. VP MIS
2. Other MIS Staff as required
Schedule 1(f) to the Management Services & Reimbursement Agreement
ACCOUNTING/TREASURY SERVICES
Flat Fee Services/Personnel:
N. Services Provided:
1. Accounting, Tax and Treasury oversight.
2. Maintain accounting system for consolidation.
3. Oversight of Tax Preparation.
4. Management or oversight of bank accounts and investment balances.
5. Maintain or obtain Lender-approved Letter of Credits.
6. Manage and supervise Internal and External Audits.
7. Assist in preparation of External Financials, as may be required.
8. Management of Sarbanes/Oxley process, if any, as required.
9. Any additional requirements required to comply with Covanta's audit and corporate governance policies.
O. Key Personnel included in Flat Fee:
1. SVP, Chief Accounting Officer
2. Treasury Staff
3. Accounting Staff
Hourly Rate/At-Cost Services:
P. Services:
1. All external tax advice and tax preparation
2. All consultants and advisors relating to internal and external audits
3. Any external/third-party Accounting/Treasury expense, or non-ordinary course expense relating to CPIH, as requested and approved by CPIH.
Schedule 2 to the Management Services & Reimbursement Agreement
EMPLOYEES EXCLUDED FROM FLAT FEE
ALL COSTS RELATING TO THESE EMPLOYEES WILL BE CHARGED DIRECTLY TO CPIH OVERHEAD AND CPIH WILL REIMBURSE THE COVANTA ENTITIES ACCORDINGLY.
1. CPIH Chief Executive Officer
2. CPIH President
3. CPIH General Counsel
4. CPIH Chief Financial Officer
5. CPIH Senior Vice President of Operations
6. CPIH Vice President
7. CPIH Vice President of Operations
8. General Manager - Quezon
9. Plant Manager - Quezon
10. Chief Engineer/Maintenance Manager - Quezon
11. Vice President Philippines Country Manager
12. Vice President Business Manager
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-86004) of Danielson Holdings Corporation of our report dated March 26, 2002, except for the restatement, as to which the date is August 13, 2002 relating to the financial statements of American Commercial Lines LLC, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
Louisville, Kentucky
March 15, 2004
EXHIBIT 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Samuel Zell, certify that:
1. I have reviewed this annual report on Form 10-K of DHC;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's quarter ended December 31, 2003 that has materially affected, or is reasonably likely to materially affect the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
/s/ SAMUEL ZELL
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Samuel Zell
Chief Executive Officer/
Principal Executive Officer
Date: March 15, 2004
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EXHIBIT 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Philip G. Tinkler, certify that:
1. I have reviewed this annual report on Form 10-K of DHC;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's quarter ended December 31, 2003 that has materially affected, or is reasonably likely to materially affect the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
/s/ PHILIP G. TINKLER
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Philip G. Tinkler
Chief Financial Officer
Date: March 15, 2004
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EXHIBIT 32.1
CERTIFICATION OF PERIODIC FINANCIAL REPORT PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350
In connection with the Annual Report on Form 10-K for the period ended December 31, 2003 of Danielson Holding Corporation ("DHC") as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Samuel Zell, as Chief Executive Officer of DHC, hereby certifies, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge, that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of DHC; and
(3) this certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by DHC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to DHC and will be retained by DHC and furnished to the Securities and Exchange Commission or its staff upon request.
/s/ SAMUEL ZELL
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Samuel Zell
Chief Executive Officer
March 15, 2004
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EXHIBIT 32.2
CERTIFICATION OF PERIODIC FINANCIAL REPORT PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350
In connection with the Annual Report on Form 10-K for the period ended December 31, 2003 of Danielson Holding Corporation ("DHC") as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Philip G. Tinkler, as Chief Financial Officer of DHC, hereby certifies, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge, that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of DHC; and
(3) this certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by DHC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to DHC and will be retained by DHC and furnished to the Securities and Exchange Commission or its staff upon request.
/s/ PHILIP G. TINKLER
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Philip G. Tinkler
Chief Financial Officer
March 15, 2004
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