Document:

exh101.htm

	
Execution

Version

 

 

 

$30,000,000

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

dated as of January 13, 2012,

 

by and among

 

COMPX INTERNATIONAL, INC.

 

as Borrower,

and

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,

 

 

as Lender

 

 

 

 

 

NOTICE:  THIS INSTRUMENT IS SUBJECT TO MANDATORY ARBITRATION 

PURSUANT TO THE FEDERAL ARBITRATION ACT AND IF THE FEDERAL 

ARBITRATION ACT IS INAPPLICABLE, THE UNIFORM ARBITRATION ACT, § 15-

48-10, ET SEQ., CODE OF LAWS OF SOUTH CAROLINA (1976), AS AMENDED

 

 

 

  

  

  

TABLE OF CONTENTS

 

Page

 

 

ARTICLE I

DEFINITIONS  

 

	
  

	
Section 1.1

	
Definitions

	
 

	
  

	
Section 1.2

	
Other Definitions and Provisions

	
 

	
  

	
Section 1.3

	
Accounting Terms

	
 

	
  

	
Section 1.4

	
Rounding

	
 

	
  

	
Section 1.5

	
References to Agreement and Laws

	
 

	
  

	
Section 1.6

	
Times of Day

	
 

	
  

	
Section 1.7

	
Letter of Credit Amounts

	
 

	
  

	
Section 1.8

	
Guaranty Obligations

	
 

 

ARTICLE II

REVOLVING CREDIT FACILITY  

 

	
  

	
Section 2.1

	
Revolving Credit Loans

	
 

	
  

	
Section 2.2

	
Alternative Currency Loans.

	
 

	
  

	
Section 2.3

	
Procedure for Advances of Alternative Currency Loans

	
 

	
  

	
Section 2.4

	
Repayment and Prepayment of Revolving Credit Loans and Alternative Currency Loans

	
 

	
  

	
Section 2.5

	
Termination of Revolving Credit Facility

	
 

 

ARTICLE III

LETTER OF CREDIT FACILITY  

 

	
  

	
Section 3.1

	
L/C Commitment

	
 

	
  

	
Section 3.2

	
Procedure for Issuance of Letters of Credit

	
 

	
  

	
Section 3.3

	
Commissions and Other Charges

	
 

	
  

	
Section 3.4

	
Reimbursement Obligation of the Borrower

	
 

	
  

	
Section 3.5

	
Obligations Absolute

	
 

	
  

	
Section 3.6

	
Effect of Letter of Credit Application

	
 

 

ARTICLE IV

GENERAL LOAN PROVISIONS  

 

	
  

	
Section 4.1

	
Interest

	
 

	
  

	
Section 4.2

	
Notice and Manner of Conversion or Continuation of Alternative Currency Loans

	
 

	
  

	
Section 4.3

	
Fees

	
 

	
  

	
Section 4.4

	
Manner of Payment

	
 

	
  

	
Section 4.5

	
Evidence of Indebtedness

	
 

	
  

	
Section 4.6

	
Redenomination of Alternative Currency Loans.

	
 

	
  

	
Section 4.7

	
Regulatory Limitation

	
 

	
  

	
Section 4.8

	
Changed Circumstances

	
 

	
  

	
Section 4.9

	
Indemnity

	
 

  

  

  

	
  

	
Section 4.10

	
Increased Costs

	
 

	
  

	
Section 4.11

	
Taxes

	
 

	
  

	
Section 4.12

	
Mitigation Obligations

	
 

	
  

	
Section 4.13

	
Incremental Loans

	
 

 

ARTICLE V

CONDITIONS OF CLOSING AND BORROWING  

 

	
  

	
Section 5.1

	
Conditions to Closing

	
 

	
  

	
Section 5.2

	
Conditions to All Loans and Letters of Credit

	
 

 

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF THE CREDIT PARTIES  

 

	
  

	
Section 6.1

	
Organization; Power; Qualification

	
 

	
  

	
Section 6.2

	
Ownership

	
 

	
  

	
Section 6.3

	
Authorization of Agreement, Loan Documents and Borrowing

	
 

	
  

	
Section 6.4

	
Compliance of Agreement, Loan Documents and Borrowing with Laws, Etc.

	
 

	
  

	
Section 6.5

	
Compliance with Law; Governmental Approvals

	
 

	
  

	
Section 6.6

	
Taxes

	
 

	
  

	
Section 6.7

	
Intellectual Property Matters

	
 

	
  

	
Section 6.8

	
Environmental Matters

	
 

	
  

	
Section 6.9

	
ERISA

	
 

	
  

	
Section 6.10

	
Margin Stock

	
 

	
  

	
Section 6.11

	
Government Regulation

	
 

	
  

	
Section 6.12

	
Employee Relations

	
 

	
  

	
Section 6.13

	
Financial Statements

	
 

	
  

	
Section 6.14

	
No Material Adverse Change

	
 

	
  

	
Section 6.15

	
Solvency

	
 

	
  

	
Section 6.16

	
Liens

	
 

	
  

	
Section 6.17

	
Debt and Guaranty Obligations

	
 

	
  

	
Section 6.18

	
Litigation

	
 

	
  

	
Section 6.19

	
Absence of Defaults

	
 

	
  

	
Section 6.20

	
Accuracy and Completeness of Information

	
 

	
  

	
Section 6.21

	
Survival of Representations and Warranties, Etc.

	
 

 

ARTICLE VII

AFFIRMATIVE COVENANTS  

 

	
  

	
Section 7.1

	
Financial Statements and Budgets

	
 

	
  

	
Section 7.2

	
Certificates; Other Reports

	
 

	
  

	
Section 7.3

	
Notice of Litigation and Other Matters

	
 

	
  

	
Section 7.4

	
Preservation of Corporate Existence and Related Matters

	
 

	
  

	
Section 7.5

	
Maintenance of Property

	
 

	
  

	
Section 7.6

	
Insurance

	
 

	
  

	
Section 7.7

	
Accounting Methods and Financial Records

	
 

	
  

	
Section 7.8

	
Payment and Performance of Obligations

	
 

  

ii

  

	
  

	
Section 7.9

	
Compliance with Laws and Approvals

	
 

	
  

	
Section 7.10

	
Compliance with ERISA

	
 

	
  

	
Section 7.11

	
Compliance with Material Agreements

	
 

	
  

	
Section 7.12

	
Visits and Inspections

	
 

	
  

	
Section 7.13

	
Additional Subsidiaries and Additional Collateral

	
 

	
  

	
Section 7.14

	
Use of Proceeds

	
 

	
  

	
Section 7.15

	
Burdensome Provisions

	
 

	
  

	
Section 7.16

	
Titles to Properties

	
 

	
  

	
Section 7.17

	
Senior Debt Status

	
 

	
  

	
Section 7.18

	
Further Assurances

	
 

	
  

	
Section 7.19

	
Deposit Accounts, Cash Management and Lockbox Services

	
 

 

ARTICLE VIII

NEGATIVE COVENANTS  

 

	
  

	
Section 8.1

	
Limitations on Debt

	
 

	
  

	
Section 8.2

	
Limitations on Liens

	
 

	
  

	
Section 8.3

	
Limitations on Loans, Advances, Investments and Acquisitions

	
 

	
  

	
Section 8.4

	
Limitations on  Mergers and Liquidations

	
 

	
  

	
Section 8.5

	
Limitations on Sale of Assets

	
 

	
  

	
Section 8.6

	
Limitations on Dividends and Distributions

	
 

	
  

	
Section 8.7

	
Limitations on Exchange and Issuance of Capital Stock

	
 

	
  

	
Section 8.8

	
Transactions with Affiliates

	
 

	
  

	
Section 8.9

	
Certain Accounting Changes; Organizational Documents

	
 

	
  

	
Section 8.10

	
Amendments; Payments and Prepayments of Subordinated Debt

	
 

	
  

	
Section 8.11

	
Restrictive Agreements

	
 

	
  

	
Section 8.12

	
Nature of Business

	
 

	
  

	
Section 8.13

	
Impairment of Security Interests

	
 

	
  

	
Section 8.14

	
Subsidiaries

	
 

	
  

	
Section 8.15

	
Financial Covenants

	
 

 

ARTICLE IX

DEFAULT AND REMEDIES  

 

	
  

	
Section 9.1

	
Events of Default

	
 

	
  

	
Section 9.2

	
Remedies

	
 

	
  

	
Section 9.3

	
Rights and Remedies Cumulative; Non-Waiver; etc

	
 

	
  

	
Section 9.4

	
Crediting of Payments and Proceeds

	
 

 

ARTICLE X

MISCELLANEOUS  

 

	
  

	
Section 10.1

	
Notices.

	
 

	
  

	
Section 10.2

	
Amendments, Waivers and Consents

	
 

	
  

	
Section 10.3

	
Expenses; Indemnity

	
 

	
  

	
Section 10.4

	
Right of Set Off

	
 

	
  

	
Section 10.5

	
Governing Law; Jurisdiction, Etc.

	
 

	
  

	
Section 10.6

	
Binding Arbitration

	
 

  

iii

  

	
  

	
Section 10.7

	
Reversal of Payments

	
 

	
  

	
Section 10.8

	
Injunctive Relief

	
 

	
  

	
Section 10.9

	
Accounting Matters

	
 

	
  

	
Section 10.10

	
Successors and Assigns; Participations.

	
 

	
  

	
Section 10.11

	
Confidentiality

	
 

	
  

	
Section 10.12

	
Performance of Duties

	
 

	
  

	
Section 10.13

	
All Powers Coupled with Interest

	
 

	
  

	
Section 10.14

	
Survival.

	
 

	
  

	
Section 10.15

	
Titles and Captions

	
 

	
  

	
Section 10.16

	
Severability of Provisions

	
 

	
  

	
Section 10.17

	
Counterparts; Integration; Effectiveness; Electronic Execution.

	
 

	
  

	
Section 10.18

	
Term of Agreement

	
 

	
  

	
Section 10.19

	
USA PATRIOT Act

	
 

	
  

	
Section 10.20

	
Independent Effect of Covenants

	
 

	
  

	
Section 10.21

	
Amendment and Restatement; No Novation

	
 

	
  

	
Section 10.22

	
Inconsistencies with Other Documents

	
 

                                                                    

  

iv

  

EXHIBITS

 

	
Exhibit A-1

	
-

	
Form of Revolving Credit Note

	
Exhibit A-2

	
-

	
Form of Alternative Currency Note

	
Exhibit B

	
-

	
Form of Notice of Borrowing

	
Exhibit C

	
-

	
Form of Notice of Account Designation

	
Exhibit D

	
-

	
Form of Notice of Prepayment

	
Exhibit E

	
-

	
Form of Notice of Conversion/Continuation

	
Exhibit F

	
-

	
Form of Officer’s Compliance Certificate

	
Exhibit G

	
-

	
Form of Subsidiary Guaranty Agreement

	
Exhibit H

	
-

	
Form of Collateral Agreement

	
Exhibit I

Exhibit J

Exhibit K

 

	
-

-

 

-

	
Form of Joinder Agreement

Form of Foreign Subsidiary Alternative Currency Loan Note

Form of Guaranty of Foreign Subsidiary Loan

 

SCHEDULES

 

	
Schedule 1.1(a)

Schedule 1.1(b)

	
-

-

	
TIMET Note

Mandatory Cost Rate

	
Schedule 6.1

	
-

	
Jurisdictions of Organization and Qualification

	
Schedule 6.2

	
-

	
Subsidiaries and Capitalization

	
Schedule 6.9

	
-

	
ERISA Plans

	
Schedule 6.12

	
-

	
Labor and Collective Bargaining Agreements

	
Schedule 6.17

	
-

	
Existing Debt and Guaranty Obligations

	
Schedule 6.18

	
-

	
Litigation

	
Schedule 8.2

	
-

	
Existing Liens

	
Schedule 8.3

	
-

	
Existing Loans, Advances and Investments

	
Schedule 8.8

	
-

	
Transactions with Affiliates

                                                                

  

v

  

 

CREDIT AGREEMENT

 

CREDIT AGREEMENT, dated as of January 13, 2012, by and among COMPX INTERNATIONAL INC., a Delaware corporation (the “Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as Lender.

STATEMENT OF PURPOSE

 

Lender extended certain credit facilities to the Borrower pursuant to the Credit Agreement dated as of December 23, 2005, by and among the Borrower, the lenders identified therein and the administrative agent identified therein (as amended and modified, the “Existing Credit Agreement”).

 

The Borrower has requested, and the Lender has agreed, to terminate and replace the existing credit facilities provided under the Existing Credit Agreement, with the credit facilities extended to the Borrower on the terms and conditions of this Agreement.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, such parties hereby agree as follows:

 

 

 

    ARTICLE I

 

         DEFINITIONS

 

Section 1.1 Definitions.  The following terms when used in this Agreement shall have the meanings assigned to them below:

 

“Affiliate” means, with respect to any Person, any other Person (other than a Subsidiary of the Borrower) which directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such first Person or any of its Subsidiaries.  The term “control” means (a) the power to vote ten percent (10%) or more of the securities or other equity interests of a Person having ordinary voting power, or (b) the possession, directly or indirectly, of any other power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.  The terms “controlling” and “controlled” have meanings correlative thereto.

 

“Agreement” means this Credit Agreement, as amended, restated, supplemented or otherwise modified from time to time.

 

“Alternative Currency” means (i) the Euro, (ii) the Canadian Dollar and (iii) with the prior written consent of the Lender, any other lawful currency (other than Dollars) which is freely transferable and convertible into Dollars in the United States currency market and freely available to the Lender in the London interbank deposit market.

“Alternative Currency Amount” means with respect to each Loan made or continued (or to be made or continued) in an Alternative Currency, the amount of such Alternative Currency which is equivalent to the principal amount in Dollars of such Loan at the most favorable spot exchange rate (to the Borrower) determined by the Lender to be available to it at approximately 11:00 a.m. (London time) two (2) Business Days before such Loan is made or continued (or to be made or continued).  When used with respect to any other sum expressed in Dollars, “Alternative Currency Amount” shall mean the amount of such Alternative Currency which is equivalent to the amount so expressed in Dollars at the most favorable spot exchange rate (to the Borrower) determined by the Lender to be available to it at the relevant time.

  

  

  

“Alternative Currency Commitment” means Fifteen Million Dollars ($15,000,000), as such amount may be reduced or modified at any time or from time to time pursuant to the terms hereof.

“Alternative Currency Facility” means the alternative currency facility established pursuant to Section 2.2.

“Alternative Currency Loan” means any revolving credit loan denominated in an Alternative Currency made by the Lender to the Borrower pursuant to Section 2.2, and all such Alternative Currency Loans collectively as the context requires.

“Alternative Currency Note” means the Alternative Currency Note made by the Borrower payable to the order of the Lender, substantially in the form of Exhibit A-3 hereto, evidencing the Alternative Currency Loans, and any amendments, supplements and modifications thereto, any substitutes therefor and any replacements, restatements, renewals or extensions thereof, in whole or in part.

“Applicable Law” means all applicable provisions of constitutions, laws, statutes, ordinances, rules, treaties, regulations, permits, licenses, approvals, interpretations and orders of courts or Governmental Authorities and all orders and decrees of all courts and arbitrators.

 

“Applicable Margin” shall mean:  (i) in the case of each LIBOR Rate Loan, 2.25% and (ii) in the case of each Base Rate Loan, 1.00%; provided, that with respect to each LIBOR Rate Loan made in an Alternative Currency, the Applicable Margin shall include the Mandatory Cost Rate, as determined pursuant to the formula set forth on Schedule 1.1(b) hereto.

 

“Base Rate” means, at any time, the highest of (a) the Prime Rate or (b) the Federal Funds Rate plus 1⁄2 of 1.00%; each change in the Base Rate shall take effect simultaneously with the corresponding change or changes in the Prime Rate or the Federal Funds Rate.

 

“Base Rate Loan” means any Loan bearing interest at a rate based upon the Base Rate as provided in Section 4.8.

 

“Borrower” has the meaning assigned thereto in the introductory paragraph hereto.

 

“Borrower Materials” has the meaning assigned thereto in Section 7.2.

 

“Business Day” means (a) for all purposes other than as set forth in clause (b) below, any day (other than a Saturday or Sunday) on which banks in Charlotte, North Carolina and New York, New York, are open for the conduct of their domestic or international commercial banking business, as applicable, and (b) with respect to all notices and determinations in connection with, and payments of principal and interest on, any LIBOR Rate Loan, any day (i) that is a Business Day described in clause (a) and that is also a day for trading by and between banks in deposits for the applicable Permitted Currency in the London interbank market and (ii) on which banks are open for the conduct of their domestic and international banking business in the place where the Lender shall make available Loans in such Permitted Currency.  Notwithstanding the foregoing, with respect to any amount denominated or to be denominated in the Euro, any reference to a “Business Day” shall be construed as a reference to a day (other than a Saturday or Sunday) on which banks are generally open for business in New York, New York and prime banks in London generally provide quotations for deposits denominated in the Euro.

 

  

2

  

“Canadian Dollar” means, at any time of determination, the then official currency of Canada.

“Capital Expenditures” means, with respect to the Borrower and its Subsidiaries for any period, the aggregate amount of all expenditures of the Borrower and its Subsidiaries during such period that, in conformity with GAAP, are included in “additions to property, plant and equipment” or comparable items reflected in the Consolidated financial statements of the Borrower and its Subsidiaries.

 

“Capital Lease” means any lease of any property by the Borrower or any of its Subsidiaries, as lessee, that should, in accordance with GAAP, be classified and accounted for as a capital lease on a Consolidated balance sheet of the Borrower and its Subsidiaries.

 

“Cash Management Agreement” means any agreement to provide cash management services, including treasury, depository, overdraft, credit or debit card, electronic funds transfer and other cash management arrangements.

 

“Cash Management Bank” means any Person that, at the time it enters into a Cash Management Agreement, is the Lender, or an Affiliate of the Lender, in its capacity as a party to such Cash Management Agreement.

 

“Change in Control” shall have the meaning assigned thereto in Section 9.1(i).

 

“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and all requests, rules, guidelines or directives thereunder or issued in connection therewith shall be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

 

“Closing Date” means the date of this Agreement or such later Business Day upon which each condition described in Section 5.1 shall be satisfied or waived in all respects in a manner acceptable to the Lender, in its sole discretion.

 

“Code” means the Internal Revenue Code of 1986, and the rules and regulations promulgated thereunder, each as amended or modified from time to time.

 

  

3

  

“Collateral” means the collateral security for the Secured Obligations pledged or granted pursuant to the Security Documents.

 

“Collateral Agreement” means the collateral agreement of even date executed by the Borrower and each of the Subsidiary Guarantors and Borrower’s Wholly Owned Material Foreign Subsidiaries in favor of the Lender, substantially in the form of Exhibit I, as amended, restated, supplemented or otherwise modified from time to time.

 

“Commitment Fee” has the meaning assigned thereto in Section 4.3(a).

 

“Consolidated” means, when used with reference to financial statements or financial statement items of the Borrower and its Subsidiaries, such statements or items on a consolidated basis in accordance with applicable principles of consolidation under GAAP.

 

“Consolidated Net Worth” means, with respect to the Borrower and its Subsidiaries, on any date of determination, the total stockholders’ equity (including capital stock, additional paid-in capital and retained earnings after deducting the treasury stock) of the Borrower and its Subsidiaries appearing on a Consolidated balance sheet of the Borrower and its Subsidiaries prepared in accordance with GAAP (excluding on a cumulative basis any adjustments for foreign currency translation or other amounts representing “other comprehensive income” in accordance with GAAP).

 

“Costs of Acquisition” means, with respect to any Permitted Acquisition, as at the date of entering into any agreement therefor, the sum of the following (without duplication):  (i) the value of the capital stock, warrants or options to acquire capital stock of the Borrower or any Subsidiary of the Borrower to be transferred in connection therewith, (ii) the amount of any cash and fair market value of other property (excluding property described in clause (i) and the unpaid principal amount of any Debt instrument) given as consideration, (iii) the amount (determined by using the face amount or the amount payable at maturity, whichever is greater) of any Debt incurred, assumed or acquired by the Borrower or any Subsidiary of the Borrower in connection with such Permitted Acquisition, (iv) all additional purchase price amounts in the form of  earnouts and other contingent obligations that should be recorded on the financial statements of the Borrower and its Subsidiaries in accordance with GAAP, (v) all amounts paid in respect of covenants not to compete, consulting agreements that should be recorded on the financial statements of the Borrower and its Subsidiaries in accordance with GAAP, and other affiliated contracts in connection with such Permitted Acquisition, (vi) the aggregate fair market value of all other consideration given by the Borrower or any Subsidiary of the Borrower in connection with such Permitted Acquisition recorded on the financial statements of the Borrower and its Subsidiaries in accordance with GAAP, and (vii) out-of-pocket transaction costs for the services and expenses of attorneys, accountants and other consultants incurred in effecting such transaction, and other similar transaction costs so incurred.  For purposes of determining the Cost of Acquisition for any transaction, (A) the capital stock of the Borrower shall be valued (I) in the case of capital stock that is then designated as a national market system security by the National Association of Securities Dealers, Inc. (“NASDAQ”) or is listed on a national securities exchange, the average of the last reported bid and ask quotations or the last prices reported on, or immediately prior to, the acquisition date and (II) with respect to any other shares of capital stock, as reasonably determined by the Board of Directors of the Borrower, (B) the capital stock of any Subsidiary shall be valued as reasonably determined by the Board of Directors of such Subsidiary and (C) with respect to any Permitted Acquisition accomplished pursuant to the exercise of options or warrants or the conversion of securities, the Cost of Acquisition shall include both the cost of acquiring such option, warrant or convertible security as well as the cost of exercise or conversion.

 

  

4

  

“Credit Facility” means, collectively, the Revolving Credit Facility, the Alternative Currency Facility and the L/C Facility.

 

“Credit Parties” means, collectively, the Borrower and the Subsidiary Guarantors.

 

“Debt” means, with respect to the Borrower and its Subsidiaries at any date and without duplication, the sum of the following calculated in accordance with GAAP:  (a) all liabilities, obligations and indebtedness of any such Person for borrowed money including but not limited to obligations evidenced by bonds, debentures, notes or other similar instruments, (b) all obligations of any such Person to pay a deferred purchase price for property or services (provided that “Debt” shall not include trade payables and other accrued liabilities arising in the ordinary course of business which are either (i) not more than ninety (90) days past due or (ii) if more than ninety (90) days past due, being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with GAAP), (c) all obligations of any such Person as lessee under Capital Leases, (d) all Debt of any other Person secured by a Lien on any asset of any such Person, (e) all Guaranty Obligations of any such Person, (f) all obligations, contingent or otherwise, of any such Person relative to the face amount of letters of credit, whether or not drawn, including without limitation any Reimbursement Obligation, and banker’s acceptances issued for the account of any such Person, (g) all obligations of any such Person to redeem, repurchase, exchange, defease or otherwise make payments in respect of capital stock or other securities or partnership interests of such Person, (h) all net payment obligations incurred by any such Person pursuant to Hedging Agreements (solely to the extent that such net payment obligations are in excess of $2,000,000), (i) all outstanding payment obligations with respect to Synthetic Leases and (j) all obligations of any such Person under any asset securitization program.  For the purpose of item (h) above, (1) the amount of any net payment obligation pursuant to any Hedging Agreement on any date shall be deemed to be the Termination Value thereof as of such date and (2) “Termination Value” means, in respect of any one or more Hedging Agreements, after taking into account the effect of any legally enforceable netting agreement relating to such Hedging Agreements, (A) for any date on or after the date such Hedging Agreements have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (B) for any date prior to the date referenced in clause (A), the amount(s) determined as the mark-to-market value(s) for such Hedging Agreements, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Hedging Agreements (which may include any Person that is the Lender or an Affiliate thereof at the time such Hedging Agreement is executed).

“Default” means any of the events specified in Section 9.1 which with the passage of time, the giving of notice or any other condition, would constitute an Event of Default.

 

“Disputes” means any dispute, claim or controversy arising out of, connected with or relating to this Agreement or any other Loan Document, between or among parties hereto and to the other Loan Documents.

 

  

5

  

“Dollar Amount” means (a) with respect to each Loan made or continued (or to be made or continued), or Letter of Credit issued or extended (or to be issued or extended), in Dollars, the principal amount thereof and (b) with respect to each Loan made or continued (or to be made or continued) in an Alternative Currency, the amount of Dollars which is equivalent to the principal amount of such Loan, at the most favorable spot exchange rate (to the Borrower) determined by the Lender at approximately 11:00 a.m. (London time) two (2) Business Days before such Loan is made or continued (or to be made or continued).  When used with respect to any other sum expressed in an Alternative Currency, “Dollar Amount” shall mean the amount of Dollars which is equivalent to the amount so expressed in such Alternative Currency at the most favorable spot exchange rate (to the Borrower) determined by the Lender to be available to it at the relevant time.

“Dollars” or “$” means, unless otherwise qualified, dollars in lawful currency of the United States.

 

“Domestic Subsidiary” means any Subsidiary of the Borrower organized under the laws of any state of the United States or the District of Columbia.

 

“EBIT” means, for any period, the sum of the following determined on a Consolidated basis, without duplication, for the Borrower and its Subsidiaries in accordance with GAAP:  (a) Net Income for such period plus (b) the sum of the following to the extent deducted in determining Net Income: (i) income taxes, franchise taxes and similar taxes imposed in lieu of net income taxes, (ii) Interest Expense and (iii) all non cash charges associated with any asset impairment less (c) interest income; provided that for the purposes of determining EBIT for any period during which any Permitted Acquisition is consummated, EBIT shall be adjusted to give effect to the consummation of such Permitted Acquisition on a pro forma basis in accordance with GAAP, as if such Permitted Acquisition occurred on the first day of such period, such adjustments to be calculated in a manner reasonably satisfactory to the Lender.

“EBITDA” means, for any period, the sum of the following determined on a Consolidated basis, without duplication, for the Borrower and its Subsidiaries in accordance with GAAP:  (a) Net Income for such period plus (b) the sum of the following to the extent deducted in determining Net Income: (i) income taxes, franchise taxes and similar taxes imposed in lieu of net income taxes, (ii) Interest Expense, (iii) amortization, depreciation and other non-cash charges and (iv) all non cash charges associated with any asset impairment less (c) interest income; provided that for the purposes of determining EBITDA for any period during which any Permitted Acquisition is consummated, EBITDA shall be adjusted to give effect to the consummation of such Permitted Acquisition on a pro forma basis in accordance with GAAP, as if such Permitted Acquisition occurred on the first day of such period, such adjustments to be calculated in a manner reasonably satisfactory to the Lender.

“EMU”  means the economic and monetary union as contemplated in the Treaty on European Union.

“EMU Legislation” means legislative measures of the Council of European Union for the introduction of, change over to or operation of the Euro.

  

6

  

“Employee Benefit Plan” means any employee benefit plan within the meaning of Section 3(3) of ERISA which (a) is maintained for employees of the Borrower or any ERISA Affiliate or (b) has at any time within the preceding six (6) years been maintained for the employees of the Borrower or any current or former ERISA Affiliate.

 

“Environmental Claims” means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations (other than internal reports prepared by any Person in the ordinary course of business and not in response to any third party action or request of any kind) or proceedings relating in any way to any actual or alleged violation of or liability under any Environmental Law or relating to any permit issued, or any approval given, under any such Environmental Law, including, without limitation, any and all claims by Governmental Authorities for enforcement, cleanup, removal, response, remedial or other actions or damages, contribution, indemnification cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to human health or the environment.

 

“Environmental Laws” means any and all federal, foreign, state, provincial and local laws, statutes, ordinances, rules, regulations, permits, licenses, approvals, interpretations and orders of courts or Governmental Authorities, relating to the protection of human health or the environment.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, and the rules and regulations thereunder, each as amended or modified from time to time.

 

“ERISA Affiliate” means any Person who together with any Credit Party or any of its Subsidiaries is treated as a single employer within the meaning of Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA.

 

“Euro” means the single currency of the Participating Member States of the European Union.

 

“Eurodollar Reserve Percentage” means, for any day, the percentage (expressed as a decimal and rounded upwards, if necessary, to the next higher 1/100th of 1%) which is in effect for such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any basic, supplemental or emergency reserves) in respect of eurocurrency liabilities or any similar category of liabilities for a member bank of the Federal Reserve System in New York City.

 

“Event of Default” means any of the events specified in Section 9.1, provided that any requirement for passage of time, giving of notice, or any other condition has been satisfied.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Excluded Taxes” means, with respect to the Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located or, in the case of the Lender, in which its applicable Lending Office is located, and (b) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which the Borrower is located.

 

  

7

  

“Existing Credit Agreement” has the meaning set forth in the Statement of Purpose.

 

“Facility Fee” has the meaning assigned thereto in Section 4.3(b).

 

“FDIC” means the Federal Deposit Insurance Corporation, or any successor thereto.

 

“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day (or, if such day is not a Business Day, for the immediately preceding Business Day), as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that if such rate is not so published for any day which is a Business Day, the average of the quotation for such day on such transactions received by the Lender from three Federal Funds brokers of recognized standing selected by the Lender.

 

“Fiscal Year” means the fiscal year of the Borrower and its Subsidiaries ending on the nearest Sunday to December 31 (for United States reporting purposes).

 

“Foreign Subsidiary” means any Subsidiary of the Borrower not organized under the laws of any State of the United States or the District of Columbia.

 

“GAAP” means accounting principles generally accepted in the United States of America, as recognized by the U.S. Securities and Exchange Commission, the American Institute of Certified Public Accountants and the Financial Accounting Standards Board, consistently applied and maintained on a consistent basis for the Borrower and its Subsidiaries throughout the period indicated and (subject to Section 1.3) consistent with the prior financial practice of the Borrower and its Subsidiaries.  Any differences in the recognition of GAAP between such parties shall be resolved in favor of (i) the U.S. Securities and Exchange Commission over the American Institute of Certified Public Accountants and the Financial Accounting Standards Board and (ii) the Financial Accounting Standards Board over the American Institute of Certified Public Accountants.

 

“Governmental Approvals” means all authorizations, consents, approvals, licenses and exemptions of, registrations and filings with, and reports to, all Governmental Authorities.

 

“Governmental Authority” means any nation, province, state or political subdivision thereof, and any government or any Person exercising executive, legislative, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.

 

“Guaranty Obligation” means, with respect to the Borrower and its Subsidiaries, without duplication, any obligation, contingent or otherwise, of any such Person pursuant to which such Person has directly or indirectly guaranteed any Debt or other obligations of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of any such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (b) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, that the term Guaranty Obligation shall not include endorsements for collection or deposit in the ordinary course of business.

 

  

8

  

“Hazardous Materials” means any substances or materials that are toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise harmful to human health or the environment and are or become regulated by any Governmental Authority, or that contain, without limitation, asbestos, polychlorinated biphenyls, urea formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived substances or waste, crude oil, nuclear fuel, natural gas or synthetic gas.

 

“Hedge Bank” means any Person that, at the time it enters into a Hedging Agreement permitted under Article VII, is the Lender, or an Affiliate of the Lender, in its capacity as a party to such Hedging Agreement.

 

“Hedging Agreement” means any agreement with respect to any Interest Rate Contract, forward rate agreement, commodity swap, forward foreign exchange agreement, currency swap agreement, cross-currency rate swap agreement, currency option agreement or other agreement or arrangement designed to alter the risks of any Person arising from fluctuations in interest rates, currency values or commodity prices, all as amended, restated, supplemented or otherwise modified from time to time.

 

“Hedging Obligations” shall have the meaning assigned thereto in the definition of “Obligations.”

“Interest Expense” means, with respect to the Borrower and its Subsidiaries for any period, the gross interest expense of the Borrower and its Subsidiaries, all determined for such period on a Consolidated basis, without duplication, in accordance with GAAP.

 

“Increased Amount Date” has the meaning assigned thereto in Section 4.13.

 

“Incremental Loan Commitments” has the meaning assigned thereto in Section 4.13.

 

“Incremental Loans” has the meaning assigned thereto in Section 4.13.

 

“Indemnified Taxes” means Taxes and Other Taxes other than Excluded Taxes.

 

“Interest Period” has the meaning assigned thereto in Section 4.1(b).

 

“Interest Rate Contract” means any interest rate swap agreement, interest rate cap agreement, interest rate floor agreement, interest rate collar agreement, interest rate option or any other agreement regarding the hedging of interest rate risk exposure executed in connection with hedging the interest rate exposure of any Person and any confirming letter executed pursuant to such agreement, all as amended, restated, supplemented or otherwise modified from time to time.

“IRS” means the United States Internal Revenue Service, or any successor thereto.

 

  

9

  

“ISP98” means the International Standby Practices (1998 Revision, effective January 1, 1999), International Chamber of Commerce Publication No.  590.

 

 “Joinder Agreement” means, collectively, each joinder agreement executed in favor of the Lender, substantially in the form of Exhibit J.

“L/C Commitment” means the lesser of (a) Five Million Dollars ($5,000,000) and (b) the Revolving Credit Commitment.

 

“L/C Facility” means the letter of credit facility established pursuant to Article III.

 

“L/C Obligations” means at any time, an amount equal to the sum of (a) the aggregate undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount of drawings under Letters of Credit which have not then been reimbursed pursuant to Section 3.4.

 

“Lender” means Wells Fargo.

 

“Lending Office” means the Lender maintaining the Lender’s Loans and Letters of Credit.

 

“Letter of Credit Application” means an application, in the form specified by the Lender from time to time, requesting the Lender to issue a Letter of Credit.

 

“Letters of Credit” means the collective reference to letters of credit issued pursuant to Section 3.1.

 

“LIBOR” means,

 

(a)           for any interest rate calculation with respect to a LIBOR Rate Loan (or the Alternative Currency Amount thereof with respect to a borrowing to be made in an Alternative Currency), the rate of interest per annum determined on the basis of the rate for deposits in Dollars or in Alternative Currency for a period equal to the applicable Interest Period which appears on Reuters Screen LIBOR 01 Page (or any applicable successor page) at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of the applicable Interest Period (rounded upward, if necessary, to the nearest 1/100th of 1%).  If, for any reason, such rate does not appear on Reuters Screen LIBOR01 Page (or any applicable successor page), then “LIBOR” shall be determined by the Lender to be the arithmetic average of the rate per annum at which deposits in Dollars in minimum amounts of at least $5,000,000 would be offered by first class banks in the London interbank market to the Lender at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of the applicable Interest Period for a period equal to such Interest Period.

 

(b)           for any interest rate calculation with respect to a Base Rate Loan, the rate of interest per annum determined on the basis of the rate for deposits in Dollars in minimum amounts of at least $5,000,000 for a period equal to one month (commencing on the date of determination of such interest rate) which appears on the Reuters Screen LIBOR01 Page (or any applicable successor page) at approximately 11:00 a.m.  (London time) on such date of determination, or, if such date is not a Business Day, then the immediately preceding Business Day (rounded upward, if necessary, to the nearest 1/100th of 1%).  If, for any reason, such rate does not appear on Reuters Screen LIBOR01 Page (or any applicable successor page) then “LIBOR” for such Base Rate Loan shall be determined by the Lender to be the arithmetic average of the rate per annum at which deposits in Dollars in minimum amounts of at least $5,000,000 would be offered by first class banks in the London interbank market to the Lender at approximately 11:00 a.m. (London time) on such date of determination for a period equal to one month commencing on such date of determination.

 

  

10

  

Each calculation by the Lender of LIBOR shall be conclusive and binding for all purposes, absent manifest error.

 

“LIBOR Rate” means

(i)           with respect to any LIBOR Rate Loan denominated in Dollars, a rate per annum (rounded upwards, if necessary, to the next higher 1/100th of 1%) determined by the Lender pursuant to the following formula:

 

 

LIBOR Rate =                                LIBOR                                           

1.00-Eurodollar Reserve Percentage

 

and

 

(ii)           with respect to any LIBOR Rate Loan denominated in any Alternative Currency, a rate per annum (rounded upwards, if necessary, to the next higher 1/100th of 1%) equal to LIBOR.

Each calculation by the Lender of the LIBOR Rate shall be conclusive and binding for all purposes, absent manifest error.

“LIBOR Rate Loan” means any Loan bearing interest at a rate based upon the LIBOR Rate as provided in Section 4.1(a).

 

“Lien” means, with respect to any asset, any mortgage, leasehold mortgage, lien, pledge, charge, security interest, hypothecation or encumbrance of any kind in respect of such asset.  For the purposes of this Agreement, a Person shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, Capital Lease or other title retention agreement relating to such asset.

 

“Liquidity” means, with respect to the Borrower and its Subsidiaries as of any date of determination, (i) Consolidated cash and cash equivalents as of such date plus (ii) the aggregate Available Commitments as of such date.

 

“Loan Documents” means, collectively, this Agreement, the Notes, the Letter of Credit Applications, the Security Documents, each Joinder Agreement, the Fee Letter, the Waterloo Note (and any guaranty thereof), each Foreign Subsidiary Alternative Currency Loan Note, each Guaranty of Foreign Subsidiary Loan and each other document, instrument, certificate and agreement executed and delivered by the Credit Parties or any of their respective Subsidiaries in favor of or provided to the Lender in connection with this Agreement or otherwise referred to herein or contemplated hereby (excluding any Secured Hedging Agreement and any Secured Cash Management Agreement), all as may be amended, restated, supplemented or otherwise modified from time to time.

 

  

11

  

“Loans” means the collective reference to the Revolving Credit Loans and the Alternative Currency Loans (“Loan” means any of such Loans).

 

“Mandatory Cost Rate” means an addition to the interest rate on any Revolving Credit Loan or Alternative Currency Loan made by the Lender to compensate the Lender for the cost imputed to the Lender resulting from the imposition from time to time under or pursuant to the Bank of England Act 1998 and/or by the Bank of England and/or the Financial Services Authority (or other Governmental Authorities of the United Kingdom) of a requirement to place non-interest bearing cash ratio deposits or special deposits (whether interest bearing or not) with the Bank of England and/or fees to the Financial Services Authority calculated by reference to liabilities used to fund the Revolving Credit Loans and the Alternative Currency Loans, expressed as a rate per annum and determined pursuant to the formula set forth on Schedule 1.1(b) hereto.

“Material Acquisition”  means any Permitted Acquisition, the Costs of Acquisition of which exceed five percent (5%) of the total net assets of the Borrower and its Subsidiaries as reflected on the financial statements delivered in accordance with Section 7.1.

 

“Material Adverse Effect” means a material adverse effect on (i) the properties, business, prospects, operations or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole, (ii) the ability of the Borrower or any of its Subsidiaries to perform its material obligations under the Loan Documents to which it is a party, or (iii) the validity and enforceability of the Loan Documents.

 

“Material Domestic Subsidiary” means, at any time, (a) any Domestic Subsidiary of the Borrower with net assets in excess of five percent (5%) of the total net assets of the Borrower and its Subsidiaries as reflected on the financial statements delivered in accordance with Section 7.1, (b) any parent of any Domestic Subsidiary referred to in clause (a) of this definition, which parent is also a Domestic Subsidiary and which parent is not deemed a “Material Domestic Subsidiary” pursuant to clause (a) of this definition, (c) any Domestic Subsidiary of the Borrower voluntarily designated in writing to the Lender by the Borrower as a “Material Domestic Subsidiary” regardless of whether such Domestic Subsidiary is deemed a “Material Domestic Subsidiary” pursuant to clause (a) or (b) of this definition and (d) any Domestic Subsidiary of the Borrower that executes all the relevant joinder documents in compliance with Section 7.13 regardless of whether such Domestic Subsidiary is deemed a “Material Domestic Subsidiary” pursuant to clause (a), (b) or (c) of this definition.

 

“Material Foreign Subsidiary” means, at any time, (a) any Foreign Subsidiary of the Borrower directly owned by the Borrower or a Domestic Subsidiary of the Borrower with net assets in excess of five percent (5%) of the total net assets of the Borrower and its Subsidiaries as reflected on the financial statements delivered in accordance with Section 7.1 and (b) any Foreign Subsidiary of the Borrower voluntarily designated in writing to the Lender by the Borrower as a “Material Foreign Subsidiary” regardless of whether such Foreign Subsidiary is deemed a “Material Foreign Subsidiary” pursuant to clause (a) of this definition.

 

  

12

  

“Multiemployer Plan” means a “multiemployer plan” as defined in Section 4001 (a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making, or is accruing an obligation to make, or has accrued an obligation to make, contributions within the preceding six (6) years.

 

“Net Cash Position” means on any day, with respect to the Operating Account, a sum equal to the opening available balance in the Operating Account, plus any maturing investment principal and interest credited to the Operating Account, minus the daily presentment of checks and Operating Account holds, minus any floor balance which has been established to cover bank charges, minus any maturing interest debited to the Operating Account, in each case for such day.

 

“Net Income” means, with respect to the Borrower and its Subsidiaries, for any period of determination, the net income (or loss) of the Borrower and its Subsidiaries for such period, determined on a Consolidated basis in accordance with GAAP; provided that there shall be excluded from Net Income (a) the net income (or loss) of any Person in which the Borrower or any of its Subsidiaries has a joint interest with a third party, except to the extent such net income is actually paid to the Borrower or any of its Subsidiaries by dividend or other distribution during such period, (b) the net income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of such Person or is merged into or consolidated with such Person or any of its Subsidiaries or that Person’s assets are acquired by such Person or any of its Subsidiaries, (c) the cumulative effect of a change in accounting principles required or permitted by a change in GAAP subsequent to the Closing Date, and (d) any net gain classified as an extraordinary item in accordance with GAAP.

 

“Notes” means the collective reference to the Revolving Credit Notes and the Alternative Currency Note and “Note” means any of such Notes.

 

“Notice of Account Designation” has the meaning assigned thereto in Section 2.3(b).

 

“Notice of Borrowing” has the meaning assigned thereto in Section 2.3(a).

 

“Notice of Conversion/Continuation” has the meaning assigned thereto in Section 4.2.

 

“Notice of Prepayment” has the meaning assigned thereto in Section 2.4(c).

 

“Obligations” means, in each case, whether now in existence or hereafter arising: (a) the principal of and interest on (including interest accruing after the filing of any bankruptcy or similar petition) the Loans and the Waterloo Note, (b) the L/C Obligations, (c) all existing or future payment and other obligations owing by the Borrower under any Hedging Agreement (which such Hedging Agreement is permitted hereunder) with any Person that is the Lender hereunder or an Affiliate of the Lender hereunder at the time such Hedging Agreement is executed (all such obligations with respect to any such Hedging Agreement, “Hedging Obligations”) and (d)  all other fees and commissions (including attorneys’ fees), charges, indebtedness, loans, liabilities, financial accommodations, obligations, covenants and duties owing by the Borrower or any of its Subsidiaries to the Lender, in each case under or in respect of this Agreement, any Note, any Letter of Credit or any of the other Loan Documents of every kind, nature and description, direct or indirect, absolute or contingent, due or to become due, contractual or tortious, liquidated or unliquidated, and whether or not evidenced by any note.

 

  

13

  

“Officer’s Compliance Certificate” means a certificate of the chief financial officer or the treasurer of the Borrower substantially in the form attached as Exhibit F.

 

“Operating Account” means the principal operating account of the Borrower maintained with Wells Fargo.

 

“Other Taxes” means 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 under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.

 

“Participant” has the meaning assigned thereto in Section 10.10(b).

 

“Participating Member State” means each state so described in any EMU Legislation.

 

“PATRIOT Act” means the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), as amended.

 

“PBGC” means the Pension Benefit Guaranty Corporation or any successor agency.

 

“Pension Plan” means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of the Code and which (a) is maintained for the employees of the Borrower or any ERISA Affiliate or (b) has at any time within the preceding six (6) years been maintained for the employees of the Borrower or any of its current or former ERISA Affiliates.

 

“Permitted Acquisition” has the meaning set forth in Section 8.3(c).

“Permitted Acquisition Documents” means with respect to any acquisition proposed by the Borrower or any Subsidiary thereof, the purchase agreement, sale agreement, merger agreement or other agreement evidencing such acquisition, including, without limitation, all legal opinions and each other document executed, delivered, contemplated by or prepared in connection therewith and any amendment, modification or supplement to any of the foregoing.

 

“Permitted Currency” means Dollars or any Alternative Currency, or each such currency, as the context requires.

“Permitted Distribution Amount” means, on any date of determination, the lesser of (i) twelve and one-half cents ($0.125) times the number of shares of capital stock of the Borrower issued and outstanding as of the last day of the most recently ended calendar quarter and (ii) the amount that Borrower is permitted to distribute as a dividend or like distribution to its shareholders in respect of its shares of capital stock for such quarter pursuant to Applicable Law, its corporate governing documents and any contractual obligations applicable to it; provided, however, that the aggregate Permitted Distribution Amount shall not in any event exceed $8,000,000 in any calendar year.

  

14

  

“Permitted Holders” means (i) Harold C. Simmons, (ii) the trustees of the Harold C. Simmons Family Trust No. 1 dated January 1, 1964, the Harold C. Simmons Family Trust No. 2 dated January 1, 1964 and any trust or trusts established after the Closing Date for the benefit of Harold C. Simmons and/or his spouse or his or her descendants, whether natural or adopted (such trusts collectively, the “Trusts” and such individuals, collectively the “Beneficiaries”), (iii) each of the Trusts, (iv) each of the Beneficiaries, (v) any Person controlled, directly or indirectly, by one or more of the Persons described in clauses (i) through (iv) above, (vi) any employee benefit plan or pension fund of the Borrower or any Subsidiary and any Person holding any class of voting stock of the Borrower or Subsidiary for or pursuant to the terms of any such plan or fund, and (vii) any group made up of Persons described in clauses (i) through (vi) above.

“Permitted TIMET Debt” shall mean that certain unsecured term loan in the original principal amount of $42,230,190.00 made by TIMET Finance Management Company to the Borrower, as evidenced by a certain note dated September 21, 2009 (a copy of which is attached hereto as Schedule 1.1(a)), and which is subordinate to the repayment of the Obligations upon terms and conditions satisfactory to the Lender.

“Person” means an individual, corporation, limited liability company, partnership, association, trust, business trust, joint venture, joint stock company, pool, syndicate, sole proprietorship, unincorporated organization, Governmental Authority or any other form of entity or group thereof.

 

“Pounds Sterling” means, at any time of determination, the then official currency of the United Kingdom of Great Britain and Northern Ireland.

 

“Prime Rate” means, at any time, the rate of interest per annum publicly announced from time to time by the Lender as its prime rate.  Each change in the Prime Rate shall be effective as of the opening of business on the day such change in such prime rate occurs.  The parties hereto acknowledge that the rate announced publicly by the Lender as its prime rate is an index or base rate and shall not necessarily be its lowest or best rate charged to its customers or other banks.

 

“Pro Forma Basis” means, for purposes of calculating Consolidated EBITDA for any period during which one or more Specified Transactions occurs, that such Specified Transaction (and all other Specified Transactions that have been consummated during the applicable period) shall be deemed to have occurred as of the first day of the applicable period of measurement and all income statement items (whether positive or negative) attributable to the Property or Person disposed of in a Specified Disposition shall be excluded and all income statement items (whether positive or negative) attributable to the Property or Person acquired in a Permitted Acquisition shall be included; provided that the foregoing pro forma adjustments may be applied to any such definition, test or financial covenant solely to the extent that such adjustments (i) are reasonably expected to be realized within twelve (12) months of such Specified Transaction as set forth in reasonable detail on a certificate of a Responsible Officer of the Borrower delivered to the Lender and (ii) are calculated on a basis consistent with GAAP and Regulation S-X of the Exchange Act.

 

“Reimbursement Obligation” means the obligation of the Borrower to reimburse the Lender pursuant to Section 3.4 for amounts drawn under Letters of Credit.

 

  

15

  

“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents and advisors of such Person and of such Person’s Affiliates.

 

“Responsible Officer” means, as to any Person, the chief executive officer, president, chief financial officer, controller, treasurer or assistant treasurer of such Person or any other officer of such Person reasonably acceptable to the Lender.  Any document delivered hereunder or under any other Loan Document that is signed by a Responsible Officer of a Person shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Person and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Person.

 

“Restricted Payment” has the meaning set forth in Section 8.6.

 

“Revolving Credit Commitment” means the obligation of the Lender to make Revolving Credit Loans to the account of the Borrower hereunder as may be modified at any time or from time to time pursuant to the terms hereof (including, without limitation, Section 4.13).  The Revolving Credit Commitment on the Closing Date shall be $30,000,000.

 

“Revolving Credit Facility” means the revolving credit and alternative currency facilities established pursuant to Article II.

 

“Revolving Credit Loan” means any revolving loan made to the Borrower pursuant to Section 2.1, and all such revolving loans collectively as the context requires.

 

“Revolving Credit Maturity Date” means the earliest to occur of (a) January 27, 2015 or (b) the date of termination of the Revolving Credit Commitment pursuant to Section 9.2(a).

 

“Revolving Credit Note” means a promissory note made by the Borrower in favor of the Lender evidencing the Revolving Credit Loans, substantially in the form attached as Exhibit A-1, and any amendments, supplements and modifications thereto, any substitutes therefor, and any replacements, restatements, renewals or extension thereof, in whole or in part.

 

“Revolving Credit Outstandings” means the sum of (a) with respect to Revolving Credit Loans and Alternative Currency Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of Revolving Credit Loans and Alternative Currency Loans, as the case may be, occurring on such date; plus (b) with respect to any L/C Obligations on any date, the aggregate outstanding amount thereof on such date after giving effect to any changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements of outstanding unpaid drawings under any Letters of Credit or any reductions in the maximum amount available for drawing under Letters of Credit taking effect on such date.

 

“SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

 

“Secured Cash Management Agreement” means any Cash Management Agreement that is entered into by and between any Credit Party and any Cash Management Bank.

 

  

16

  

“Secured Hedging Agreement” means any Hedging Agreement permitted under Article VIII, in each case that is entered into by and between any Credit Party and any Hedge Bank.

 

“Secured Obligations” means, collectively, (a) the Obligations and (b) all existing or future payment and other obligations owing by any Credit Party under (i) any Secured Hedging Agreement and (ii) any Secured Cash Management Agreement.

 

“Security Documents” means the collective reference to the Subsidiary Guaranty Agreement, the Collateral Agreement and each other agreement or writing pursuant to which the Borrower or any Subsidiary thereof purports to guaranty the payment and/or performance of the Obligations, in each case, as amended, restated, supplemented or otherwise modified from time to time.

 

“Solvent” means, as to the Borrower and its Subsidiaries on a particular date, that any such Person (a) has capital sufficient to carry on its business and transactions and all business and transactions in which it is about to engage and is able to pay its debts as they mature, (b) owns property having a value, at fair valuation, greater than the amount required to pay its probable liabilities (including contingencies), and (c) does not believe that it will incur debts or liabilities beyond its ability to pay such debts or liabilities as they mature.

 

“Subordinated Debt” means the collective reference to any Debt of the Borrower or any Subsidiary subordinated in right and time of payment to the Obligations and containing such other terms and conditions, in each case as are satisfactory to the Lender.

 

“Subsidiary” means as to any Person, any corporation, partnership, limited liability company or other entity of which more than fifty percent (50%) of the outstanding Capital Stock or other ownership interests having ordinary voting power to elect a majority of the board of directors or other managers of such corporation, partnership, limited liability company or other entity is at the time owned by or the management is otherwise controlled by such Person (irrespective of whether, at the time, Capital Stock or other ownership interests of any other class or classes of such corporation, partnership, limited liability company or other entity shall have or might have voting power by reason of the happening of any contingency).  Unless otherwise qualified references to “Subsidiary” or “Subsidiaries” herein shall refer to those of the Borrower.

 

“Subsidiary Guarantors” means the Material Domestic Subsidiaries of the Borrower.

“Subsidiary Guaranty Agreement” means the unconditional guaranty agreement of even date executed by the Subsidiary Guarantors in favor of the Lender, for the ratable benefit of itself and the Lender, substantially in the form of Exhibit H, as amended, restated, supplemented or otherwise modified from time to time.

 

“Sweep Plus Loan Service Program” means the Sweep Plus Loan Service Program of Wells Fargo and any other cash management arrangement which the Borrower and Wells Fargo agree should be included in the borrowing and repayment of Revolving Credit Loans.

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, fines, additions to tax or penalties applicable thereto.

 

  

17

  

“Termination Event” means except for any such event or condition that could not reasonably be expected to have a Material Adverse Effect:  (a) a “Reportable Event” described in Section 4043 of ERISA for which the notice requirement has not been waived by the PBGC, or (b) the withdrawal of the Borrower or any ERISA Affiliate from a Pension Plan during a plan year in which it was a “substantial employer” as defined in Section 4001 (a)(2) of ERISA, or (c) the termination of a Pension Plan, the filing of a notice of intent to terminate a Pension Plan or the treatment of a Pension Plan amendment as a termination, under Section 4041 of ERISA, if the plan assets are not sufficient to pay all plan liabilities, or (d) the institution of proceedings to terminate, or the appointment of a trustee with respect to, any Pension Plan by the PBGC, or (e) any other event or condition which would constitute grounds under Section 4042(a) of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan, or (f) the imposition of a Lien pursuant to Section 412 of the Code or Section 302 of ERISA, or (g) the partial or complete withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer Plan if withdrawal liability is asserted by such plan, or (h) any event or condition which results in the reorganization or insolvency of a Multiemployer Plan under Sections 4241 or 4245 of ERISA, or (i) any event or condition which results in the termination of a Multiemployer Plan under Section 4041A of ERISA or the institution by the PBGC of proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA.

 

 “Total Funded Debt” means, as of any date of determination with respect to the Borrower and its Subsidiaries on a Consolidated basis without duplication, the sum of all Debt of the Borrower and its Subsidiaries.

 

“Treaty on European Union” means the Treaty of Rome of March 25, 1957, as amended by the Single European Act of 1986 and the Maastricht Treaty (signed February 7, 1992), as amended from time to time.

 

“Uniform Customs” means the Uniform Customs and Practice for Documentary Credits (2007 Revision), effective July, 2007 International Chamber of Commerce Publication No.  600.

 

“United States” means the United States of America.

 

“Waterloo Note” means that certain promissory note dated January 13, 2012 from Waterloo Furniture Components Limited in favor of Wells Fargo in the original principal amount of C$5,000,000 (as amended, modified, restated or supplemented from time to time).

 

“Wells Fargo” means Wells Fargo Bank, National Association, a national banking association, and its successors.

 

“Wholly-Owned” means, with respect to a Subsidiary, any Subsidiary for which all of the shares of Capital Stock or other ownership interests are, directly or indirectly, owned or controlled by the Borrower and/or one or more of its Wholly-Owned Subsidiaries (except for directors’ qualifying shares or other shares required by Applicable Law to be owned by a Person other than the Borrower).

 

  

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Section 1.2 Other Definitions and Provisions.  With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document: (a) the definitions of terms herein shall apply equally to the singular and plural forms of the terms defined, (b) whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms, (c) the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”, (d) the word “will” shall be construed to have the same meaning and effect as the word “shall”, (e) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (f) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (g) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, (h) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights, (i) the term “documents” includes any and all instruments, documents, agreements, certificates, notices, reports, financial statements and other writings, however evidenced, whether in physical or electronic form, (j) in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including” and (k) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

 

Section 1.3 Accounting Terms.  All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with GAAP, applied on a consistent basis, as in effect from time to time and in a manner consistent with that used in preparing the audited financial statements required by Section 7.1(a), except as otherwise specifically prescribed herein.  Notwithstanding the foregoing, for purposes of determining compliance with any covenant (including the computation of any financial covenant) contained herein, Debt of the Borrower and its Subsidiaries shall be deemed to be carried at 100% of the outstanding principal amount thereof, and the effects of FASB ASC 825 and FASB ASC 470-20 on financial liabilities shall be disregarded.

 

Section 1.4 Rounding.  Any financial ratios required to be maintained by the Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio or percentage is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

 

Section 1.5 References to Agreement and Laws.  Unless otherwise expressly provided herein, (a) references to formation documents, governing documents, agreements (including the Loan Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto, but only to the extent that such amendments, restatements, extensions, supplements and other modifications are not prohibited by any Loan Document; and (b) references to any Applicable Law shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such Applicable Law.

 

  

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Section 1.6 Times of Day.  Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).

 

Section 1.7 Letter of Credit Amounts.  Unless otherwise specified, all references herein to the amount of a Letter of Credit at any time shall be deemed to mean the maximum face amount of such Letter of Credit after giving effect to all increases thereof contemplated by such Letter of Credit or the Letter of Credit Application therefor (at the time specified therefor in such applicable Letter of Credit or Letter of Credit Application and as such amount may be reduced by (a) any permanent reduction of such Letter of Credit or (b) any amount which is drawn, reimbursed and no longer available under such Letter of Credit).

 

Section 1.8 Guaranty Obligations.  Unless otherwise specified, the amount of any Guaranty Obligation shall be the lessor of the principal amount of the obligations guaranteed and still outstanding and the maximum amount for which the guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Guaranty Obligation.

   

ARTICLE II             

         

REVOLVING CREDIT FACILITY

 

Section 2.1 Revolving Credit Loans.  (a)  Subject to the terms and conditions of this Agreement and the other Loan Documents, and in reliance upon the representations and warranties set forth herein, the Lender severally agrees to make Revolving Credit Loans to the Borrower from time to time from the Closing Date through, but not including, the Revolving Credit Maturity Date as requested by the Borrower in accordance with the terms of Section 2.3; provided, that the principal amount of outstanding Revolving Credit Loans from the Lender plus the outstanding L/C Obligations and outstanding Alternative Currency Loans shall not at any time exceed the Revolving Credit Commitment.  Subject to the terms and conditions hereof, the Borrower may borrow, repay and reborrow Revolving Credit Loans hereunder until the Revolving Credit Maturity Date.

 

(b)           Sweep Plus Loan Service Program.  The Borrower shall borrow all Revolving Credit Loans in accordance with the Sweep Plus Loan Service Program.  On each Business Day, the Lender shall calculate the Net Cash Position.  If the Net Cash Position is less than zero, then the Borrower shall be deemed to have irrevocably requested that the Lender make a Revolving Credit Loan to the Borrower in an amount equal to the lesser of (i) the amount of the deficit Net Cash Position and (ii) the amount that is (1) the Revolving Credit Commitment less (2) the sum of the aggregate principal amount of all outstanding Loans and all outstanding L/C Obligations; provided, however, that the obligation of the Lender to make any such Revolving Credit Loan to the Borrower shall be subject to all the terms and conditions hereof (including, without limitation, Section 5.2 hereof).  Principal and interest on Revolving Credit Loans deemed requested pursuant to this Section 2.1(b) hereof shall be paid pursuant to the terms and conditions of the Sweep Plus Loan Service Program without any deduction, setoff or counterclaim whatsoever.  Unless sooner paid pursuant to the provisions hereof or the provisions of the Sweep Plus Loan Service Program, the principal of the Revolving Credit Loans shall be paid in full, together with accrued interest thereon, on the Revolving Credit Maturity Date.

 

  

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Section 2.2 Alternative Currency Loans.

 

(a)           Availability.  Subject to the terms and conditions of this Agreement, and in reliance upon the representations and warranties set forth herein, the Lender agrees to make Alternative Currency Loans to the Borrower from time to time from the Closing Date through, but not including, the Revolving Credit Termination Date as requested by the Borrower in accordance with the terms of Section 2.3; provided, that, based upon the Dollar Amount of all outstanding Loans and L/C Obligations, immediately after the making of any such Alternative Currency Loans, the aggregate principal amount of all outstanding Alternative Currency Loans shall not exceed the lesser of (i) the Alternative Currency Commitment and (ii) the amount that is (A) the Revolving Credit Commitment, less (B) the sum of the aggregate principal amount of all outstanding Loans and all outstanding L/C Obligations.  Alternative Currency Loans shall be funded in an amount equal to the Alternative Currency Amount of such Alternative Currency Loan.  Subject to the terms and conditions hereof, the Borrower may borrow, repay and reborrow Alternative Currency Loans hereunder until the Revolving Credit Termination Date.  The Alternative Currency Loans and the obligation of the Borrower to repay such Alternative Currency Loans shall be evidenced by a separate Alternative Currency Note executed by the Borrower payable to the order of the Lender.

 

 

    (b)    Separate Alternative Currency Loans.  Borrower may elect by written notice to the Lender to cause a Foreign Subsidiary to directly borrow an Alternative Currency Loan hereunder.  Such Foreign Subsidiary shall become a borrower of an Alternative Currency Loan only upon the satisfaction of each of the following conditions precedent:  (a) the Lender shall have consented in writing to the addition of such Foreign Subsidiary as a borrower of an Alternative Currency Loan, which consent shall not be unreasonably withheld or delayed, (b) such Foreign Subsidiary shall execute and deliver to the Lender a Foreign Subsidiary Alternative Currency Loan Note substantially in the form of Exhibit J attached hereto, (c) Borrower shall execute and deliver to the Lender a Guaranty of Foreign Subsidiary Loan substantially in the form of Exhibit K attached hereto and (d) the Lender shall have received such additional due diligence, financial information, documents, instruments or agreements as the Lender may reasonably require (including, without limitation, resolutions of such Foreign Subsidiary demonstrating its authority to complete the transaction).   Any such Alternative Currency Loan made directly to a Foreign Subsidiary pursuant to this Section 2.2(b), including but not limited to the Waterloo Note, shall constitute an Alternative Currency Loan under the Credit Agreement.  

 

(c)           Refunding of Alternative Currency Loans.  Upon the occurrence and during the continuance of an Event of Default, each Alternative Currency Loan may, at the discretion of the Lender, be converted immediately to a Base Rate Loan funded in Dollars by the Lender in an amount equal to the Dollar Amount of such Alternative Currency Loan for the remainder of the Interest Period applicable to such Alternative Currency Loan.  Such Base Rate Loan shall thereafter be reflected as a Revolving Credit Loan of the Lender.  

 

Section 2.3 Procedure for Advances of Alternative Currency Loans

 

.

  

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(a)           Requests for Borrowing of Alternative Currency Loans.  The Borrower shall give the Lender irrevocable prior written notice substantially in the form of Exhibit B (a “Notice of Borrowing”) not later than 11:00 a.m. (London time) at least four (4) Business Days before each LIBOR Rate Loan denominated in an Alternative Currency, of its intention to borrow, specifying (A) the date of such borrowing, which shall be a Business Day, (B) the amount of such borrowing, which shall be in an aggregate principal Alternative Currency Amount of $2,000,000 or a whole multiple of $1,000,000 in excess thereof and (C) the duration of the Interest Period applicable thereto.  A Notice of Borrowing received after 11:00 a.m. (London time) shall be deemed received on the next Business Day.

 

(b)           Disbursement of Alternative Currency Loans.  Not later than 11:00 a.m. (London time) on or before the proposed borrowing date for any Alternative Currency Loan, the Lender will make available to the Borrower for the account of the Borrower, in the requested Alternative Currency in funds immediately available to the Borrower, the Alternative Currency Loan to be made on such borrowing date.  The Borrower hereby irrevocably authorizes the Lender to disburse the proceeds of each borrowing requested pursuant to this Section 2.3 in immediately available funds by crediting or wiring such proceeds to the deposit account of the Borrower identified in the most recent notice substantially in the form attached as Exhibit C (a “Notice of Account Designation”) delivered by the Borrower to the Lender or as may be otherwise requested by the Borrower from time to time (subject to the reasonable consent of the Lender).

 

Section 2.4 Repayment and Prepayment of Revolving Credit Loans and Alternative Currency Loans

 

.

 

(a)           Repayment on Termination Date.  The Borrower hereby agrees to repay the outstanding principal amount of (i) all Revolving Credit Loans in full on the Revolving Credit Maturity Date and (ii) all Alternative Currency Loans in full in the Alternative Currency in which each Alternative Currency Loan was initially funded on the Revolving Credit Maturity Date, together, in each case, with all accrued but unpaid interest thereon.

 

(b)           Mandatory Prepayments.  If at any time the Revolving Credit Outstandings exceed the Revolving Credit Commitment, the Borrower agrees to repay immediately upon notice from the Lender, by payment to the Lender, Loans and L/C Obligations in an amount equal to such excess with each such repayment applied first to the principal amount of outstanding Revolving Credit Loans, second to the principal amount of outstanding Alternative Currency Loans and third, with respect to any Letters of Credit then outstanding, a payment of cash collateral into a cash collateral account opened by the Lender, in an amount equal to such excess (such cash collateral to be applied in accordance with Section 9.2(b)).

 

(c)           Optional Prepayments.  Prepayments of Revolving Credit Loans shall be permitted in accordance with the terms and conditions of the Sweep Plus Loan Service Program.  The Borrower may at any time and from time to time prepay Alternative Currency Loans, in whole or in part, with irrevocable prior written notice to the Lender substantially in the form attached as Exhibit D (a “Notice of Prepayment”) given not later than 11:00 a.m. (London time) at least four (4) Business Days’ in advance, specifying the date and amount of prepayment of such Alternative Currency Loans.  If any such notice is given, the amount specified in such notice shall be due and payable on the date set forth in such notice.  Partial prepayments shall be in an aggregate amount of $2,000,000 or a whole multiple of $1,000,000 in excess thereof (based upon the Alternative Currency Amount thereof), or as otherwise agreed to by the Lender and the Borrower.  A Notice of Prepayment received after 11:00 a.m. (London time) shall be deemed received on the next Business Day.  Each such repayment shall be accompanied by any amount required to be paid pursuant to Section 4.9 hereof.

 

  

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(d)           Limitation on Prepayment of Alternative Currency Loans.  The Borrower may not prepay any Alternative Currency Loan on any day other than on the last day of the Interest Period applicable thereto unless such prepayment is accompanied by any amount required to be paid pursuant to Section 4.9 hereof.

 

(e)           Hedging Agreements.  No repayment or prepayment pursuant to this Section shall affect any of the Borrower’s obligations under any Hedging Agreement.

 

Section 2.5 Termination of Revolving Credit Facility.  The Credit Facility shall terminate on the Revolving Credit Maturity Date.

 

                            ARTICLE III                                

LETTER OF CREDIT FACILITY

 

Section 3.1 L/C Commitment.  Subject to the terms and conditions hereof, the Lender agrees to issue standby letters of credit (the “Letters of Credit”) for the account of the Borrower on any Business Day from the Closing Date through but not including the fifth (5th) Business Day prior to the Revolving Credit Maturity Date in such form as may be approved from time to time by the Lender; provided, that the Lender shall have no obligation to issue any Letter of Credit if, after giving effect to such issuance, (a) the L/C Obligations would exceed the L/C Commitment or (b) the Revolving Credit Outstandings would exceed the Revolving Credit Commitment.  Each Letter of Credit shall (i) be denominated in Dollars in a minimum amount of $100,000, (or such lesser amount as agreed to by the Lender), (ii) be a standby letter of credit issued to support obligations of the Borrower or any of its Subsidiaries, contingent or otherwise, incurred in the ordinary course of business, (iii) expire on a date no more than twelve (12) months after the date of issuance or last renewal of such Letter of Credit (subject to automatic renewal for additional one (1) year periods pursuant to the terms of the Letter of Credit Application or other documentation acceptable to the Lender), which date shall be no later than the fifth (5th) Business Day prior to the Revolving Credit Maturity Date and (iv) be subject to the Uniform Customs and/or ISP98, as set forth in the Letter of Credit Application or as determined by the Lender and, to the extent not inconsistent therewith, the laws of the State of New York.  References herein to “issue” and derivations thereof with respect to Letters of Credit shall also include extensions or modifications of any outstanding Letters of Credit, unless the context otherwise requires.

 

Section 3.2 Procedure for Issuance of Letters of Credit.  The Borrower may from time to time request that the Lender issue a Letter of Credit by delivering to the Lender at the Lender’s Office a Letter of Credit Application therefor, completed to the satisfaction of the Lender, and such other certificates, documents and other papers and information as the Lender may request.  Upon receipt of any Letter of Credit Application, the Lender shall process such Letter of Credit Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall, subject to Section 3.1 and Article V, promptly issue the Letter of Credit requested thereby (but in no event shall the Lender be required to issue any Letter of Credit earlier than three (3) Business Days after its receipt of the Letter of Credit Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed by the Lender and the Borrower.

 

  

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Section 3.3 Commissions and Other Charges.

 

(a)           Letter of Credit Commissions.  The Borrower shall pay to the Lender, a letter of credit commission with respect to each Letter of Credit in the amount equal to the daily amount available to be drawn under such Letter of Credit times the Applicable Margin with respect to Revolving Credit Loans that are LIBOR Rate Loans (determined on a per annum basis).  Such commission shall be payable quarterly in arrears on the last Business Day of each calendar quarter, on the Revolving Credit Maturity Date and thereafter on demand of the Lender.

 

(b)           Issuance Fee.  In addition to the foregoing commission, the Borrower shall pay to the Lender, an issuance fee with respect to each Letter of Credit as set forth in the Fee Letter.  Such issuance fee shall be payable quarterly in arrears on the last Business Day of each calendar quarter commencing with the first such date to occur after the issuance of such Letter of Credit, on the Revolving Credit Maturity Date and thereafter on demand of the Lender.

 

(c)           Other Costs.  In addition to the foregoing fees and commissions, the Borrower shall pay or reimburse the Lender for such normal and customary costs and expenses as are incurred or charged by the Lender in issuing, effecting payment under, amending or otherwise administering any Letter of Credit.

 

Section 3.4 Reimbursement Obligation of the Borrower.  In the event of any drawing under any Letter of Credit, the Borrower agrees to reimburse (either with the proceeds of a Revolving Credit Loan as provided for in this Section or with funds from other sources), in same day funds, the Lender on each date on which the Lender notifies the Borrower of the date and amount of a draft paid under any Letter of Credit for the amount of (a) such draft so paid and (b) any amounts referred to in Section 3.3(c) incurred by the Lender in connection with such payment.  Unless the Borrower shall immediately notify the Lender that the Borrower intends to reimburse the Lender for such drawing from other sources or funds, the Borrower shall be deemed to have timely given a Notice of Borrowing to the Lender requesting that the Lender make a Revolving Credit Loan bearing interest at the LIBOR Rate on such date in the amount of (a) such draft so paid and (b) any amounts referred to in Section 3.3(c) incurred by the Lender in connection with such payment, and the Lender shall make a Revolving Credit Loan bearing interest at the LIBOR Rate in such amount, the proceeds of which shall be applied to reimburse the Lender for the amount of the related drawing and costs and expenses.  The Lender acknowledges and agrees that its obligation to fund a Revolving Credit Loan in accordance with this Section to reimburse the Lender for any draft paid under a Letter of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, non-satisfaction of the conditions set forth in Section 2.3(a) or Article V.  If the Borrower has elected to pay the amount of such drawing with funds from other sources and shall fail to reimburse the Lender as provided above, the unreimbursed amount of such drawing shall bear interest at the rate which would be payable on any outstanding Base Rate Loans which were then overdue from the date such amounts become payable (whether at stated maturity, by acceleration or otherwise) until payment in full.

 

  

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Section 3.5 Obligations Absolute.  The Borrower’s obligations under this Article III (including, without limitation, the Reimbursement Obligation) shall be absolute and unconditional under any and all circumstances and irrespective of any set off, counterclaim or defense to payment which the Borrower may have or have had against the Lender or any beneficiary of a Letter of Credit or any other Person.  The Borrower also agrees that the Lender shall not be responsible for, and the Borrower’s Reimbursement Obligation under Section 3.4 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee.  The Lender shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions caused by the Lender’s gross negligence or willful misconduct, as determined by a court of competent jurisdiction by final nonappealable judgment.  The Borrower agrees that any action taken or omitted by the Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct shall be binding on the Borrower and shall not result in any liability of the Lender to the Borrower.  The responsibility of the Lender to the Borrower in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are in conformity with such Letter of Credit.

 

Section 3.6 Effect of Letter of Credit Application.  To the extent that any provision of any Letter of Credit Application related to any Letter of Credit is inconsistent with the provisions of this Article III, the provisions of this Article III shall apply.

 

                            ARTICLE IV                                

 

GENERAL LOAN PROVISIONS

Section 4.1 Interest.

 

(a)           Interest Rate.  Unless required to be Base Rate Loans in accordance with Section 4.8, (i) all Revolving Credit Loans shall bear interest for each day at the LIBOR Rate for such day (utilizing an Interest Period of one month) plus the Applicable Margin (provided that each change in the LIBOR Rate shall be effective as of the opening of business on the day such change in the LIBOR Rate occurs) and (ii) Alternative Currency Loans shall bear interest at the LIBOR Rate plus the Applicable Margin.  The Borrower shall select the Interest Period applicable to any Alternative Currency Loan at the time a Notice of Borrowing is given or at the time a Notice of Conversion/Continuation is given pursuant to Section 4.2.  Any  Alternative Currency Loan or any portion thereof as to which the Borrower has not duly specified an interest rate as provided herein shall be deemed to have an Interest Period of one (1) month and shall be made four (4) Business Days after receipt of such notice.

 

  

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(b)           Interest Periods.  In connection with each Alternative Currency Loan, the Borrower, by giving notice at the times described in Section 2.3 or 5.2, as applicable, shall elect an interest period (each, an “Interest Period”) to be applicable to such Loan, which Interest Period shall be a period of one (1), two (2), three (3), or six (6) months; provided that:

 

(i)           the Interest Period shall commence on the date of advance of or conversion to any Alternative Currency Loan and, in the case of immediately successive Interest Periods, each successive Interest Period shall commence on the date on which the immediately preceding Interest Period expires;

 

(ii)           if any 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 with respect to an Alternative Currency Loan 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 immediately preceding Business Day;

 

(iii)           any Interest Period with respect to an Alternative Currency Loan 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 end on the last Business Day of the relevant calendar month at the end of such Interest Period;

 

(iv)           no Interest Period shall extend beyond the Revolving Credit Maturity Date; and

 

(v)           there shall be no more than six (6) Interest Periods in effect at any time.

 

(c)           Default Rate.  Subject to Section 9.3, (i) immediately upon the occurrence and during the continuance of an Event of Default under Section 9.1(a), (b), (j) or (k), or (ii) at the election of the Lender, upon the occurrence and during the continuance of any other Event of Default, (A) the Borrower shall no longer have the option to request LIBOR Rate Loans, Alternative Currency Loans or Letters of Credit, (B) all outstanding LIBOR Rate Loans (including, without limitation, Alternative Currency Loans) shall bear interest at a rate per annum of two percent (2%) in excess of the rate (including the Applicable Margin) then applicable to LIBOR Rate Loans until the end of the applicable Interest Period and thereafter at a rate equal to two percent (2%) in excess of the rate (including the Applicable Margin) then applicable to Base Rate Loans, (C) all outstanding Base Rate Loans and other Obligations arising hereunder or under any other Loan Document shall bear interest at a rate per annum equal to two percent (2%) in excess of the rate (including the Applicable Margin) then applicable to Base Rate Loans or such other Obligations arising hereunder or under any other Loan Document and (D) all accrued and unpaid interest shall be due and payable on demand of the Lender.  Interest shall continue to accrue on the Obligations after the filing by or against the Borrower of any petition seeking any relief in bankruptcy or under any act or law pertaining to insolvency or debtor relief, whether state, federal or foreign.

 

  

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(d)           Interest Payment and Computation.  Interest on each Alternative Currency Loan shall be due and payable on the last day of each Interest Period applicable thereto, and if such Interest Period extends over three (3) months, at the end of each three (3) month interval during such Interest Period.  To the extent that Base Rate Loans are required by Section 4.8, interest on each such Base Rate Loan shall be due and payable in arrears on the last Business Day of each calendar quarter.  All computations of interest for Base Rate Loans when the Base Rate is determined by the Prime Rate shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed.  All other computations of fees and interest provided hereunder shall be made on the basis of a 360- day year and actual days elapsed (which results in more fees or interest, as applicable, being paid than if computed on the basis of a 365/366-day year), except, to the extent that Pounds Sterling is agreed upon as an Alternative Currency pursuant to the definition thereof, for Alternative Currency Loans denominated in Pounds Sterling which shall be computed on the basis of a 365/66-day year.

 

(e)           Maximum Rate.  In no contingency or event whatsoever shall the aggregate of all amounts deemed interest under this Agreement charged or collected pursuant to the terms of this Agreement exceed the highest rate permissible under any Applicable Law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto.  In the event that such a court determines that the Lender has charged or received interest hereunder in excess of the highest applicable rate, the rate in effect hereunder shall automatically be reduced to the maximum rate permitted by Applicable Law.  It is the intent hereof that the Borrower not pay or contract to pay, and that the Lender not receive or contract to receive, directly or indirectly in any manner whatsoever, interest in excess of that which may be paid by the Borrower under Applicable Law.

 

Section 4.2 Notice and Manner of Conversion or Continuation of Alternative Currency Loans.  Provided that no Default or Event of Default has occurred and is then continuing, and upon the expiration of any Interest Period, the Borrower shall have the option to continue any LIBOR Rate Loan denominated in any Alternative Currency in a principal amount of $2,000,000 or any whole multiple of $1,000,000 in excess thereof (based on the Alternative Currency Amount thereof) as a LIBOR Rate Loan in the same Alternative Currency.  Whenever the Borrower desires to convert or continue Loans as provided above, the Borrower shall give the Lender irrevocable prior written notice in the form attached as Exhibit E (a “Notice of Conversion/Continuation”) not later than 11:00 a.m. (London time) four (4) Business Days before the day on which a proposed conversion or continuation of such Alternative Currency Loan is to be effective specifying (A) the Alternative Currency Loans to be converted or continued, and the last day of the Interest Period therefor, (B) the effective date of such conversion or continuation (which shall be a Business Day), (C) the principal amount of such Alternative Currency Loans to be converted or continued, and (D) the Interest Period to be applicable to such converted or continued Alternative Currency Loan.

 

  

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Section 4.3 Fees.

 

(a)           Commitment Fee.  Commencing on the Closing Date, the Borrower shall pay to the Lender a non-refundable commitment fee (the “Commitment Fee”) at a rate per annum equal to 0.40% on the average daily unused portion of the Revolving Credit Commitment of the Lender.  The Commitment Fee shall be payable in arrears on the last Business Day of each calendar quarter during the term of this Agreement commencing March 31, 2012 and ending on the Revolving Credit Maturity Date.

 

(b)           Facility Fee.  On the Closing Date, the Borrower shall pay to the Lender a non-refundable facility fee (the “Facility Fee”) of $30,000.00.

 

Section 4.4 Manner of Payment.

 

(a)           Sharing of Payments.  Each payment by the Borrower on account of the principal of or interest on the Loans or of any fee, commission or other amounts (including the Reimbursement Obligation) payable to the Lender under this Agreement shall be made not later than 1:00 p.m.  on the date specified for payment under this Agreement to the Lender in Dollars, in immediately available funds and shall be made without any set off, counterclaim or deduction whatsoever.  Any payment received after such time but before 2:00 p.m.  on such day shall be deemed a payment on such date for the purposes of Section 9.1, but for all other purposes shall be deemed to have been made on the next succeeding Business Day.  Any payment received after 2:00 p.m. shall be deemed to have been made on the next succeeding Business Day for all purposes.

 

(b)           Alternative Currency Loans.  Each payment by the Borrower on account of the principal of or interest on the Alternative Currency Loans shall be made in such Alternative Currency not later than 11:00 a.m. (London time) on the date specified for payment under this Agreement to the Lender for the account of the Lender (other than as set forth below) in immediately available funds, and shall be made without any set-off, counterclaim or deduction whatsoever.  Any payment received after such time but before 12:00 noon (the time of the Lender’s office) on such day shall be deemed a payment on such date for the purposes of Section 9.1, but for all other purposes shall be deemed to have been made on the next succeeding Business Day.  Any payment received after 12:00 noon (the time of the Lender’s office) shall be deemed to have been made on the next succeeding Business Day for all purposes.

 

Section 4.5 Evidence of Indebtedness.

 

(a)           Loans.  The Loans and Letters of Credit made by the Lender shall be evidenced by one or more accounts or records maintained by the Lender in the ordinary course of business.  The accounts or records maintained by the Lender shall be conclusive absent manifest error of the amount of the Loans made by the Lender to the Borrower and the interest and payments thereon.  Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations.  The Borrower shall execute and deliver to the Lender a Revolving Credit Note and/or Alternative Currency Note, as applicable, which shall evidence the Lender’s Revolving Credit Loans and/or Alternative Currency Loans, as applicable, in addition to such accounts or records.  The Lender may attach schedules to its Notes and endorse thereon the date, amount and maturity of its Loans and payments with respect thereto.

 

  

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Section 4.6 Redenomination of Alternative Currency Loans.

 

(a)           Conversion to the Base Rate.  If any Alternative Currency Loan is required to bear interest at the Base Rate rather than the LIBOR Rate pursuant to Section 4.1(c), Section 4.8 or any other applicable provision hereof, such Loan shall be funded in Dollars in an amount equal to the Dollar Amount of such Alternative Currency Loan.  The Borrower shall reimburse the Lender upon any such conversion for any amounts required to be paid under Section 4.9.

 

(b)           Redenomination of Loans and Obligations.  (i) Any Loan to be denominated in the currency of the applicable Participating Member State shall be made in the Euro, and (ii) any obligation of any party under this Agreement or any other Loan Document which has been denominated in the currency of a Participating Member State shall be redenominated into the Euro.

 

(c)           Further Assurances.  The terms and provisions of this Agreement will be subject to such reasonable changes of construction as determined by the Lender to reflect the implementation of the EMU in any Participating Member State or any market conventions relating to the fixing and/or calculation of interest being changed or replaced and to  reflect market practice at that time, and subject thereto, to put the Lender and the Borrower in the same position, so far as possible, that they would have been if such implementation had not occurred.  In connection therewith, the Borrower agrees, at the request of the Lender, at the time of or at any time following the implementation of the EMU in any Participating Member State or any market conventions relating to the fixing and/or calculation of interest being changed or replaced, to enter into an agreement amending this Agreement in such manner as the Lender shall reasonably request.

 

Section 4.7 Regulatory Limitation.  In the event, as a result of increases in  the value of Alternative Currencies against the Dollar or for any other reason, the obligation of Lender to make Loans (taking into account the Dollar Amount of the Obligations and all other indebtedness required to be aggregated under 12 U.S.C.A. §84, as amended, the regulations promulgated thereunder and  any other Applicable Law) is determined by the Lender to exceed its then  applicable legal lending limit under 12 U.S.C.A. §84, as amended, and the  regulations promulgated thereunder, or any other Applicable Law, the amount of additional Loans the Lender shall be obligated to make or issue hereunder shall immediately be reduced to the maximum amount which the Lender may legally advance (as determined by the Lender), to the extent necessary under such laws and regulations (as determined by the Lender, with respect to the applicability of such laws and regulations to itself), and the Borrower shall reduce, or cause to be reduced, complying to the extent practicable with the remaining provisions hereof, the Obligations outstanding hereunder by an amount sufficient to comply with such maximum amounts.

 

Section 4.8 Changed Circumstances.

 

  

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(a)           Circumstances Affecting LIBOR Rate and Alternative Currency Availability.  If with respect to any Interest Period for any LIBOR Rate Loan, the Lender shall determine that (i) by reason of circumstances affecting the foreign exchange and interbank markets generally, deposits in Eurodollars or an Alternative Currency in the applicable amounts are not being quoted via Dow Jones Market Screen 3750 or the applicable Reuters Screen Page or offered to the Lender for such Interest Period, (ii) a fundamental change has occurred in the foreign exchange or interbank markets with respect to any Alternative Currency (including, without limitation, changes in national or international financial, political or economic conditions or currency exchange rates or exchange controls) or (iii) it has become otherwise materially impractical for the Lender to make such Alternative Currency Loans, then the Lender shall forthwith give notice thereof to the Borrower.  Thereafter, until the Lender notifies the Borrower that such circumstances no longer exist, the obligation of the Lender, as applicable, to make LIBOR Rate Loans or Alternative Currency Loans, as applicable, and the right of the Borrower to convert any Loan to or continue any Loan as a LIBOR Rate Loan or an Alternative Currency Loan, as applicable, shall be suspended, and the Borrower shall repay in full (or cause to be repaid in full) the then outstanding principal amount of each such LIBOR Rate Loan or Alternative Currency Loan, as applicable, together with accrued interest thereon, on the last day of the then current Interest Period applicable to such LIBOR Rate Loan or Alternative Currency Loan, as applicable, or convert the then outstanding principal amount of each such LIBOR Rate Loan or Alternative Currency Loan, as applicable, to a Base Rate Loan in Dollars as of the last day of such Interest Period; provided that if the Borrower elects to make such conversion, the Borrower shall pay to the Lender any and all costs, fees and other expenses incurred by the Lender in effecting such conversion.  All Base Rate Loans shall bear interest at the Base Rate plus the Applicable Margin.

 

(b)           Laws Affecting LIBOR Rate and Alternative Currency Availability.  If, after the date hereof, the introduction of, or any change in, any Applicable Law or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Lender (or any of its Lending Offices) with any request or directive (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency, shall make it unlawful or impossible for the Lender (or any of its Lending Offices) to honor its obligations hereunder to make or maintain any LIBOR Rate Loan or any Alternative Currency Loan, the Lender shall promptly give notice thereof to the Borrower.  Thereafter, until the Lender notifies the Borrower that such circumstances no longer exist, (i) the obligations of the Lender or the Lender, as applicable, to make LIBOR Rate Loans or Alternative Currency Loans, as applicable, and the right of the Borrower to convert any Loan or continue any Loan as a LIBOR Rate Loan or an Alternative Currency Loan, as applicable, shall be suspended and thereafter the Borrower may select only Base Rate Loans hereunder, and (ii) if the Lender may not lawfully continue to maintain a LIBOR Rate Loan or an Alternative Currency Loan, as applicable, to the end of the then current Interest Period applicable thereto as a LIBOR Rate Loan or Alternative Currency Loan, as applicable, the applicable LIBOR Rate Loan or an Alternative Currency Loan, as applicable, shall immediately be converted to a Base Rate Loan in Dollars for the remainder of such Interest Period; provided that if the Borrower elects to make such conversion, the Borrower shall pay to the Lender any and all costs, fees and other expenses incurred by the Lender in effecting such conversion, including any amounts required to be paid under Section 4.9.

 

  

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Section 4.9 Indemnity.  The Borrower hereby indemnifies Lender against any loss or expense (including any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain a LIBOR Rate Loan or from fees payable to terminate the deposits from which such funds were obtained) which may arise or be attributable to the Lender’s obtaining, liquidating or employing deposits or other funds acquired to effect, fund or maintain any Loan (a) as a consequence of any failure by the Borrower to make any payment when due of any amount due hereunder in connection with a LIBOR Rate Loan or an Alternative Currency Loan, (b) due to any failure of the Borrower to borrow, continue or convert on a date specified therefor in a Notice of Borrowing or Notice of Conversion/Continuation or (c) due to any payment, prepayment or conversion of any LIBOR Rate Loan or any Alternative Currency Loan on a date other than the last day of the Interest Period therefor.  The amount of such loss or expense shall be determined, in the applicable Lender’s sole discretion, based upon the assumption that the Lender funded the LIBOR Rate Loans in the London interbank market and using any reasonable attribution or averaging methods which the Lender deems appropriate and practical.  A certificate of the Lender setting forth the basis for determining such amount or amounts necessary to compensate the Lender shall be forwarded to the Borrower and shall be conclusively presumed to be correct save for manifest error.

 

Section 4.10 Increased Costs.

 

(a)           Increased Costs Generally.  If any Change in Law shall:

 

(i)           impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or advances, loans or other credit extended or participated in by, the Lender (except any reserve requirement reflected in the LIBOR Rate) or the Lender;

 

(ii)           subject the Lender to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, or any LIBOR Rate Loan or Alternative Currency Loan made by it, or change the basis of taxation of payments to the Lender in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section 4.11 and the imposition of, or any change in the rate of any Excluded Tax payable by the Lender); or

 

(iii)           impose on the Lender or the London interbank market any other condition, cost or expense affecting this Agreement or LIBOR Rate Loans or Alternative Currency Loans made by the Lender or any Letter of Credit;

 

and the result of any of the foregoing shall be to increase the cost to the Lender of making, converting into or maintaining any LIBOR Rate Loan or an Alternative Currency Loan (or of maintaining its obligation to make any such Loan), or to increase the cost to the Lender of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by the Lender hereunder (whether of principal, interest or any other amount) then, upon written request of the Lender, the Borrower shall promptly pay to the Lender such additional amount or amounts as will compensate the Lender for such additional costs incurred or reduction suffered.

 

  

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(b)           Capital Requirements.  If the Lender determines that any Change in Law affecting the Lender or any lending office of the Lender or Lender’s holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on the Lender’s or the Lender’s capital or on the capital of the Lender’s holding company, if any, as a consequence of this Agreement, the Revolving Credit Commitment of the Lender or the Loans made by the Lender, or the Letters of Credit issued by the Lender, to a level below that which the Lender or the Lender’s holding company could have achieved but for such Change in Law (taking into consideration the Lender’s or the Lender’s policies and the policies of the Lender’s or the Lender’s holding company with respect to capital adequacy), then from time to time upon written request of the Lender or the Borrower shall promptly pay to the Lender such additional amount or amounts as will compensate the Lender for any such reduction suffered.

 

(c)           Certificates for Reimbursement.  A certificate of a Lender setting forth the amount or amounts necessary to compensate the Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section and delivered to the Borrower shall be conclusive absent manifest error.  The Borrower shall pay the Lender the amount shown as due on any such certificate within ten (10) days after receipt thereof.

 

(d)           Delay in Requests.  Failure or delay on the part of Lender to demand compensation pursuant to this Section shall not constitute a waiver of Lender’s right to demand such compensation; provided that the Borrower shall not be required to compensate the Lender pursuant to this Section for any increased costs incurred or reductions suffered more than nine (9) months prior to the date that the Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of Lender’s intention to claim compensation therefor (except that if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).

 

(e)           Exchange Indemnification and Increased Costs.  The Borrower shall, upon demand from the Lender, pay to the Lender, the amount of (i) any loss or cost or increased cost incurred by the Lender, (ii) any reduction in any amount payable to or in the effective return on the capital to the Lender, (iii) any interest or any other return, including principal, foregone by the Lender as a result of the introduction of, change over to or operation of the Euro, or (iv) any currency exchange loss, that Lender sustains as a result of any payment being made by the Borrower in a currency other than that originally extended to the Borrower.  A certificate of the Lender setting forth the basis for determining such additional amount or amounts necessary to compensate the Lender shall be conclusively presumed to be correct save for manifest error.

 

Section 4.11 Taxes

 

.

 

(a)           Payments Free of Taxes.  Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall be made free and clear of and without reduction or withholding for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required by Applicable Law to deduct any Indemnified Taxes (including any 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 Lender 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 timely pay the full amount deducted to the relevant Governmental Authority in accordance with Applicable Law.

 

  

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(b)           Payment of Other Taxes by the Borrower.  Without limiting the provisions of paragraph (a) above, the Borrower shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with Applicable Law.

 

(c)           Indemnification by the Borrower.  The Borrower shall indemnify the Lender, within ten (10) days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Lender, 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; provided that the Borrower shall not be obligated to indemnify the Lender for any amount in respect of any such penalties, interest or reasonable expenses if written demand therefor was not made by the Lender within 180 days from the date on which such party makes payment for such penalties, interest or expenses; provided further that the foregoing limitation shall not apply to any such penalties, interest or reasonable expenses arising out of the retroactive application of any such Indemnified Tax or Other Tax.  A certificate as to the amount of such payment or liability delivered to the Borrower by the Lender, shall be conclusive absent manifest error.  In addition, the Borrower shall indemnify the Lender within ten (10) days after demand therefor, for any incremental Taxes that may become payable by the Lender as a result of any failure of any Credit Party to pay any Taxes when due to the appropriate Governmental Authority or to deliver to the Lender, pursuant to clause (d), documentation evidencing the payment of Taxes.

 

(d)           Evidence of Payments.  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 Lender 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 Lender.

 

(e)           Treatment of Certain Refunds.  If the Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified pursuant to this Section (including additional amounts paid by the Borrower pursuant to this Section), it shall pay to the applicable indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Lender, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided that the applicable indemnifying party, upon the request of the Lender, agrees to repay the amount paid over pursuant to this Section (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Lender in the event the Lender is required to repay such refund to such Governmental Authority.  Notwithstanding anything to the contrary in this paragraph (f), in no event will the Lender be required to pay any amount to an indemnifying party pursuant to this paragraph (f) the payment of which would place the Lender in a less favorable net after-Tax position than the Lender would have been in if the indemnification payments or additional amounts giving rise to such refund had never been paid.  This paragraph shall not be construed to require the Lender to make available its tax returns (or any other information relating to its taxes which it deems confidential) to the Borrower or any other Person.

 

  

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(g)           Survival.  Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section shall survive the payment in full of the Obligations and the termination of the Revolving Credit Commitment.

 

Section 4.12 Mitigation Obligations.  If the Lender requests compensation under Section 4.10, or requires the Borrower to pay any additional amount to the Lender or any Governmental Authority for the account of the Lender pursuant to Section 4.11, then the Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of the Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 4.10 or Section 4.11, as the case may be, in the future and (ii) would not subject the Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to the Lender.  The Borrower hereby agrees to pay all reasonable costs and expenses incurred by the Lender in connection with any such designation or assignment.

 

Section 4.13 Incremental Loans.

 

(a)           At any time, the Borrower may by written notice to the Lender elect to request the establishment of one or more increases in the Revolving Credit Commitment, an “Incremental Loan Commitment”) to make incremental revolving credit loans (the “Incremental Loans”); provided that (1) the total aggregate amount for all such Incremental Loan Commitments shall not (as of any date of incurrence thereof) exceed $20,000,000 and (2) the total aggregate amount for each Incremental Loan Commitment (and the Incremental Loans made thereunder) shall not be less than a minimum principal amount of $5,000,000 or, if less, the remaining amount permitted pursuant to the foregoing clause (1).  Each such notice shall specify the date (each, an “Increased Amount Date”) on which the Borrower proposes that any Incremental Loan Commitment shall be effective, which shall be a date not less than ten (10) Business Days after the date on which such notice is delivered to Lender.  The Borrower may invite the Lender to provide an Incremental Loan Commitment.  The Lender may elect or decline, in its sole discretion, to provide such Incremental Loan Commitment.  Any Incremental Loan Commitment shall become effective as of such Increased Amount Date; provided that:

 

(A)           no Default or Event of Default shall exist on such Increased Amount Date before or after giving effect to (1) any Incremental Loan Commitment, (2) the making of any Incremental Loans pursuant thereto and (3) any Permitted Acquisition consummated in connection therewith;

 

(B)           the Lender shall have received from the Borrower an Officer’s Compliance Certificate demonstrating that the Borrower will be in compliance on a pro forma basis with the financial covenants set forth in Section 8.15 both before and after giving effect to (1) any Incremental Loan Commitment, (2) the making of any Incremental Loans pursuant thereto and (3) any Permitted Acquisition consummated in connection therewith;

 

  

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(C)           the proceeds of any Incremental Loans shall be used for general corporate purposes of the Borrower and its Subsidiaries (including Permitted Acquisitions);

 

(D)           each Incremental Loan Commitment (and the Incremental Loans made thereunder) shall constitute Obligations of the Borrower and shall be secured and guaranteed with the other Loans on a pari passu basis;

 

(E)           the Borrower shall deliver or cause to be delivered any customary legal opinions or other documents (including, without limitation, a resolution duly adopted by the board of directors (or equivalent governing body) of each Credit Party authorizing such Incremental Loan) reasonably requested by Lender in connection with any such transaction.

 

ARTICLE V   

                   

CONDITIONS OF CLOSING AND BORROWING

 

Section 5.1 Conditions to Closing.  The obligation of the Lender to close this Agreement and to make the initial Loan or issue or participate in the initial Letter of Credit, if any, is subject to the satisfaction of each of the following conditions:

 

(a)           Executed Loan Documents.  The following Loan Documents in form and substance satisfactory to the Lender:

 

(i)           this Agreement,

 

(ii)           the Revolving Credit Note,

 

(iii)           the Alternative Currency Note,

 

(iv)           the Subsidiary Guaranty Agreement;

 

(v)           the Collateral Agreement; and

 

(vi)           each other applicable Loan Document;

 

shall have been duly authorized, executed and delivered to the Lender by the parties thereto, shall be in full force and effect and no Default or Event of Default shall exist thereunder, and the Borrower shall have delivered original counterparts thereof to the Lender.

 

  

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(b)           Closing Certificates; Etc.

 

(i)           Officer’s Certificate of the Borrower.  The Lender shall have received a certificate from a Responsible Officer of the Borrower, in form and substance satisfactory to the Lender, to the effect that all representations and warranties of the Borrower and its Subsidiaries contained in this Agreement and the other Loan Documents are true, correct and complete; that the Borrower and its Subsidiaries are not in violation of any of the covenants contained in this Agreement and the other Loan Documents; that, after giving effect to the transactions contemplated by this Agreement, no Default or Event of Default has occurred and is continuing; and that the Borrower and its Subsidiaries have satisfied each of the closing conditions.

 

(ii)           Certificate of Secretary of each Subsidiary Guarantor.  The Lender shall have received a certificate of the secretary or assistant secretary of the Borrower and each Subsidiary Guarantor certifying as to the incumbency and genuineness of the signature of each officer of the Borrower or such Subsidiary Guarantor executing Loan Documents to which it is a party and certifying that attached thereto is a true, correct and complete copy of (A) the articles of incorporation of the Borrower or such Subsidiary Guarantor and all amendments thereto, certified by the appropriate Governmental Authority in its jurisdiction of incorporation, (B) the bylaws of the Borrower or such Subsidiary Guarantor as in effect on the date of such certifications, (C) resolutions duly adopted by the Board of Directors of the Borrower and such Subsidiary Guarantor authorizing the borrowings contemplated hereunder and the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party, and (D) each certificate required to be delivered pursuant to Section 5.1(b)(iii).

 

(iii)           Certificates of Good Standing.  The Lender shall have received (A) certificates as of a recent date of the good standing of the Borrower and each Subsidiary Guarantor under the laws of its jurisdiction of organization and, to the extent requested by the Lender, each other jurisdiction where the Borrower and each Subsidiary Guarantor is qualified to do business and (B) a certificate of the relevant taxing authority of the jurisdiction of organization of the Borrower and each Subsidiary Guarantor certifying that such Person has filed required tax returns and owes no delinquent taxes.

 

(iv)           Opinions of Counsel.  The Lender shall have received favorable opinions of counsel to the Borrower and each Subsidiary Guarantor addressed to the Lender with respect to the Borrower, the Subsidiary Guarantors, the Loan Documents and such other matters as the Lender shall request.

 

(c)           Security Interests/Pledged Collateral.  To the extent that the Applicable Laws and practices of any relevant foreign jurisdiction provide for the issuance of stock certificates or other certificates, the Lender shall have received original stock certificates or other certificates (or the equivalent taking into account the Applicable Laws and practices of any relevant foreign jurisdiction) of each Material Foreign Subsidiary evidencing the capital stock or other ownership interests pledged pursuant to the Collateral Agreement, together with an undated stock power for each such certificate duly executed in blank by the registered owner thereof; provided that the Borrower may evidence compliance herewith by providing a perfected first priority security interest (or the equivalent thereof pursuant to the Applicable Laws and practices of any relevant foreign jurisdiction) in the relevant indicia of ownership of such Material Foreign Subsidiary; provided, further, that the Borrower or the applicable Domestic Subsidiary of the Borrower owning the capital stock or other ownership interests of such Material Foreign Subsidiary shall not be required to pledge more than that percentage of all issued and outstanding shares of all capital stock or other ownership interests of such Foreign Subsidiary the granting of a security interest in which shall not result in material adverse tax consequences to the Borrower or such applicable Domestic Subsidiary (it being acknowledged by the Borrower and the Lender as of the Closing Date, such percentage required to be pledged is sixty-five percent (65%)); provided, further, and notwithstanding anything in the Loan Documents to the contrary, (A) the Borrower shall not be required to deliver a foreign pledge agreement unless reasonably requested to do so by the Lender and (B) the Borrower shall not be required to make any representations or warranties or deliver an opinion of counsel as to the perfection, validity and binding nature of the security interests created pursuant to such foreign pledge agreement unless reasonably requested to do so by the Lender.

 

  

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(d)           Consents; Defaults.

 

(i)           Governmental and Third Party Approvals.  The Borrower shall have obtained all necessary material approvals, authorizations and consents of any Person and of all Governmental Authorities and courts having jurisdiction with respect to the transactions contemplated by this Agreement and the other Loan Documents.

 

(ii)           No Injunction, Etc.  No action, suit, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any Governmental Authority to enjoin, restrain, or prohibit, or to obtain substantial damages in respect of, or which is related to or arises out of, this Agreement or the other Loan Documents or the consummation by the Borrower or any of its Subsidiaries of the transactions contemplated hereby or thereby, or which would be reasonably likely to have a Material Adverse Effect.

 

(iii)           No Event of Default.  No Default or Event of Default shall have occurred and be continuing.

 

(e)           Financial Matters.

 

(i)           Financial Statements.  The Lender shall have received the audited Consolidated financial statements of the Borrower and its Subsidiaries for each of the Borrower’s Fiscal years ending in 2010, 2009 and 2008, each as filed with the Securities and Exchange Commission and prepared in accordance with GAAP.

 

(ii)           Financial Condition Certificate.  The Borrower shall have delivered to the Lender a certificate, in form and substance satisfactory to the Lender, and certified as accurate by a Responsible Officer, that (A) the Borrower and each of its Subsidiaries are each Solvent as of the Closing Date, (B) attached thereto are calculations evidencing compliance with the covenants contained in Section 8.15 hereof as of the most recent quarterly financial statements of the Borrower and its Subsidiaries, and (C) the financial projections previously delivered to the Lender represent the good faith estimates (utilizing reasonable assumptions) of the financial condition and operations of the Borrower and its Subsidiaries as of the date thereof.

 

  

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(iii)           Payment at Closing.  The Borrower shall have paid to the Lender the fees set forth or referenced in Section 4.3 and any other fees due hereunder (provided, however, Borrower shall pay the reasonable legal fees and expenses of Lender promptly after closing).

 

(f)           Miscellaneous.

 

(i)           Existing Indebtedness.  All existing Debt of the Borrower and its Subsidiaries (including Debt under the Existing Credit Agreement but excluding the Waterloo Note and other Debt permitted pursuant to Section 8.1) shall be repaid in full and terminated and all collateral security therefor shall be released, and the Lender shall have received pay-off letters in form and substance satisfactory to it evidencing such repayment, termination and release.  Any existing Debt permitted pursuant to Section 8.1 shall be on terms and conditions reasonably satisfactory to the Lender.

 

(ii)           Miscellaneous Matters.  The Lender shall have received such information as it may have requested from the Borrower and its Subsidiaries relating to litigation, tax, accounting, labor, insurance, pension liabilities (actual or contingent), leases of real property, agreements evidencing Debt, ownership of assets by the Borrower or any of its Subsidiaries, environmental matters, contingent liabilities and management of the Borrower and its Subsidiaries (including, as applicable, copies of all documents, instruments and agreements relating to such subjects), and such information shall be in form and substance satisfactory to Lender.

 

(iii)           Other Documents.  All opinions, certificates and other instruments and all proceedings in connection with the transactions contemplated by this Agreement shall be satisfactory in form and substance to the Lender.  The Lender shall have received copies of all other documents, certificates and instruments reasonably requested thereby with respect to the transactions contemplated by this Agreement.

 

Section 5.2 Conditions to All Loans and Letters of Credit

 

.  The obligations of the Lender to make or participate in any Loans, convert or continue any Loan and/or the Lender to issue or extend any Letter of Credit are subject to the satisfaction of the following conditions precedent on the relevant borrowing, continuation, conversion, issuance or extension date:

 

(a)           Continuation of Representations and Warranties.  The representations and warranties contained in Sections 6.1, 6.3, 6.4, 6.5, 6.9, 6.12 and 6.13 shall be true and correct on and as of such borrowing, conversion, continuation, issuance or extension date with the same effect as if made on and as of such date, except for any representation and warranty made as of an earlier date, which representation and warranty shall remain true and correct as of such earlier date.

 

(b)           No Existing Default.  No Event of Default shall have occurred and be continuing (i) on the borrowing, continuation or conversion date with respect to such Loan or after giving effect to the Loans to be made, continued or converted on such date or (ii) on the issuance or extension date with respect to such Letter of Credit or after giving effect to the issuance or extension of such Letter of Credit on such date.

 

  

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(c)           Notices.  The Lender shall have received a Notice of Borrowing or Notice of Conversion/Continuation, as applicable, from the Borrower in accordance with Section 2.3(a) or Section 4.2, as applicable.

 

(d)           Additional Documents.  The Lender shall have received each additional document, instrument, legal opinion or other item reasonably requested by it.

 

ARTICLE VI             

                   

REPRESENTATIONS AND WARRANTIES OF THE CREDIT PARTIES

 

To induce the Lender to enter into this Agreement and to induce the Lender to make the Loans and the Letters of Credit, the Credit Parties hereby represent and warrant to the Lender both before and after giving effect to the transactions contemplated hereunder, which representations and warranties shall be deemed made on the Closing Date and as otherwise set forth in Section 5.2, that:

 

Section 6.1 Organization; Power; Qualification.  Each of the Borrower and its Subsidiaries (i) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, (ii) has the power and authority to own its Properties and to carry on its business and (iii) is duly qualified and authorized to do business in each jurisdiction in which its business requires such qualification and authorization, except where the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect.  The jurisdictions in which the Borrower and its Subsidiaries are organized and qualified to do business as of the Closing Date are described on Schedule 6.1.

 

Section 6.2 Ownership.  Each Subsidiary of the Borrower as of the Closing Date is listed, and the Material Domestic Subsidiaries and Material Foreign Subsidiaries are identified as such, on Schedule 6.2.  As of the Closing Date, the capitalization of the Borrower and its Subsidiaries consists of the number of shares, authorized, issued and outstanding, of such classes and series, with or without par value, described on Schedule 6.2.  All outstanding shares or equity interests have been duly authorized and validly issued and are fully paid and nonassessable, with no personal liability attaching to the ownership thereof, and not subject to any preemptive or similar rights.  The shareholders of the Subsidiaries of the Borrower and the number of shares owned by each as of the Closing Date are described on Schedule 6.2.  As of the Closing Date, there are no outstanding stock purchase warrants, subscriptions, options, securities, instruments or other rights of any type or nature whatsoever, which are convertible into, exchangeable for or otherwise provide for or permit the issuance of capital stock of the Borrower or its Subsidiaries, except pursuant to plans and agreements described in the Borrower’s periodic filings with the SEC.

 

Section 6.3 Authorization of Agreement, Loan Documents and Borrowing.  Each of the Borrower and its Subsidiaries has the right, power and authority and has taken all necessary corporate and other organizational action to authorize the execution, delivery and performance of this Agreement and each of the other Loan Documents to which it is a party in accordance with their respective terms.  This Agreement and each of the other Loan Documents have been duly executed and delivered by the duly authorized officers of the Borrower and each of its Subsidiaries party thereto, and each such document constitutes the legal, valid and binding obligation of the Borrower or its Subsidiary party thereto, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar state or federal debtor relief laws from time to time in effect which affect the enforcement of creditors’ rights in general and the availability of equitable remedies.

 

  

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Section 6.4 Compliance of Agreement, Loan Documents and Borrowing with Laws, Etc.  The execution, delivery and performance by the Borrower and its Subsidiaries of the Loan Documents to which each such Person is a party, in accordance with their respective terms, the Loan and L/C Obligations hereunder and the transactions contemplated hereby do not and will not, by the passage of time, the giving of notice or otherwise, (i) require any material Governmental Approval or violate any material Applicable Law relating to the Borrower or any of its Subsidiaries, (ii) conflict with, result in a breach of or constitute a default under the articles of incorporation, bylaws or other organizational documents of the Borrower or any of its Subsidiaries or any material indenture, agreement or other instrument to which such Person is a party or by which any of its properties may be bound or any Governmental Approval relating to such Person, (iii) result in or require the creation or imposition of any material Lien upon or with respect to any property now owned or hereafter acquired by such Person other than Liens arising under the Loan Documents or (iv) require any material consent or material authorization of, material filing with, or other material act in respect of, an arbitrator or Governmental Authority and no material consent of any other Person is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement.

 

Section 6.5 Compliance with Law; Governmental Approvals.  Each of the Borrower and its Subsidiaries (i) has all Governmental Approvals required by any Applicable Law for it to conduct its business, each of which is in full force and effect, is final and not subject to review on appeal and is not the subject of any pending or, to Borrower’s knowledge, threatened attack by direct or collateral proceeding, (ii) is in compliance in all material respects with each Governmental Approval applicable to it, (iii) is in compliance, and has been in compliance, with all Applicable Laws relating to it or any of its respective properties and (iv) has timely filed all material reports, documents and other materials required to be filed by it under all Applicable Laws with any Governmental Authority and has retained all material records and documents required to be retained by it under Applicable Law, except where the failure to comply with or satisfy could not reasonably be expected to have a Material Adverse Effect.

 

Section 6.6 Taxes.  No Governmental Authority has asserted any Lien or other claim against the Borrower or any Subsidiary thereof with respect to unpaid taxes which has not been discharged or resolved, except unpaid taxes which are being contested in good faith and for which  adequate reserves have been provided in accordance with GAAP.

 

Section 6.7 Intellectual Property Matters.  Each of the Borrower and its Subsidiaries owns or possesses rights to use all franchises, licenses, copyrights, copyright applications, patents, patent rights or licenses, patent applications, trademarks, trademark rights, service marks, service mark rights, trade names, trade name rights, copyrights and rights with respect to the foregoing which are required to conduct its business, except for those, the failure of which to own or possess, could not reasonably be expected to have a Material Adverse Effect.  To its knowledge, (i) no event has occurred which permits, or after notice or lapse of time or both would permit, the revocation or termination of any such rights and (ii) neither the Borrower nor any Subsidiary thereof is liable to any Person for infringement under Applicable Law with respect to any such rights as a result of its business operations, in each case which could reasonably be expected to have a Material Adverse Effect.

 

  

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Section 6.8 Environmental Matters.

 

(a)           To the Borrower’s knowledge, there is no contamination at, under or about the borrower’s or any of its Subsidiaries’ properties or such operations which could interfere with the continued operation of such properties or impair the fair saleable value thereof, except to the extent any such  non-compliance or contamination could not reasonably be expected to have a Material Adverse Effect;

 

(b)           Neither the Borrower nor any Subsidiary thereof has received any notice of violation, alleged violation, non-compliance, liability or potential liability regarding Environmental Laws, except as could not reasonably be expected to have a Material Adverse Effect; and

 

(c)           To the Borrower’s knowledge, Hazardous Materials have not been transported or disposed of by the Borrower or any of its Subsidiaries or by any other Person to or from the properties owned, leased or operated by the Borrower and its Subsidiaries in a manner or to a location which could give rise to liability under Environmental Laws that could reasonably be expected to have a Material Adverse Effect.

 

Section 6.9 ERISA.

 

(a)           As of the Closing Date, neither the Borrower nor any ERISA Affiliate maintains or contributes to, or has any obligation under, any Employee Benefit Plans other than those identified on Schedule 6.9;

 

(b)           Each Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code has been determined by the Internal Revenue Service to be so qualified, and each trust related to such plan has been determined to be exempt under Section 501(a) of the Code except for such plans that have not yet received determination letters but for which the remedial amendment period for submitting a determination letter has not yet expired;

 

(c)           As of the Closing Date, no Pension Plan has been terminated, nor has any accumulated funding deficiency (as defined in Section 412 of the Code) been incurred (without regard to any waiver granted under Section 412 of the Code), nor has any funding waiver from the Internal Revenue Service been received or requested with respect to any Pension Plan, nor has there been any event requiring any disclosure under Section 4041 (c)(3)(C) or 4063(a) of ERISA with respect to any Pension Plan; and

 

(d)           No Termination Event has occurred or is reasonably expected to occur.

 

  

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Section 6.10 Margin Stock.  Neither the Borrower nor any Subsidiary thereof is engaged principally or as one of its activities in the business of extending credit for the purpose of “purchasing” or “carrying” any “margin stock” (as each such term is defined or used, directly or indirectly, in Regulation U of the Board of Governors of the Federal Reserve System).  No part of the proceeds of any of the Loans or Letters of Credit will be used for purchasing or carrying margin stock or for any purpose which violates, or which would be inconsistent with, the provisions of Regulation T, U or X of such Board of Governors.

 

Section 6.11 Government Regulation.  Neither the Borrower nor any Subsidiary thereof is an “investment company” or a company “controlled” by an “investment company” (as each such term is defined or used in the Investment Company Act of 1940, as amended) and neither the Borrower nor any Subsidiary thereof is, or after giving effect to any Extension of Credit will be, subject to regulation under the Public Utility Holding Company Act of 1935 or the Interstate Commerce Act, each as amended, or any other Applicable Law which limits its ability to incur or consummate the transactions contemplated hereby.

 

Section 6.12 Employee Relations.  Each of the Borrower and its Subsidiaries is not, as of the Closing Date, party to any collective bargaining agreement nor has any labor union been recognized as the representative of its employees except as set forth on Schedule 6.12.  The Borrower knows of no pending, threatened or contemplated strikes, work stoppage or other collective labor disputes involving its employees or those of its Subsidiaries that could reasonably be expected to have a Material Adverse Effect.

 

Section 6.13 Financial Statements.  The (i) audited Consolidated balance sheet, statement of operations, stockholders’ equity and cash flows of the Borrower and its Subsidiaries as of December 31, 2010 and (ii) unaudited Consolidated balance sheet, statement of operations, stockholders’ equity and cash flows of the Borrower and its Subsidiaries as of September 30, 2011 and, in each case including the accompanying notes, copies of which have been furnished to the Lender, are complete and correct and fairly present on a Consolidated basis the financial position, results of operations and cash flows of the Borrower and its Subsidiaries as of such dates and for the periods then ended (other than customary year-end adjustments for unaudited financial statements).  All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP.  The Borrower and its Subsidiaries have no Debt, obligation or other unusual forward or long-term commitment which is not fairly reflected in the foregoing financial statements or in the  notes thereto.

 

Section 6.14 No Material Adverse Change.  Except as publicly disclosed by the Borrower prior to the Closing Date, since September 30, 2011, there has been no material adverse change in the properties, assets, liabilities (actual or contingent), business, operations, prospects, or condition (financial or otherwise) of the Borrower and its Subsidiaries, taken as a whole, and no event has occurred or condition arisen that could reasonably be expected to have a Material Adverse Effect.

 

Section 6.15 Solvency.  As of the Closing Date and after giving effect to each Extension of Credit made hereunder, the Borrower and each of its Subsidiaries will be Solvent.

 

  

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Section 6.16 Liens.  None of the properties and assets of the Borrower or any Subsidiary thereof is subject to any Lien, except Liens permitted pursuant to Section 8.2.  No financing statement under the Uniform Commercial Code of any state which names the Borrower or any Subsidiary thereof or any of their respective trade names or divisions as debtor and which has not been terminated, has been filed in any state or other jurisdiction and neither the Borrower nor any Subsidiary thereof has signed any such financing statement or any security agreement authorizing any secured party thereunder to file any such financing statement, except to perfect those Liens permitted by Section 8.2 hereof.

 

Section 6.17 Debt and Guaranty Obligations.  Schedule 6.17 is a complete and correct listing of all Debt and Guaranty Obligations of the Borrower and its Subsidiaries as of the Closing Date in excess of $3,000,000.

 

Section 6.18 Litigation.  Except for matters existing on the Closing Date and set forth on Schedule 6.18, there are no actions, suits or proceedings pending nor, to the knowledge of the Borrower, threatened against the Borrower or any Subsidiary thereof or any of their respective properties in any court or before any arbitrator of any kind or before or by any Governmental Authority that, if adversely determined, could reasonably be expected to have a Material Adverse Effect.

 

Section 6.19 Absence of Defaults.  No event has occurred or is continuing which constitutes a Default or an Event of Default, or which constitutes, or which with the passage of time or giving of notice or both would constitute, a default or event of default by the Borrower or any Subsidiary thereof under any judgment, decree or order to which the Borrower or its subsidiaries is a party or by which the Borrower or its Subsidiaries or any of their respective properties may be bound or which would require the Borrower or its Subsidiaries to make any payment thereunder prior to the scheduled maturity date therefor, except where such default or defaults, if any, could not reasonably be expected to have a Material Adverse Effect.

 

Section 6.20 Accuracy and Completeness of Information.  All written information produced by or on behalf of the Borrower or any Subsidiary thereof and furnished to the Lender was, at the time the same was so furnished, complete and correct in all material respects to the extent necessary to give the recipient a true and accurate knowledge of the subject matter, as it pertains to the financing contemplated by this Agreement.  No document furnished or written statement made to the Lender by the Borrower or any Subsidiary thereof in connection with the negotiation, preparation or execution of this Agreement or any of the Loan Documents contains any untrue statement of a fact material to the creditworthiness of the Borrower or its Subsidiaries or omits to state a material fact necessary in order to make the statements contained therein not misleading in any material respect.  The Borrower is not aware of any facts which it has not disclosed in writing to the Lender having a Material Adverse Effect.

 

Section 6.21 Survival of Representations and Warranties, Etc.  All representations and warranties set forth in this Article VI and all representations and warranties contained in any certificate, or any of the Loan Documents (including but not limited to any such representation or warranty made in or in connection with any amendment thereto) shall constitute representations and warranties made under this Agreement.  All representations and warranties made under this Agreement shall be made or deemed to be made at and as of the Closing Date (except those that are expressly made as of a specific date), shall survive the Closing Date and shall not be waived by the execution and delivery of this Agreement, any investigation made by or on behalf of the Lender or any borrowing hereunder.

 

  

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ARTICLE VII      

                          

AFFIRMATIVE COVENANTS

 

Until all of the Obligations (other than contingent indemnification obligations not then due) have been paid and satisfied in full in cash, all Letters of Credit have been terminated or expired (or been cash collateralized) and the Revolving Credit Commitment and the Alternative Currency Commitment have terminated, each Credit Party will, and will cause each of its Subsidiaries to:

 

Section 7.1 Financial Statements and Budgets.  Deliver to the Lender, in form and detail satisfactory to the Lender (which shall promptly make such information available to the Lender in accordance with its customary practice):

 

(a)           Annual Financial Statements.  As soon as practicable and in any event within one hundred fifty (150) days after the end of each Fiscal Year, audited Consolidated financial statements of the Borrower for the Fiscal Year then ended, including the notes thereto, all in reasonable detail and certified by an independent public accounting firm in accordance with GAAP, and accompanied by a report thereon by such independent public accounting firm that is not qualified with respect to scope limitations imposed by the Borrower or with respect to accounting principles followed by the Borrower not in accordance with GAAP (it being agreed that the requirements of this subsection may be satisfied by filing of the applicable annual report on Form 10-K of the Borrower with the SEC to the extent that: (i) it contains the foregoing information, (ii) it is available to the Lender on the SEC’s Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”) and (iii) the Borrower notifies the Lender within the time period noted herein that it is available to them on EDGAR).

 

(b)           Quarterly Financial Statements.  As soon as practicable and in any event within sixty (60) days after the end of the first three fiscal quarters of each Fiscal Year, unaudited Consolidated financial statements of the Borrower for the fiscal quarter then ended and that portion of the Fiscal Year then ended, including the notes thereto, all in reasonable detail and prepared by the Borrower in accordance with GAAP and in compliance with applicable reporting requirements of the Securities and Exchange Commission for issuers of publicly traded securities, and certified by the chief financial officer or the controller of the Borrower to present fairly in all material respects the financial condition of the Borrower and the results of operations of the Borrower for the respective periods then ended, subject to normal year end adjustments (it being agreed that the requirements of this subsection may be satisfied by filing of the applicable quarterly report on Form 10-Q of the Borrower with the Securities and Exchange Commission to the extent that: (i) it contains the foregoing information, (ii) it is available to the Lender on EDGAR and (iii) the Borrower notifies the Lender within the time period noted herein that it is available to them on EDGAR).

 

  

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(c)           Annual Financial Projections.  As soon as practicable and in any event within thirty (30) days after the end of each Fiscal Year, annual financial projections of the Borrower and its Subsidiaries for next fiscal year.

 

Section 7.2 Certificates; Other Reports.  Deliver to the Lender (which shall promptly make such information available to the Lender in accordance with its customary practice):

 

(a)           At each time financial statements are delivered pursuant to Sections 7.1(a) or (b) and at such other times as the Lender shall reasonably request, a certificate of the chief financial officer, the controller or the treasurer of the Borrower in the form of Exhibit F attached hereto (an “Officer’s Compliance Certificate”).

 

(b)           Such other information regarding the operations, business affairs and financial condition of the Borrower or any of its Subsidiaries as the Lender may reasonably request.

 

Documents required to be delivered pursuant to Section 7.1(a) or (b) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet at the website address provided by Borrower pursuant to Section 10.1; or (ii) on which such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to which the Lender has access (whether a commercial or third-party website); provided that: (i) the Borrower shall deliver paper copies of such documents to the Lender if Lender requests the Borrower to deliver such paper copies until a written request to cease delivering paper copies is given by the Lender and (ii) the Borrower shall notify the Lender (by telecopier or electronic mail) of the posting of any such documents and provide to the Lender by electronic mail electronic versions of such documents.  Notwithstanding anything contained herein, in every instance the Borrower shall be required to provide paper copies of the Officer’s Compliance Certificates required by this Section 7.2 to the Lender.

 

Section 7.3 Notice of Litigation and Other Matters.  Promptly (but in no event later than ten (10) days after any Responsible Officer of any Credit Party obtains knowledge thereof) notify the Lender in writing of (which shall promptly make such information available to the Lender in accordance with its customary practice):

 

(a)           (i) the occurrence of any Default or Event of Default or (ii) the occurrence or existence of any event or circumstance that could reasonably be expected to become a Default or Event of Default;

 

(b)           any attachment, judgment, lien, levy or order exceeding $3,000,000 which is assessed against any Credit Party or any Subsidiary thereof; and

 

 (c)           any event which makes any of the representations set forth in Article VI inaccurate in any respect and which would result in a Material Adverse Effect.

 

Each notice pursuant to this Section 7.3 shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto.  Each notice pursuant to this Section 7.3(a) shall describe with particularity any and all provisions of this Agreement and any other Loan Document that have been breached.

 

  

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Section 7.4 Preservation of Corporate Existence and Related Matters.  Except as permitted by Section 8.4, preserve and maintain its separate corporate existence and all rights, franchises, licenses and privileges necessary to the material conduct of its business, and qualify and remain qualified as a foreign corporation and authorized to do business in each jurisdiction in which the failure to so qualify could reasonably be expected to have a Material Adverse Effect.

 

Section 7.5 Maintenance of Property.  Protect and preserve all properties useful in and material to its business, including copyrights, patents, trade names, service marks and trademarks; maintain in good working order and condition all buildings, equipment and other tangible real and personal property; and from time to time make or cause to be made all renewals, replacements and additions to such Property necessary for the conduct of its business, so that the business carried on in connection therewith may be conducted in a commercially reasonable manner.

 

Section 7.6 Insurance.  Maintain insurance with financially sound and reputable insurance companies against such risks and in such amounts as are customarily maintained by similar businesses (including, without limitation, hazard and business interruption coverage) and as may be required by Applicable Law, and from time to time after the Closing Date deliver to the Lender upon its request a detailed list of the insurance then in effect, stating the names of the insurance companies, retention amounts, the amounts of the insurance, the dates of the expiration thereof and the properties and risks covered thereby.

 

Section 7.7 Accounting Methods and Financial Records.  Maintain a system of accounting, and keep such books, records and accounts (which shall be true and complete in all material respects) as may be required or as may be necessary to permit the preparation of financial statements in accordance with GAAP and in compliance with the regulations of any Governmental Authority having jurisdiction over it or any of its Properties.

 

Section 7.8 Payment and Performance of Obligations.  Pay and perform all Obligations under this Agreement and the other Loan Documents, and pay or perform (a) all taxes, assessments and other governmental charges that may be levied or assessed upon it or any of its Property, and (b) all other indebtedness, obligations and liabilities in accordance with customary trade practices; provided, that the Borrower or such Subsidiary may contest any item described in clauses (a) or (b) of this Section 7.8 in good faith so long as adequate reserves are maintained with respect thereto in accordance with GAAP.

 

Section 7.9 Compliance with Laws and Approvals.  Observe and remain in compliance in all material respects with all Applicable Laws and maintain in full force and effect all Governmental Approvals, in each case applicable to its properties and the conduct of its business.

 

Section 7.10 Compliance with ERISA.  The Borrower shall furnish to the Lender upon the Lender’s request such additional information about any Employee Benefit Plan as may be reasonably requested by the Lender.

 

  

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Section 7.11 Compliance with Material Agreements.  Comply in all material respects with each term, condition and provision of all material agreements and other instruments entered into in the conduct of its business; provided, that the Borrower or any such Subsidiary may contest any such material agreement or other instrument in good faith through applicable proceedings so long as adequate reserves are maintained in accordance with GAAP.

 

Section 7.12 Visits and Inspections.  Permit representatives of the Lender, from time to time upon reasonable notice, to visit and inspect its properties; inspect, audit and make extracts from its books, records and files, including, but not limited to, management letters prepared by independent accountants; and discuss with its principal officers, and its independent accountants, its business, assets, liabilities, financial condition, results of operations and business prospects.

 

Section 7.13 Additional Subsidiaries and Additional Collateral.  Notify the Lender of (1) the creation or acquisition of any Material Domestic Subsidiary or Material Foreign Subsidiary or (2) any Domestic Subsidiary or Foreign Subsidiary of the Borrower becoming a Material Domestic Subsidiary or Material Foreign Subsidiary as evidenced by the information set forth in the Officer’s Compliance Certificate delivered pursuant to Section 7.2, and promptly thereafter (and in any event within thirty (30) days), cause to be executed and delivered to the Lender (i) a duly executed Joinder Agreement (pursuant to which such Material Domestic Subsidiary shall become a party to the Guaranty Agreement, the Collateral Agreement and any other applicable Security Documents and such Material Foreign Subsidiary shall execute the Collateral Agreement as an issuer), (ii) such other instruments and documents and other items of the type required to be delivered pursuant to Section 5.1(c), all in form and substance reasonably satisfactory to the Lender, as may be reasonably required by the Lender to obtain a first priority perfected security interest in the capital stock of any Material Foreign Subsidiary to be pledged pursuant to the Loan Documents, (iii) such closing documents and closing certificates of the type required to be delivered pursuant to Section 5.1(b), including, without limitation, favorable legal opinions addressed to the Lender in form and substance reasonably satisfactory thereto with respect to such duly executed Joinder Agreement (and (i) the Guaranty Agreement, the Collateral Agreement and any other applicable Security Documents to which such Material Domestic Subsidiary shall become party thereto in connection therewith and (ii) the Collateral Agreement that the Material Foreign Subsidiary shall execute as an issuer in connection therewith), in each case as may reasonably be requested by the Lender, and (iv) such other documents and certificates as may be reasonably requested by the Lender.  Notwithstanding the foregoing, neither the Borrower nor any material Domestic Subsidiary shall pledge to the Lender more than that percentage of all issued and outstanding shares of all capital stock or other ownership interests of a material Foreign Subsidiary the granting of a security interest in which shall result in material adverse tax consequences to the Borrower or the applicable Material Domestic Subsidiary (it being acknowledged by the Borrower and the Lender that, as of the Closing Date, such percentage required to be pledge is sixty-five percent (65%).

 

Section 7.14 Use of Proceeds.  Use the proceeds of the Loans (a) to refinance the Existing Facility and (b) for working capital and general corporate requirements of the Borrower and its Subsidiaries, including the payment of certain fees and expenses incurred in connection with the transactions contemplated by this Agreement.

 

  

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Section 7.15 Burdensome Provisions.  Neither the Borrower nor any Subsidiary thereof shall be a party to any indenture, agreement, lease or other instrument, or subject to any corporate or partnership restriction, Governmental Approval or Applicable Law which could be reasonably expected to have a Material Adverse Effect.  No Subsidiary shall be a party to any agreement or instrument or otherwise subject to any restriction or encumbrance that restricts or limits its ability to make dividend payments or other distributions in respect of its capital stock to the Borrower or any Subsidiary or to transfer any of its assets or properties to the Borrower or any other Subsidiary in each case other than existing under or by reason of the Loan Documents or Applicable Law.

 

Section 7.16 Titles to Properties.  Each of the Borrower and its Subsidiaries shall have such title to the real property owned or leased by it as is necessary or desirable to the conduct of its business and valid and legal title to all of its personal property and assets, except those which have been disposed of by the Borrower or its Subsidiaries in the ordinary course of business or as otherwise expressly permitted hereunder.

 

Section 7.17 Senior Debt Status.  The Obligations of the Borrower and each of its Subsidiaries under this Agreement and each of the other Loan Documents shall rank at least senior in priority of payment to all Subordinated Debt of each such Person and shall be designated at all times as “Senior Indebtedness” under all instruments and documents, now or in the future, relating to all Subordinated Debt.

 

Section 7.18 Further Assurances.  Make, execute and deliver all such additional and further acts, things, deeds and instruments as the Lender may reasonably require to document and consummate the transactions contemplated hereby and to vest completely in and insure the Lender its rights under this Agreement, the Notes, the Letters of Credit and the other Loan Documents.

 

Section 7.19 Deposit Accounts, Cash Management and Lockbox Services.  The Material Domestic Subsidiaries shall maintain their primary demand deposit, cash management accounts and lockbox services with Lender.

 

ARTICLE VIII  

                              

NEGATIVE COVENANTS

 

Until all of the Obligations (other than contingent, indemnification obligations not then due) have been paid and satisfied in full in cash, all Letters of Credit have been terminated or expired (or been cash collateralized) and the Commitments terminated, the Credit Parties will not, and will not permit any of their respective Subsidiaries to.

 

Section 8.1 Limitations on Debt.  Create, incur, assume or suffer to exist any Debt, except:

 

(a)           the Obligations (excluding any Hedging Obligations);

 

(b)           Debt incurred in connection with a Hedging Agreement with a counterparty and upon terms and conditions (including interest rate) reasonably satisfactory to the Lender;

 

  

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(c)           Debt existing on the Closing Date and not otherwise permitted under this Section 8.1, as set forth on Schedule 6.17, and the renewal, refinancing, extension and replacement (but not the increase in the aggregate principal amount) thereof;

 

(d)           Guaranty Obligations in favor of the Lender;

 

(e)           unsecured Debt of the Borrower and the Domestic Subsidiaries in an aggregate amount not to exceed $5,000,000 on any date of determination (provided that such Debt may be secured to the extent that any such Debt is created, incurred, assumed or suffered to exist in connection with Capital Leases and purchase money financing;

 

(f)           Debt of the Foreign Subsidiaries in an aggregate amount not to exceed $10,000,000 on any date of determination;

 

(g)           intercompany Debt between the Borrower and any Subsidiary of the Borrower or between any Subsidiary of the Borrower and any other Subsidiary of the Borrower;

 

(h)           the Permitted TIMET Debt; or

 

(i)           Debt of any Person acquired in accordance with Section 8.3(c), including any renewal, extension or refinancing, but not any increase in the aggregate principal amount, thereof (provided that such Debt was not incurred in connection with such acquisition);

 

provided, that no agreement or instrument with respect to Debt permitted to be incurred by this Section shall restrict, limit or otherwise encumber (by covenant or otherwise) the ability of any Subsidiary of the Borrower to make any payment to the Borrower or any of its Subsidiaries (in the form of dividends, intercompany advances or otherwise) for the purpose of enabling the Borrower to pay the Obligations.

 

Section 8.2 Limitations on Liens.  Create, incur, assume or suffer to exist, any Lien on or with respect to any of its assets or properties (including, without limitation, shares of capital stock or other ownership interests), real or personal, whether now owned or hereafter acquired, except:

 

(a)           Liens for taxes, assessments and other governmental charges or levies (excluding any Lien imposed pursuant to any of the provisions of ERISA or the Environmental Laws not yet due or as to which the period of grace, if any, related thereto has not expired or which are being contested in good faith and by appropriate proceedings if adequate reserves are maintained to the extent required by GAAP;

 

(b)           the claims of materialmen, mechanics, carriers, warehousemen, processors, landlords or other similar parties for labor, materials, supplies or rentals incurred in the ordinary course of business, (i) which are not overdue for a period of more than thirty (30) days or which are being contested in good faith and by appropriate proceedings;

 

(c)           Liens consisting of deposits or pledges made in the ordinary course of business in connection with, or to secure payment of, obligations under workers’ compensation, unemployment insurance or similar legislation;

 

  

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(d)           Liens constituting encumbrances in the nature of zoning restrictions, easements and rights or restrictions of record on the use of real property, which in the aggregate are not substantial in amount and which do not, in any case, prevent the use thereof in the ordinary conduct of the Borrower’s business;

 

(e)           Liens of the Lender;

 

(f)           Liens not otherwise permitted by this Section 8.2 and in existence at the Closing Date and described on Schedule 8.2;

 

(g)           Liens securing Debt incurred in connection with Capital Leases and purchase money Debt (in each case to the extent that such Debt is permitted under Section 8.1(e)); provided that (A) such Liens shall be created substantially simultaneously with the acquisition or lease of the related assets, (B) such Liens do not at any time encumber any property other than the Property financed by such Debt, (C) the amount of such Debt secured thereby is not increased and (D) the principal amount of such Debt secured by any such Lien shall at no time exceed one hundred percent (100%) of the original purchase price or lease payment amount of such Property at the time it was acquired;

 

(h)           Liens on the assets of Foreign Subsidiary securing debt of such Foreign Subsidiary (to the extent that such Debt is permitted under Section 8.1;

 

(i)           Liens securing judgments not giving rise to an Event of Default so long as (A) such Lien is adequately bonded and (B) any appropriate legal proceeding which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceeding may be initiated shall not have expired;

 

(j)           Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual or warranty requirements of the Borrower or any of its Subsidiaries, including rights of offset and set-off, incurred in the ordinary course of business;

 

(k)           Liens in favor of custom and revenue authorities arising as a matter of law to secure payment of custom duties in connection with the importation of goods in the ordinary course of business;

 

(l)           Liens arising from the precautionary filing of Uniform Commercial Code financing statements (or similar foreign counterparts) regarding leases;

 

(m)           rights of setoff or bankers’ liens upon deposits of cash in favor of banks or other financial institutions in the ordinary course of business; and

 

(n)           Liens securing Debt incurred in accordance with Section 8.1(i) as a Cost of Acquisition; provided that (A) such Liens do not at any time encumber any property other than the assets acquired in such Permitted Acquisition and (B) the amount of such Debt secured thereby is not increased.

 

Section 8.3 Limitations on Loans, Advances, Investments and Acquisitions.  Purchase, own, invest in or otherwise acquire, directly or indirectly, any Capital Stock, interests in any partnership or joint venture (including, without limitation, the creation or capitalization of any Subsidiary), evidence of Debt or other obligation or security, substantially all or a portion of the business or assets of any other Person or any other investment or interest whatsoever in any other Person, or make or permit to exist, directly or indirectly, any loans, advances or extensions of credit to, or any investment in cash or by delivery of Property in, any Person except:  (a) investments (i) existing on the Closing Date in Subsidiaries, (ii) in Subsidiaries formed or acquired after the Closing Date so long as the Borrower and its Subsidiaries comply with the provisions of Section 7.13 and (iii) existing on the Closing Date in the form of loans, advances and investments described on Schedule 8.3;

 

  

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(b)           investments in (i) marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency thereof maturing within three hundred sixty-five (365) days from the date of acquisition thereof, (ii) commercial paper maturing no more than one hundred twenty (120) days from the date of creation thereof and currently having a rating of “A2” or better from Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. or a rating of “P2” or better from Moody’s Investors Service, Inc., (iii) certificates of deposit maturing no more than one hundred twenty (120) days from the date of creation thereof issued by commercial banks incorporated under the laws of the United States of America, each having combined capital, surplus and undivided profits of not less than $500,000,000 and having a rating of “A” or better by a nationally recognized rating agency; provided, that the aggregate amount invested in such certificates of deposit shall not at any time exceed $5,000,000 for any one such certificate of deposit and $10,000,000 for any one such bank, (iv) time deposits maturing no more than thirty (30)  days from the date of creation thereof with commercial banks or savings banks or savings and loan associations each having membership either in the FDIC or the deposits of which are insured by the FDIC and in amounts not exceeding the maximum amounts of insurance thereunder, (v) tax-exempt municipal bonds maturing within one hundred twenty (120) days from the date of acquisition thereof, (vi) any money market or bank fund investing only in the investments set forth above or (vii) investments held in trust or escrow accounts subject to government regulation, legal settlements, collateral requirements or other similar arrangements; and

 

(c)           investments by the Borrower or any of its Subsidiaries in the form of acquisitions of all, substantially all or a majority of the stock or assets of the business or a line of business (whether by the acquisition of capital stock, assets or any combination thereof) of any other Person (each, a “Permitted Acquisition”); provided that:

 

(i)           the Person to be acquired shall be a going concern, engaged in a business, or the assets to be acquired shall be used in a business which is similar, related or complimentary to the line of business of the Borrower and its Subsidiaries as required pursuant to Section 8.12;

 

(ii)           the Borrower or such Subsidiary (unless the Person to be acquired complies with Section 7.13), as applicable, shall be the surviving Person and no Change in Control shall have been effected thereby;

 

(iii)           with respect to any Material Acquisition, the Borrower shall have delivered written notice of such proposed acquisition to the Lender, which notice shall include the proposed closing date of such proposed acquisition, not less than twenty (20) calendar days prior to such proposed closing date;

 

  

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(iv)           with respect to any Material Acquisition, the Borrower shall have delivered to the Lender copies of the Permitted Acquisition Documents;

 

(v)           with respect to any Material Acquisition, the Borrower shall have certified on or before the closing date of such proposed acquisition, in writing and in a form reasonably acceptable to the Lender, that such proposed acquisition has been approved by the board of directors or equivalent governing body of the Person to be acquired;

 

(vi)           no Default or Event of Default shall have occurred and be continuing both before and after giving effect to such proposed acquisition;

 

(vii)           the Borrower shall have complied with Section 7.13;

 

(viii)           with respect to any Material Acquisition, the Borrower shall have delivered to the Lender an Officer’s Compliance Certificate dated as of the closing date of such proposed acquisition demonstrating, in form and substance reasonably satisfactory thereto, pro forma compliance with each covenant contained in Article VIII (both before and after giving effect to such proposed acquisition) (it being agreed by the Borrower, the Lender that such calculations shall assume that all Debt assumed or incurred in conjunction with such proposed acquisition was incurred at the beginning of the applicable calculation period and that all income and expenses associated with such proposed acquisition shall be treated as earned and included in the pro-forma calculations (both on a consolidated and consolidating basis));

 

(ix)           the Borrower shall have at least $10,000,000 in Liquidity both before and after giving effect to such proposed acquisition;

 

(x)           the Person to be acquired is not subject to material pending litigation which could reasonably be expected to have a Material Adverse Effect; and

 

(xi) without the prior written consent of the Lender, the Costs of Acquisition of the Permitted Acquisition (regardless of the form of consideration) together with the aggregate Costs of Acquisition of all other Permitted Acquisitions pursuant to this Section 8.3(c) shall not exceed $20,000,000;

 

(d)           investments by the Borrower or any of its Subsidiaries in the form of acquisitions of less than a majority of the capital stock or other ownership interests of any other Person; provided that:

 

(i)           the Person to be invested in shall be a going concern, engaged in a business which is similar, related or complimentary to the line of business of the Borrower and its Subsidiaries;

 

  

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(ii)           the amount of the investment (regardless of the form of consideration), together with the aggregate amounts of all other investments pursuant to this Section 8.3(d), shall not exceed $10,000,000;

 

(iii)           neither the Borrower nor any Material Domestic Subsidiary or Material Foreign Subsidiary shall make any investment in which such party’s potential liability is not limited to the amount of its investment (i.e., investments as a general partner, in joint ventures, etc.);

 

(iv)           no Default or Event of Default shall have occurred and be continuing both before and after giving effect to such proposed investment;

 

(v)           the Borrower shall have complied with Section 7.13;

 

(vi)           the Borrower shall have at least $10,000,000 in Liquidity both before and after giving effect to such proposed investment; and

 

(vii)           the Person to be invested in is not subject to material pending litigation which could reasonably be expected to have a Material Adverse Effect.

 

(e)           intercompany loans and advances in connection with intercompany Debt permitted under Section 8.1(g);

 

(f)           Hedging Agreements permitted pursuant to Section 8.1(b); and

 

(g)           purchases of assets in the ordinary course of business.

 

Section 8.4 Limitations on  Mergers and Liquidations.  Merge, consolidate or enter into any similar combination with any other Person or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution) except: (a) (i) any Wholly-Owned Domestic Subsidiary of the Borrower may merge with the Borrower or any other Wholly-Owned Domestic Subsidiary of the Borrower (provided that (1) in any  merger involving the Borrower, the Borrower shall be the surviving entity and (2) in any merger involving any Subsidiary Guarantor (and not involving the Borrower), such Subsidiary Guarantor shall be the surviving entity) and (ii) any Wholly-Owned Foreign Subsidiary of the Borrower may merge with any other Wholly-Owned Foreign Subsidiary of the Borrower;

 

(b)           (i) any Wholly-Owned Domestic Subsidiary of the Borrower may merge into the Person such Wholly-Owned Domestic Subsidiary was formed to acquire in connection with an acquisition permitted by Section 8.3(c) (provided that, after giving effect to such acquisition, such Person shall be a Wholly-Owned Domestic Subsidiary and shall comply with the requirements set forth in Section 7.13) and (ii) any Wholly-Owned Foreign Subsidiary of the Borrower may merge into the Person such Wholly-Owned Foreign Subsidiary was formed to acquire in connection with an acquisition permitted by Section 8.3(c); and

 

c)           (i) any Wholly-Owned Domestic Subsidiary of the Borrower may wind-up into the Borrower or any other Wholly-Owned Subsidiary of the Borrower and (ii) any Wholly-Owned Foreign Subsidiary of the Borrower may wind-up into any other Wholly-Owned Foreign Subsidiary of the Borrower..

 

  

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Section 8.5 Limitations on Sale of Assets.  Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, the sale of any receivables and leasehold interests and any sale-leaseback or similar transaction), whether now owned or hereafter acquired except:

 

(a)           the sale of inventory in the ordinary course of business;

 

(b)           the sale of assets, for fair market value in the ordinary course of business that are no longer used or usable in the business of the Borrower or any of its Subsidiaries;

 

(c)           The transfer of assets to the Borrower or any Wholly-Owned Subsidiary of the Borrower pursuant to Section 8.4(c);

 

(d)           The sale or discount without recourse of accounts receivable arising in the ordinary course of business in connection with the compromise or collection thereof;

 

(e)           the disposition of any Hedging Agreement;

 

(f)           sales or grants of licenses in the ordinary course of business to use the patents, trade secrets, know-how and other intellectual property of the Borrower and its Subsidiaries to the extent that any such license does not prohibit the Borrower or its Subsidiaries from using any material technologies licensed unless for due consideration, or require the Borrower or its Subsidiaries to pay fees for the use of any material technology;

 

(g)           any distribution permitted pursuant to Section 8.6; and

 

(h)           sales of assets by the Borrower or any Subsidiary of the Borrower in an aggregate amount not to exceed $10,000,000; provided that such limitations on the sale of assets shall not include, so long as no Default or Event of Default has occurred and is continuing, any sale of assets consisting of property, plant or equipment of Borrower or any of its Subsidiaries in which the net cash proceeds of such sale are reinvested in assets consisting of property, plant or equipment (or otherwise in a manner acceptable to the Lender in its sole discretion) within two hundred seventy (270) days after receipt of such net cash proceeds.

 

Section 8.6 Limitations on Dividends and Distributions.  Declare or pay any dividends upon any of its capital stock or any other ownership interests; purchase, redeem, retire or otherwise acquire (directly or indirectly), any shares of its capital stock or other ownership interests, or make any distribution of cash, property or assets amount the holders of shares of its capital stock or other ownership interests, or make any change in its capital structure (any of the foregoing a “Restricted Payment”); provided that:

 

(a)           the Borrower or any Subsidiary may pay dividends in shares of its own capital stock;

 

(b)           any Subsidiary may pay cash dividends to the Borrower;

 

  

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(c)           the Borrower may pay cash dividends on its capital stock, purchase, redeem, retire or otherwise acquire, directly or indirectly, shares of its capital stock (including purchases of treasury stock), or make distributions of cash, property or assets among its shareholders; provided, however, that the aggregate amount of (x) any Restricted Payments made under this clause (c) plus (y) any payments or prepayments in respect of Subordinated Debt made pursuant to clause (ii) of the proviso in Section 8.10(b) shall not in any event exceed the Permitted Distribution Amount (provided, however, that the Borrower may also make prepayments of the Permitted TIMET Debt in amounts not to exceed $15,000,000 in the aggregate without additional consent of the Lender); and

 

(d)           in addition to transactions permitted under subsection (c) above, the Borrower may pay cash dividends on its capital stock, purchase, redeem, retire or otherwise acquire, directly or indirectly, shares of its capital stock (including purchases of treasury stock), or make distributions of cash, property or assets among its shareholders in an aggregate amount not to exceed the sum of (x) $20,000,000 plus (y) an amount equal to fifty percent (50%) of aggregate Net Income of the Borrower and its Subsidiaries since September 30, 2011; provided, however, that the Borrower shall not make any Restricted Payments under this clause (e) unless (i) at the time when any such Restricted Payment is to be made, no Default or Event of Default has occurred and is continuing or would result therefrom; (ii) after giving effect to the making of such Restricted Payment, Consolidated Net Worth shall not be less than the minimum required in accordance with Section 8.15(b), on a pro forma basis, determined as of the last day of the last Fiscal Quarter for which the Borrower has provided financial statements and the corresponding Officer’s Compliance Certificate to the Lender as if such Restricted Payment had been paid during such Fiscal Quarter; and (iii) the chief executive officer, controller or treasurer of the Borrower shall have certified to the Lender as to compliance with the preceding clauses (i) and (ii) in a certificate attaching calculations.

 

Section 8.7 Limitations on Exchange and Issuance of Capital Stock

 

.  Issue, sell or otherwise dispose of any class or series of capital stock that, by its terms or by the terms of any security into which it is convertible or exchangeable, is, or upon the happening of an event or passage of time would be, (a) convertible or exchangeable into debt or (b) required to be redeemed or repurchased, including at the option of the holder, in whole or in part, or has, or upon the happening of an event or passage of time would have, a redemption or similar payment due.

 

Section 8.8 Transactions with Affiliates

 

.  Except for transactions permitted by Section 8.3, 8.6 and 8.7 and those transactions existing on the Closing Date and identified on Schedule 8.8, directly or indirectly enter into, or be a party to, any transaction with any of its Affiliates, except pursuant to the reasonable requirements of its business and upon fair and reasonable terms that are no less favorable to it than it would obtain in a comparable arm’s length transaction with a Person not its Affiliate.

 

Section 8.9 Certain Accounting Changes; Organizational Documents.

 

(a)           Make any change in its accounting treatment and reporting practices except as required or permitted by GAAP; or

 

  

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(b)           Amend, modify or change its articles of incorporation (or corporate charter or other similar organizational documents) or amend, modify or change its bylaws (or other similar documents) in any manner adverse in any material respect to the rights or interests of the Lender.

 

Section 8.10 Amendments; Payments and Prepayments of Subordinated Debt.  Amend or modify (or permit the modification or amendment of) any of the terms or provisions of any Subordinated Debt other than any amendment or modification the sold effect of which is to reduce the interest rate (including any default rate) or any fees applicable to or payable in respect of such Subordinated Debt; provided that no Default or Event of Default is in existence or would arise as a result of such amendment or modification; and

 

(b)           Without the prior written consent of the Lender, cancel, forgive or discharge, make any payment or prepayment on or in respect of, or defease, redeem, purchase or acquire for value or otherwise satisfy prior to scheduled maturity (including, without limitation, by way of depositing with any trustee with respect thereto money or securities before due for the purpose of paying when due) any Subordinated Debt (including the Permitted TIMET Debt); provided that, so long as no Default or Event of Default is in existence or would arise as a result of the making of such payment (i) the Borrower may make regularly scheduled payments of principal and accrued interest on Subordinated Debt in accordance with the terms and conditions approved by the Lender pursuant to any applicable subordination agreement and (ii) the Borrower may make prepayments on or in respect of Subordinated Debt, so long as the aggregate amount of (x) all prepayments made pursuant to this clause (ii) plus (y) any Restricted Payments made pursuant to clause (c) of Section 8.6 shall not exceed the Permitted Distribution Amount, subject to receipt by the Lender of a certification from the chief financial officer, the controller or the treasurer of the Borrower as to compliance with the preceding clause.  Notwithstanding the foregoing, the Borrower may make prepayments of the Permitted TIMET Debt in amounts not to exceed $15,000,000 in the aggregate without additional consent of the Lender.

 

Section 8.11 Restrictive Agreements.

 

(a)           Enter into any Debt which contains any negative pledge on assets or any covenants more restrictive than the provisions of Articles VI, VII and VIII hereof, or which restricts, limits or otherwise encumbers its ability to incur Liens on or with respect to any of its assets or properties other than the assets or properties securing such Debt.

 

(b)           Enter into or permit to exist any agreement which impairs or limits the ability of any Subsidiary of the Borrower to pay dividends to the Borrower.

 

Section 8.12 Nature of Business.  Alter in any material respect the character or conduct of the business conducted by the Borrower and its Subsidiaries taken as a whole as of the Closing Date (except as otherwise permitted by the terms of this Agreement).

 

Section 8.13 Impairment of Security Interests.  Take or omit to take any action, which might or would have the result of materially impairing the security interests in favor of the Lender with respect to the capital stock or other ownership interests of the Material Foreign Subsidiaries pledged pursuant to the Collateral Agreement or grant to any Person (other than the Lender pursuant to the Security Documents) any interest whatsoever in the capital stock or other ownership interest of the Material Foreign Subsidiaries pledged pursuant to the Collateral Agreement, except for asset sales permitted under Section 8.5.

 

  

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Section 8.14 Subsidiaries.  Allow the Subsidiaries of the Borrower that are not “Material Domestic Subsidiaries” (including without limitation, Subsidiaries designated as Material Domestic Subsidiaries pursuant to subsection (c) of the definition of Material Domestic Subsidiary) or “Material Foreign Subsidiaries” (including without limitation, Subsidiaries designated as Material Foreign Subsidiaries pursuant to subsection (c) of the definition of Material Foreign Subsidiary) to have total net assets equal to or greater than ten percent (10%) of total net assets of the Borrower and its Subsidiaries at any time.

 

Section 8.15 Financial Covenants.

 

(a)           Leverage Ratio.  As of any fiscal quarter end, permit the ratio of (a) total Funded Debt (excluding the Permitted TIMET Debt) on such date, to (b) EBITDA for the period of four (4) consecutive fiscal quarters ending on or immediately prior to such date, to be greater than 2.50 to 1.00.

 

(b)           Consolidated Net Worth.  Permit, at any time, Consolidated Net Worth to be less than (i) prior to the last day of the Fiscal Quarter ending on or about March 31, 2012, $60,000,000 and (ii) on and after such date, the sum of $60,000,000 plus 25% of Consolidated Net Income earned in each Fiscal Quarter beginning after the Fiscal Quarter ending on or about March 31, 2012, calculated quarterly at the end of each Fiscal Quarter (with no deduction for a net loss in any such Fiscal Quarter).

 

(c)           Interest Coverage Ratio.  As of any Fiscal Quarter end, permit the ratio of EBIT to Interest Expense to be less than 2:50 to 1.00.  The ratio of EBIT to Interest Expense shall be measured for the four (4) consecutive Fiscal Quarters ending on or immediately prior to the date of determination.

 

(d)           Capital Expenditures.  Permit Capital Expenditures to be greater than an amount equal to: (a) one hundred fifty percent (150%) of depreciation and amortization expense (calculated in accordance with GAAP) for the immediately prior Fiscal Year plus (b) $2,000,000.

 

ARTICLE IX 

                               

DEFAULT AND REMEDIES

 

Section 9.1 Events of Default.  Each of the following shall constitute an Event of Default, whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment or order of any court or any order, rule or regulation of any Governmental Authority or otherwise:

 

(a)           Default in Payment of Principal of Loans and Reimbursement Obligations.  The Borrower shall default in any payment of principal of any Loan, Note or Reimbursement Obligation when and as due (whether at maturity, by reason of acceleration or otherwise).

 

  

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(b)           Other Payment Default.  The Borrower shall default in the payment when and as due (whether at maturity, by reason of acceleration or otherwise) of (i) interest on any Loan, Note or Reimbursement Obligation, and such default shall continue unremedied for five (5) Business Days or (ii) any other Obligation, and such default shall continue unremedied for ten (10) Business Days.

 

(c)           Misrepresentation.  Any representation or warranty made or deemed to be made by the Borrower or any of its Subsidiaries under this Agreement, any other Loan Document or any amendment hereto or thereto, shall at any time prove to have been incorrect or misleading in any material respect when made or deemed made.

 

(d)           Default in Performance of Certain Covenants.  The Borrower or any of its Subsidiaries shall default in the performance or observance of any covenant or agreement contained in Articles VII or VIII of this Agreement (provided that the Borrower’s failure to perform or observe any covenant or agreement in Sections 7.1 or 7.2 shall not constitute an Event of Default unless such failure continues unremedied for ten (10) Business Days).

 

(e)           Default in Performance of Other Covenants and Conditions.  The Borrower or any Subsidiary thereof shall default in the performance or observance of any term, covenant, condition or agreement contained in this Agreement (other than as specifically provided for otherwise in this Section 9.1) or any other Loan Document and such default shall continue for a period of thirty (30) days after written notice thereof has been given to the Borrower by the Lender.

 

(f)           Default under Waterloo Note.  Waterloo Furniture Components Limited shall default in the performance or observance of any term, covenant, condition or agreement contained in the Waterloo Note.

 

(g)           Hedging Agreement.  The Borrower shall default in the performance or observance of any terms, covenant, condition or agreement (after giving effect to any applicable grace or cure period) under any Hedging Agreement with respect to any Debt or other obligation in a principal amount in excess of $3,000,000 and such default causes the termination of such Hedging Agreement or permits any counterparty to such Hedging Agreement to terminate any such Hedging Agreement.

 

(h)           Debt Cross-Default.  The Borrower or any of its Subsidiaries shall (i) default in the payment of any Debt (other than the Notes or any Reimbursement Obligation) the aggregate outstanding amount of which Debt is in excess of $3,000,000 beyond the period of grace if any, provided in the instrument or agreement under which such Debt was created, or (ii) default in the observance or performance of any other agreement or condition relating to any Debt (other than the Notes or any Reimbursement Obligation) the aggregate outstanding amount of which Debt is in excess of $3,000,000 or contained in any instrument or agreement evidencing, securing or relating thereto or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Debt (or a trustee or agent on behalf of such holder or holders) to cause, with the giving of notice if required, any such Debt to become due prior to its stated maturity (any applicable grace period having expired).

 

  

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(i)           Change in Control.  (i) The sale, lease or transfer of all or substantially all of the Borrower’s assets to any person or group of persons (within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended), (ii) the liquidation or dissolution of the Borrower, (iii) any person or group of persons (within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended), other than the Permitted Holders, shall obtain ownership or control in one or more series of transactions of more than thirty-five percent (35%) of the common stock or thirty-five percent (35%) of the voting power of the Borrower entitled to vote in the election of members of the board of directors of the Borrower or (iv) during any period of twelve (12) consecutive calendar months, individuals who, at the beginning of such period, constituted the Borrower’s board of directors (together with any new directors whose election by the Borrower’s board of directors or whose nomination for election by the Borrower’s stockholders was approved by a vote of at least two-thirds (2/3rds) of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason, other than death or disability, to constitute a majority of the directors then in office (any such event, a “Change in Control”).

 

(j)           Voluntary Bankruptcy Proceeding.  The Borrower or any Subsidiary thereof shall (i) commence a voluntary case under the federal bankruptcy laws (as now or hereafter in effect), (ii) file a petition seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or composition for adjustment of debts, (iii) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under such bankruptcy laws or other laws, (iv) apply for or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of a substantial part of its property, domestic or foreign, (v) admit in writing its inability to pay its debts as they become due, (vi) make a general assignment for the benefit of creditors, or (vii) take any corporate action for the purpose of authorizing any of the foregoing.

 

(k)           Involuntary Bankruptcy Proceeding.  A case or other proceeding shall be commenced against the Borrower or any Material Domestic Subsidiary thereof in any court of competent jurisdiction seeking (i) relief under the federal bankruptcy laws (as now or hereafter in effect) or under any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or adjustment of debts, or (ii) the appointment of a trustee, receiver, custodian, liquidator or the like for the Borrower or any Material Domestic Subsidiary thereof or for all or any substantial part of their respective assets, domestic or foreign, and such case or proceeding shall continue without dismissal or stay for a period of sixty (60) consecutive days, or an order granting the relief requested in such case or proceeding (including, but not limited to, an order for relief under such federal bankruptcy laws) shall be entered.

 

(l)           Failure of Agreements.  This Agreement or any other Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or the satisfaction in full of all of the Obligations, ceases to be in full force and effect; or the Borrower, any Subsidiary Guarantor or any other Affiliate contests in any manner the validity or enforceability of this Agreement or any other Loan Document; or the Borrower or any Subsidiary Guarantor denies that it has any or further liability or obligation under this Agreement or any other Loan Document, or purports to revoke, terminate or rescind this Agreement or any other Loan Document.

 

  

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(m)           Termination Event.  The occurrence of any of the following events:  (i) the Borrower or any ERISA Affiliate fails to make full payment when due of all amounts which, under the provisions of any Pension Plan or Section 412 of the Code, the Borrower or any ERISA Affiliate is required to pay as contributions thereto, (ii) an accumulated funding deficiency in excess of $5,000,000 occurs or exists, whether or not waived, with respect to any Pension Plan, (iii) a Termination Event or (iv) the Borrower or any ERISA Affiliate as employers under one or more Multiemployer Plans makes a complete or partial withdrawal from any such Multiemployer Plan and the plan sponsor of such Multiemployer Plans notifies such withdrawing employer that such employer has incurred a withdrawal liability requiring payments in an amount exceeding $5,000,000.

 

(n)           Judgment.  A judgment or order for the payment of money which causes the aggregate amount of all such judgments to exceed $5,000,000 in any Fiscal Year shall be entered against the Borrower or any of its Subsidiaries by any court and such judgment or order shall continue without discharge or stay for a period of sixty (60) days.

 

(o)           Environmental.  Any one or more Environmental Claims shall have been asserted against the Borrower or any of its Subsidiaries; the Borrower and its Subsidiaries would be reasonable likely to incur liability as a result thereof; and such liability would be reasonably likely, individually or in the aggregate, to have a Material Adverse Effect.

 

Section 9.2 Remedies.  Upon the occurrence of an Event of Default, Lender may, by notice to the Borrower:

 

(a)           Acceleration; Termination of Credit Facility.  Terminate the Revolving Credit Commitment and declare the principal of and interest on the Loans and the Reimbursement Obligations at the time outstanding, and all other amounts owed to the Lender and to the Lender under this Agreement or any of the other Loan Documents (including, without limitation, all L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented or shall be entitled to present the documents required thereunder) and all other Obligations, to be forthwith due and payable, whereupon the same shall immediately become due and payable without presentment, demand, protest or other notice of any kind, all of which are expressly waived by each Credit Party, anything in this Agreement or the other Loan Documents to the contrary notwithstanding, and terminate the Credit Facility and any right of the Borrower to request borrowings or Letters of Credit thereunder; provided, that upon the occurrence of an Event of Default specified in Section 9.1(j) or (k), the Credit Facility shall be automatically terminated and all Obligations shall automatically become due and payable without presentment, demand, protest or other notice of any kind, all of which are expressly waived by each Credit Party, anything in this Agreement or in any other Loan Document to the contrary notwithstanding.

 

(b)           Letters of Credit.  With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to the preceding paragraph, the Borrower shall at such time deposit in a cash collateral account opened by the Lender an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit.  Amounts held in such cash collateral account shall be applied by the Lender to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay the other Obligations on a pro rata basis.  After all such Letters of Credit shall have expired or been fully drawn upon, the Reimbursement Obligation shall have been satisfied and all other Obligations shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Borrower.

 

  

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(c)           General Remedies.  Exercise all of its other rights and remedies under this Agreement, the other Loan Documents and Applicable Law, in order to satisfy all of the Obligations.

 

Section 9.3 Rights and Remedies Cumulative; Non-Waiver; etc.  The enumeration of the rights and remedies of the Lender set forth in this Agreement is not intended to be exhaustive and the exercise by the Lender of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative, and shall be in addition to any other right or remedy given hereunder or under the other Loan Documents or that may now or hereafter exist at law or in equity or by suit or otherwise.  No delay or failure to take action on the part of the Lender in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege or shall be construed to be a waiver of any Event of Default.  No course of dealing between the Borrower, the Lender or their respective agents or employees shall be effective to change, modify or discharge any provision of this Agreement or any of the other Loan Documents or to constitute a waiver of any Event of Default.

 

Section 9.4 Crediting of Payments and Proceeds.  In the event that the Obligations have been accelerated pursuant to Section 9.2 or the Lender has exercised any remedy set forth in this Agreement or any other Loan Document, all payments received by the Lender upon the Secured Obligations and all net proceeds from the enforcement of the Secured Obligations shall be applied:

 

First, to payment of that portion of the Secured Obligations constituting fees, indemnities, expenses and other amounts, including attorney fees, payable to the Lender;

 

Second, to payment of that portion of the Secured Obligations constituting accrued and unpaid interest on the Loans and Reimbursement Obligations;

 

Third, to payment of that portion of the Secured Obligations constituting unpaid principal of the Loans, Reimbursement Obligations and payment obligations then owing under Secured Hedging Agreements and Secured Cash Management Agreements;

 

Fourth, to the Lender, to cash collateralize any L/C Obligations then outstanding; and

 

Last, the balance, if any, after all of the Secured Obligations have been indefeasibly paid in full, to the Borrower or as otherwise required by Applicable Law.

 

  

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         ARTICLE X              

        

MISCELLANEOUS

Section 10.1 Notices.

 

(a)           Notices Generally.  Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in paragraph (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as follows:

 

 

If to the Borrower:                CompX International Inc.

Three Lincoln Centre

5430 LBJ Freeway, Suite 1700

Dallas, Texas  75240-2697

Attention:  J. Mark Hollingsworth

Telephone No.:  (972) 233-1700

Telecopy No.:  (972) 448-1445

With copies to:                     CompX International Inc.

Three Lincoln Centre

5430 LBJ Freeway, Suite 1700

Dallas, Texas  75240-2697

Attention:  Darryl Halbert

Telephone No.:  (972) 233-1700

Telecopy No.:  (972) 448-1445

If to Lender:                           Wells Fargo Bank, National Association

15 South Main Street

Greenville, South Carolina  29602

Attention of:  Lee Gray

Telephone No.:(864) 467-2540

Telecopy No.:  (864) 467-2543

With copies to:                     Womble Carlyle Sandridge & Rice, LLP

One West Fourth Street

Winston-Salem, North Carolina  27101

Telephone No.:  (336) 721-3518

Telecopy No.:  (336) 726-6932

Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient).  Notices delivered through electronic communications to the extent provided in paragraph (b) below, shall be effective as provided in said paragraph (b).

 

  

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(b)           Electronic Communications.  Notices and other communications to the Lender hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet web sites) pursuant to procedures approved by the Lender, provided that the foregoing shall not apply to notices to Lender pursuant to Article II if the Lender has notified the Lender that is incapable of receiving notices under such Article by electronic communication.  The Lender or the 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.  Unless the Lender otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

 

(c)           Lender’s Office.  The Lender hereby designates its office located at the address set forth above, or any subsequent office which shall have been specified for such purpose by written notice to the Borrower and Lender, as the Lender’s Office referred to herein, to which payments due are to be made and at which Loans will be disbursed and Letters of Credit requested.

 

(d)           Change of Address, Etc.  Any party hereto may change its address or telecopier number for notices and other communications hereunder by notice to the other parties hereto.

 

Section 10.2 Amendments, Waivers and Consents.  This Agreement may only be amended by a writing signed by Borrower and Lender.

 

Section 10.3 Expenses; Indemnity.

 

(a)           Costs and Expenses.  The Borrower and any other Credit Party, jointly and severally, shall pay (i) all reasonable out of pocket expenses incurred by the Lender and its Affiliates (including the reasonable fees, charges and disbursements of counsel for the Lender), in connection with the syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out of pocket expenses incurred by the Lender in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out of pocket expenses incurred by the Lender (including the fees, charges and disbursements of any counsel for Lender), in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection with the Loans made or Letters of Credit issued hereunder, including all such out of pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.

 

  

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(b)           Indemnification by the Borrower.  The Borrower shall indemnify the Lender, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, and shall pay or reimburse any such Indemnitee for, any and all losses, claims (including, without limitation, any Environmental Claims), damages, liabilities and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee by any third party or by the Borrower arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby (including, without limitation, the Transactions), (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the Lender to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or Release of Hazardous Materials on or from any property owned or operated by any Credit Party or any Subsidiary thereof, or any Environmental Claim related in any way to any Credit Party or any Subsidiary, (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by any Credit Party or any Subsidiary thereof, and regardless of whether any Indemnitee is a party thereto, or (v) any claim (including, without limitation, any Environmental Claims), investigation, litigation or other proceeding (whether or not the Lender is a party thereto) and the prosecution and defense thereof, arising out of or in any way connected with the Loans, this Agreement, any other Loan Document, or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby, including without limitation, reasonable attorneys and consultant’s fees, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by any Credit Party or any Subsidiary thereof against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if such Credit Party or such Subsidiary has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction.

 

(c)           Waiver of Consequential Damages, Etc.  To the fullest extent permitted by Applicable Law, the Borrower and each other Credit Party 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 or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof.  No Indemnitee referred to in clause (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.

 

  

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(d)           Payments.  All amounts due under this Section shall be payable promptly after demand therefor.

 

Section 10.4 Right of Set Off.

 

(a)           If an Event of Default shall have occurred and be continuing, the Lender and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by Applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by the Lender or any such Affiliate to or for the credit or the account of the Borrower or any other Credit Party against any and all of the obligations of the Borrower or such Credit Party now or hereafter existing under this Agreement or any other Loan Document to the Lender, irrespective of whether or not the Lender shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower or such Credit Party may be contingent or unmatured or are owed to a branch or office of the Lender different from the branch or office holding such deposit or obligated on such indebtedness.  The rights of the Lender and its Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that the Lender or its respective Affiliates may have.  The Lender agrees to notify the Borrower and the Lender promptly after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application.

 

(b)           Any amount to be set-off pursuant to Section 10.4(a) shall be denominated in Dollars and any amount denominated in an Alternative Currency shall be in an amount equal to the Dollar Amount of such amount at the most favorable spot exchange rate (to the Borrower) determined by the Lender to be available to it; provided that if at the time of any such determination no such spot exchange rate can reasonably be determined, the Lender may use any reasonable method as it deems applicable to determine such rate, any such determination to be conclusive absent manifest error.

 

Section 10.5 Governing Law; Jurisdiction, Etc.

 

(a)           Governing Law.  This Agreement and the other Loan Documents, unless expressly set forth therein, shall be governed by, construed and enforced in accordance with, the law of the State of South Carolina, without reference to any other conflicts or choice of law principles thereof.

 

(b)           Submission to Jurisdiction.  The Borrower and each other Credit Party irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the courts of the State of South Carolina sitting in Greenville County and of the United States District Court of the District of South Carolina, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such South Carolina state court or, to the fullest extent permitted by Applicable Law, in such Federal court.  Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  Nothing in this Agreement or in any other Loan Document shall affect any right that the Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower or any other Credit Party or its properties in the courts of any jurisdiction.

 

  

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(c)           Waiver of Venue.  The Borrower and each other Credit Party irrevocably and unconditionally waives, to the fullest extent permitted by Applicable Law, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section.  Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by Applicable Law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

(d)           Service of Process.  Each party hereto irrevocably consents to service of process in the manner provided for notices in Section 10.1.  Nothing in this Agreement will affect the right of any party hereto to serve process in any other manner permitted by Applicable Law.

 

Section 10.6 Binding Arbitration.

 

 (a)           Agreement to Arbitrate.  Upon demand of any party, whether made before or after institution of any judicial proceeding, any Disputes between or among parties hereto and to the other Loan Documents shall be resolved by binding arbitration as provided herein.  Institution of a judicial proceeding by a party does not waive the right of that party to demand arbitration hereunder.  Disputes may include, without limitation, tort claims, counterclaims, claims brought as class actions, claims arising from Loan Documents executed in the future, disputes as to whether a matter is subject to arbitration, or claims concerning any aspect of the past, present or future relationships arising out of or connected with the Loan Documents.  The parties hereto do not waive any applicable Federal or state substantive law (including the protections afforded to banks under 12 U.S.C.  Section 91 or any similar applicable state law) except as provided herein.  A judgment upon the award may be entered in any court having jurisdiction.  Notwithstanding the foregoing, this paragraph shall not apply to any Hedging Agreement or Cash Management Agreement.

 

(b)           General Rules of Arbitration.  Any arbitration proceeding will (A) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the Loan Documents between the parties, (B) be conducted by the American Arbitration Association (the “AAA”), or such other administrator as the parties shall mutually agree upon, in accordance with the commercial dispute resolution procedures of the AAA, unless the claim or counterclaim is at least $1,000,000 exclusive of claimed interest, arbitration fees and costs, in which case the arbitration shall be conducted in accordance with the AAA’s optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to, as applicable, as the “Arbitration Rules”) and (C) proceed in a location in South Carolina selected by the AAA.  The expedited procedures set forth in Rule 51, et seq. of the Arbitration Rules shall be applicable to claims of less than $1,000,000.  All applicable statutes of limitations shall apply to any Dispute.  If there is any inconsistency between the terms hereof and the Arbitration Rules, the terms and procedures set forth herein shall control.  Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any Dispute.  Notwithstanding anything in the foregoing to the contrary, any arbitration proceeding demanded hereunder shall begin within ninety (90) days after such demand thereof and shall be concluded within one hundred twenty (120) days after such demand.  These time limitations may not be extended unless a party hereto shows cause for extension and then such extension shall not exceed a total of sixty (60) days.

 

  

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(c)           Arbitrators.  Any arbitration proceeding in which the amount in controversy is $5,000,000 or less will be decided by a single arbitrator selected according to the Arbitration Rules, and who shall not render an award of greater than $5,000,000.  Any dispute in which the amount in controversy exceeds $5,000,000 shall be decided by majority vote of a panel of three arbitrators; provided that all three arbitrators must actively participate in all hearings and deliberations.  The arbitrator will be a neutral attorney licensed in the jurisdiction of the state where the hearing will be conducted or a neutral retired judge of the jurisdiction, state or federal, of the state where the hearing will be conducted, in either case with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated.  In any arbitration proceeding, the arbitrator will decide (by documents only or with a hearing at the arbitrator’s discretion) any pre-hearing motions that are similar to motions to dismiss for failure to state a claim or motions for summary adjudication.  The arbitrator shall resolve all Disputes in accordance with the substantive law of South Carolina and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award.  The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure or other Applicable Law.

 

(d)           Preservation of Certain Remedies.  Notwithstanding the preceding binding arbitration provisions, the parties hereto and to the other Loan Documents preserve, without diminution, certain remedies that such Persons may employ or exercise freely, either alone, in conjunction with or during a Dispute.  Each such Person shall have and hereby reserves the right to proceed in any court of proper jurisdiction or by self help to exercise or prosecute the following remedies, as applicable: (A) all rights to foreclose against any real or personal property or other security by exercising a power of sale granted in the Loan Documents or under Applicable Law or by judicial foreclosure and sale, including a proceeding to confirm the sale, (B) all rights of self help including peaceful occupation of property and collection of rents, set off, and peaceful possession of property, (C) obtaining provisional or ancillary remedies including injunctive relief, sequestration, garnishment, attachment, appointment of receiver and in filing an involuntary bankruptcy proceeding, and (D) when applicable, a judgment by confession of judgment.  Preservation of these remedies does not limit the power of an arbitrator to grant similar remedies that may be requested by a party in a Dispute.

 

Section 10.7 Reversal of Payments.  To the extent any Credit Party makes a payment or payments to the Lender receives any payment or proceeds of the Collateral which payments or proceeds 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, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds repaid, the Obligations or part thereof intended to be satisfied shall be revived and continued in full force and effect as if such payment or proceeds had not been received by the Lender.

 

  

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Section 10.8 Injunctive Relief.  The Borrower recognizes that, in the event the Borrower fails to perform, observe or discharge any of its obligations or liabilities under this Agreement, any remedy of law may prove to be inadequate relief to the Lender.  Therefore, the Borrower agrees that the Lender, at the Lender’s option, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages.

 

Section 10.9 Accounting Matters.  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 either the Borrower shall so request, the Lender and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP; provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall provide to the Lender financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.

 

Section 10.10 Successors and Assigns; Participations.

 

(a)           Successors and Assigns Generally.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that neither the Borrower nor any other Credit Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Lender.  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, Participants to the extent provided in paragraph (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of the Lender) any legal or equitable right, remedy or claim under or by reason of this Agreement.

 

(b)           Participations.  The Lender may at any time, without the consent of, or notice to, the Borrower, sell participations to any Person (other than a natural person or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of the Lender’s rights and/or obligations under this Agreement (including all or a portion of its Revolving Credit Commitment and/or the Loans owing to it); provided that (i) the Lender’s obligations under this Agreement shall remain unchanged, (ii) the Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower shall continue to deal solely and directly with the Lender in connection with the Lender’s rights and obligations under this Agreement.

 

Any agreement or instrument pursuant to which the Lender sells such a participation shall provide that the Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement.  Subject to paragraph (c) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 4.9, 4.10, 4.11 and 4.12 to the same extent as if it were the Lender.  To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.4 as though it were the Lender.

 

  

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(c)           Limitations upon Participant Rights.  A Participant shall not be entitled to receive any greater payment under Sections 4.11 and 4.12 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 the Borrower’s prior written consent.  No Participant shall be entitled to the benefits of Section 4.12 unless the Borrower is notified of the participation sold to such Participant.

 

(d)           Certain Pledges.  The Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of the Lender, including without limitation any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release the Lender from any of its obligations hereunder or substitute any such pledgee or assignee for the Lender as a party hereto.

 

Section 10.11 Confidentiality.  The Lender agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates’ respective partners, directors, officers, employees, agents, advisors and other representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by, or required to be disclosed to, any rating agency, or regulatory or similar authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by Applicable Laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies under this Agreement, under any other Loan Document or under any Secured Hedging Agreement or Secured Cash Management Agreement, or any action or proceeding relating to this Agreement, any other Loan Document or any Secured Hedging Agreement or Secured Cash Management Agreement, or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, Participant or proposed Participant, (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g) with the consent of the Borrower, (h) to Gold Sheets and other similar bank trade publications, such information to consist of deal terms and other information customarily found in such publications, or (i) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the Lender or any of its respective Affiliates on a nonconfidential basis from a source other than the Borrower or (j) to governmental regulatory authorities in connection with any regulatory examination of the Lender or in accordance with the Lender’s regulatory compliance policy if the Lender deems necessary for the mitigation of claims by those authorities against the Lender or any of its subsidiaries or affiliates.  For purposes of this Section, “Information” means all information received from any Credit Party or any Subsidiary thereof relating to any Credit Party or any Subsidiary thereof or any of their respective businesses, other than any such information that is available to the Lender on a nonconfidential basis prior to disclosure by any Credit Party or any Subsidiary thereof; provided that, in the case of information received from a Credit Party or any Subsidiary thereof after the date hereof, such information is clearly identified at the time of delivery as confidential.  Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

 

  

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Section 10.12 Performance of Duties.  Each of the Credit Party’s obligations under this Agreement and each of the other Loan Documents shall be performed by such Credit Party at its sole cost and expense.

 

Section 10.13 All Powers Coupled with Interest.  All powers of attorney and other authorizations granted to the Lender and any Persons designated by the Lender pursuant to any provisions of this Agreement or any of the other Loan Documents shall be deemed coupled with an interest and shall be irrevocable so long as any of the Obligations remain unpaid or unsatisfied, or any of the Revolving Credit Commitment or the Alternative Currency Commitment remain in effect or the Credit Facility has not been terminated.

 

Section 10.14 Survival.

 

(a)           All representations and warranties set forth in Article VI and all representations and warranties contained in any certificate, or any of the Loan Documents (including, but not limited to, any such representation or warranty made in or in connection with any amendment thereto) shall constitute representations and warranties made under this Agreement.  All representations and warranties made under this Agreement shall be made or deemed to be made at and as of the Closing Date (except those that are expressly made as of a specific date), shall survive the Closing Date and shall not be waived by the execution and delivery of this Agreement, any investigation made by or on behalf of the Lender or any borrowing hereunder.

 

(b)           Notwithstanding any termination of this Agreement, the indemnities to which the Lender is entitled under the provisions of this Article X and any other provision of this Agreement and the other Loan Documents shall continue in full force and effect and shall protect the Lender against events arising after such termination as well as before.

 

Section 10.15 Titles and Captions.  Titles and captions of Articles, Sections and subsections in, and the table of contents of, this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement.

 

Section 10.16 Severability of Provisions.  Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remainder of such provision or the remaining provisions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction.

 

Section 10.17 Counterparts; Integration; Effectiveness; Electronic Execution.

 

  

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(a)           Counterparts; Integration; Effectiveness.  This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  Delivery of an executed signature page of this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterparty hereof.  This Agreement and the other Loan Documents, and any separate letter agreements with respect to fees payable to the Lender, constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.  In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control; provided that the inclusion of supplemental rights or remedies in favor of the Lender in any other Loan Document shall not be deemed a conflict with this Agreement.  Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof.  Except as provided in Section 5.1, this Agreement shall become effective when it shall have been executed by the Lender and when the Lender shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto.

 

(b)           Electronic Execution of Assignments.  The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

 

Section 10.18 Term of Agreement.  This Agreement shall remain in effect from the Closing Date through and including the date upon which all Obligations (other than contingent indemnification obligations not then due) arising hereunder or under any other Loan Document shall have been indefeasibly and irrevocably paid and satisfied in full, all Letters of Credit have been terminated or expired (or been cash collateralized) and the Revolving Credit Commitment has been terminated.  No termination of this Agreement shall affect the rights and obligations of the parties hereto arising prior to such termination or in respect of any provision of this Agreement which survives such termination.

 

Section 10.19 USA PATRIOT Act.  The Lender hereby notifies the Borrower that pursuant to the requirements of the PATRIOT Act, it is required to obtain, verify and record information that identifies the Borrower and the Subsidiary Guarantors, which information includes the name and address of the Borrower and each Subsidiary Guarantor and other information that will allow the Lender to identify the Borrower or such Subsidiary Guarantor in accordance with the PATRIOT Act.

 

Section 10.20 Independent Effect of Covenants.  The Borrower expressly acknowledges and agrees that each covenant contained in Articles VII or VIII hereof shall be given independent effect.  Accordingly, the Borrower shall not engage in any transaction or other act otherwise permitted under any covenant contained in Articles VII or VIII, before or after giving effect to such transaction or act, the Borrower shall or would be in breach of any other covenant contained in Articles VII or VIII.

 

  

71

  

Section 10.21 Amendment and Restatement; No Novation.  This Agreement constitutes an amendment and restatement of the Existing Credit Agreement, as amended, effective from and after the Closing Date.  The execution and delivery of this Agreement shall not constitute a novation of any indebtedness or other obligations owing to the Lender under the Existing Credit Agreement based on facts or events occurring or existing prior to the execution and delivery of this Agreement.  On the Closing Date, the credit facilities described in the Existing Credit Agreement, as amended, shall be amended, supplemented, modified and restated in their entirety by the facilities described herein, and all loans and other obligations of the Borrower outstanding as of such date under the Existing Credit Agreement, as amended, shall be deemed to be loans and obligations outstanding under the corresponding facilities described herein, without any further action by any Person, except that the Lender shall make such transfers of funds as are necessary in order that the outstanding balance of such Loans, together with any Loans funded on the Closing Date, reflect the respective Revolving Credit Commitment of the Lender hereunder.

 

Section 10.22 Inconsistencies with Other Documents.  In the event there is a conflict or inconsistency between this Agreement and any other Loan Document, the terms of this Agreement shall control; provided that any provision of the Security Documents which imposes additional burdens on the Borrower or any of its Subsidiaries or further restricts the rights of the Borrower or any of its Subsidiaries or gives the Lender additional rights shall not be deemed to be in conflict or inconsistent with this Agreement and shall be given full force and effect.

 

[Signature pages to follow]

 

  

72

  

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed under seal by their duly authorized officers, all as of the day and year first written above.

 

 

COMPX INTERNATIONAL INC.

 

By: /s/ Darryl R Halbert

Name:  Darryl R. Halbert

Title:  CFO

 

 

  

  

  

 

LENDER:

 

WELLS FARGO BANK, NATIONAL ASSOCIATION

 

By:  /s/ Lee R. Gray

Name:  Lee R. Gray

Title:  Senior Vice President

 

 

  

  

  

EXHIBIT A-1

to

Amended and Restated Credit Agreement

dated as of January 13, 2012

by and among

COMPX INTERNATIONAL INC.,

as Borrower,

and

Wells Fargo Bank, National Association,

as Lender

FORM OF REVOLVING CREDIT NOTE

 

  

  

  

REVOLVING CREDIT NOTE

	
$30,000,000 

	
January 13, 2012

 

FOR VALUE RECEIVED, the undersigned, COMPX INTERNATIONAL INC., a Delaware corporation (the “Borrower”), promises to pay to WELLS FARGO BANK, NATIONAL ASSOCIATION (the “Lender”), at the place and times provided in the Credit Agreement referred to below, the principal sum of THIRTY MILLION DOLLARS ($30,000,000) or, if less, the unpaid principal amount of all Revolving Credit Loans made by the Lender from time to time pursuant to that certain Credit Agreement, dated as of January 13, 2012 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) by and among the Borrower and the Lender.  Capitalized terms used herein and not defined herein shall have the meanings assigned thereto in the Credit Agreement.

The unpaid principal amount of this Revolving Credit Note from time to time outstanding is subject to mandatory repayment as provided in Section 2.4 of the Credit Agreement and shall bear interest as provided in Section 4.1 of the Credit Agreement.  All payments of principal and interest on this Revolving Credit Note shall be payable in lawful currency of the United States in immediately available funds to the account designated in the Credit Agreement.

This Revolving Credit Note is entitled to the benefits of, and evidences Obligations incurred under, the Credit Agreement, to which reference is made for a description of the security for this Revolving Credit Note and for a statement of the terms and conditions on which the Borrower is permitted and required to make prepayments and repayments of principal of the Obligations evidenced by this Revolving Credit Note and on which such Obligations may be declared to be immediately due and payable.

THIS REVOLVING CREDIT NOTE SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF SOUTH CAROLINA, WITHOUT REFERENCE TO THE CONFLICTS OR CHOICE OF LAW PRINCIPLES THEREOF.

The Indebtedness evidenced by this Revolving Credit Note is senior in right of payment to all Subordinated Indebtedness referred to in the Credit Agreement.

The Borrower hereby waives all requirements as to diligence, presentment, demand of payment, protest and (except as required by the Credit Agreement) notice of any kind with respect to this Revolving Credit Note.

 

  

  

  

IN WITNESS WHEREOF, the undersigned has executed this Revolving Credit Note under seal as of the day and year first above written.

 

 

COMPX INTERNATIONAL INC.

 

	
                             By:

	  
	
                             Name:

	  
	
                             Title:

	  

 

  

  

  

EXHIBIT A-2

to

Amended and Restated Credit Agreement

dated as of January 13, 2012

by and among

COMPX INTERNATIONAL INC.,

as Borrower,

and

Wells Fargo Bank, National Association,

as Lender

FORM OF ALTERNATIVE CURRENCY NOTE

  

  

  

ALTERNATIVE CURRENCY NOTE

	
$15,000,000 

	
January 13, 2012

(or the equivalent thereof described below)

FOR VALUE RECEIVED, the undersigned, COMPX INTERNATIONAL INC., a Delaware corporation (the “Borrower”), promises to pay to WELLS FARGO BANK, NATIONAL ASSOCIATION (the “Lender”), at the place and times provided in the Credit Agreement referred to below, the principal sum of FIFTEEN MILLION DOLLARS ($15,000,000) (or the applicable Alternative Currency Amount then outstanding under this Alternative Currency Note) or, if less, the principal amount of all Alternative Currency Loans made by the Lender pursuant to that certain Credit Agreement, dated as of January 13, 2012 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) by and among the Borrower, and Wells Fargo Bank, National Association, as Lender.  Capitalized terms used herein and not defined herein shall have the meanings assigned thereto in the Credit Agreement.

The unpaid principal amount of this Alternative Currency Note from time to time outstanding is subject to mandatory repayment as provided in Section 2.4 of the Credit Agreement and shall bear interest as provided in Section 4.1 of the Credit Agreement.  Alternative Currency Loans refunded as Revolving Credit Loans in accordance with Section ___ of the Credit Agreement shall be payable by the Borrower as Revolving Credit Loans pursuant to the Revolving Credit Note, and shall not be payable under this Alternative Currency Note as Alternative Currency Loans.  All payments of principal and interest on this Alternative Currency Note shall be payable in the Alternative Currency of the related borrowing in immediately available funds to the account designated in the Credit Agreement.

This Alternative Currency Note is entitled to the benefits of, and evidences Obligations incurred under, the Credit Agreement, to which reference is made for a description of the security for this Alternative Currency Note and for a statement of the terms and conditions on which the Borrower is permitted and required to make prepayments and repayments of principal of the Obligations evidenced by this Alternative Currency Note and on which such Obligations may be declared to be immediately due and payable.

THIS TERM LOAN NOTE SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF SOUTH CAROLINA, WITHOUT REFERENCE TO THE CONFLICTS OR CHOICE OF LAW PRINCIPLES THEREOF.

The Indebtedness evidenced by this Alternative Currency Note is senior in right of payment to all Subordinated Indebtedness referred to in the Credit Agreement.

The Borrower hereby waives all requirements as to diligence, presentment, demand of payment, protest and (except as required by the Credit Agreement) notice of any kind with respect to this Alternative Currency Note.

  

  

  

IN WITNESS WHEREOF, the undersigned has executed this Alternative Currency Note under seal as of the day and year first above written.

	
  

	
                         COMPX INTERNATIONAL INC.

 

	
                             By:

	  
	
                             Name:

	  
	
                             Title:

	  

  

  

  

EXHIBIT B

to

Amended and Restated Credit Agreement

dated as of January 13, 2012

by and among

COMPX INTERNATIONAL INC.,

as Borrower,

and

Wells Fargo Bank, National Association,

as Lender

FORM OF NOTICE OF BORROWING

  

  

  

NOTICE OF BORROWING

(Alternative Currency Loans)

Dated as of: _____________

Wells Fargo Bank, National Association

15 South Main Street

Greenville, South Carolina  29602

Attention of:  Lee Gray

Ladies and Gentlemen:

This irrevocable Notice of Borrowing is delivered to you pursuant to Section 2.3 of the Credit Agreement dated as of January 13, 2012 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and CompX International Inc., a Delaware corporation (the “Borrower”), and Wells Fargo Bank, National Association, as Lender.  Capitalized terms used herein and not defined herein shall have the meanings assigned thereto in the Credit Agreement.

1.           The Borrower hereby requests that the Lender make an Alternative Currency Loan to the Borrower in the aggregate principal amount of ___________.  (Complete with an amount and currency in accordance with Section 2.3 or Section 4.1 or Section 4.5, as applicable, of the Credit Agreement.)

2.           The Borrower hereby requests that such Loan be made on the following Business Day: _____________________.  (Complete with a Business Day in accordance with Section 2.3 of the Credit Agreement for Alternative Currency Loans).

3.           The Borrower hereby requests that such Loan bear interest at the following interest rate, plus the Applicable Margin, as set forth below:

	
 

Component

of Loan

	
 

 

Interest Rate

	
 

 

Interest Period

	
 

Termination Date for Interest Period

 

	  	  	  	  

	  	  	  	  

4.           The aggregate principal amount of all Loans and L/C Obligations outstanding as of the date hereof (including the Loan requested herein) does not exceed the maximum amount permitted to be outstanding pursuant to the terms of the Credit Agreement.

5.           All of the conditions applicable to the Loan requested herein as set forth in the Credit Agreement have been satisfied as of the date hereof and will remain satisfied to the date of such Loan.

[Signature Page Follows]

  

  

  

IN WITNESS WHEREOF, the undersigned has executed this Notice of Borrowing as of the day and year first written above.

COMPX INTERNATIONAL INC.

	
                             By:

	  
	
                             Name:

	  
	
                             Title:

	  

  

  

  

EXHIBIT C

to

Amended and Restated Credit Agreement

dated as of January 13, 2012

by and among

COMPX INTERNATIONAL INC.,

as Borrower,

and

Wells Fargo Bank, National Association,

as Lender

FORM OF NOTICE OF ACCOUNT DESIGNATION

  

  

  

NOTICE OF ACCOUNT DESIGNATION

Dated as of: _________

Wells Fargo Bank, National Association

15 South Main Street

Greenville, South Carolina  29602

Attention of:  Lee Gray

Ladies and Gentlemen:

This Notice of Account Designation is delivered to you pursuant to Section 2.3 of the Credit Agreement dated as of January 13, 2012 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among CompX International Inc., a Delaware corporation (the “Borrower”), and Wells Fargo Bank, National Association, as Lender.  Capitalized terms used herein and not defined herein shall have the meanings assigned thereto in the Credit Agreement.

1.           The Lender is hereby authorized to disburse all Alternative Currency Loan proceeds into the following account(s):

____________________________

ABA Routing Number: _________

Account Number: _____________

2.           This authorization shall remain in effect until revoked or until a subsequent Notice of Account Designation is provided to the Lender.

[Signature Page Follows]

  

  

  

IN WITNESS WHEREOF, the undersigned has executed this Notice of Account Designation as of the day and year first written above.

COMPX INTERNATIONAL INC.

	
                             By:

	  
	
                             Name:

	  
	
                             Title:

	  

  

  

  

EXHIBIT D

to

Amended and Restated Credit Agreement

dated as of January 13, 2012

by and among

COMPX INTERNATIONAL INC.,

as Borrower,

and

Wells Fargo Bank, National Association,

as Lender

FORM OF NOTICE OF PREPAYMENT

  

  

  

NOTICE OF PREPAYMENT

Dated as of: _____________

Wells Fargo Bank, National Association

15 South Main Street

Greenville, South Carolina  29602

Attention of:  Lee Gray

Ladies and Gentlemen:

This irrevocable Notice of Prepayment is delivered to you pursuant to Section 2.4(c) of the Credit Agreement dated as of January 13, 2012 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among CompX International Inc., a Delaware corporation (the “Borrower”), and Wells Fargo Bank, National Association, as Lender.  Capitalized terms used herein and not defined herein shall have the meanings assigned thereto in the Credit Agreement.

 

1.           The Borrower hereby provides notice to the Lender that it shall repay the following [Base Rate Loans] and/or [LIBOR Rate Loans]: _______________. (Complete with an amount in accordance with Section 2.4 of the Credit Agreement.)

 

2.           The Loan to be prepaid is an Alternative Currency Loan.

 

3.           The Borrower shall repay the above-referenced Loans on the following Business Day: _______________. (Complete with a date no earlier than (i) the same Business Day as of the date of this Notice of Prepayment with respect to any Base Rate Loan and (ii) four (4) Business Days subsequent to date of this Notice of Prepayment with respect to any Alternative Currency Loan.)

 

[Signature Page Follows]

  

  

  

IN WITNESS WHEREOF, the undersigned has executed this Notice of Prepayment as of the day and year first written above.

COMPX INTERNATIONAL INC.

	
                             By:

	  
	
                             Name:

	  
	
                             Title:

	  

  

  

  

EXHIBIT E

to

Amended and Restated Credit Agreement

dated as of January 13, 2012

by and among

COMPX INTERNATIONAL INC.,

as Borrower,

and

Wells Fargo Bank, National Association,

as Lender

FORM OF NOTICE OF CONVERSION/CONTINUATION

  

  

  

NOTICE OF CONVERSION/CONTINUATION

Dated as of: _____________

Wells Fargo Bank, National Association

15 South Main Street

Greenville, South Carolina  29602

Attention of:  Lee Gray

Ladies and Gentlemen:

This irrevocable Notice of Conversion/Continuation (this “Notice”) is delivered to you pursuant to Section 5.2 of the Credit Agreement dated as of January 13, 2012 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among CompX International Inc., a Delaware corporation (the “Borrower”), and Wells Fargo Bank, National Association, as Lender.  Capitalized terms used herein and not defined herein shall have the meanings assigned thereto in the Credit Agreement.

1.           The Loan to which this Notice relates is an Alternative Currency Loan.

2.           This Notice is submitted for the purpose of:  (Check one and complete applicable information in accordance with the Credit Agreement.)

	
  

	
□

	
Converting a portion of LIBOR Rate Loan into a Base Rate Loan

	
Outstanding principal balance:

	
$______________

 

	
Principal amount to be converted:

	
$______________

 

	
Last day of the current Interest Period:

	
_______________

 

	
Requested effective date of conversion:

	
_______________

	
  

	
 □

	
Continuing all or a portion of a LIBOR Rate Loan as a LIBOR Rate Loan

	
Outstanding principal balance:

	
$______________

 

	
Principal amount to be continued:

	
$______________

 

	
Last day of the current Interest Period:

	
_______________

 

	
Requested effective date of continuation:

	
_______________

 

	
Requested new Interest Period:

	
_______________

3.           The aggregate principal amount of all Loans and L/C Obligations outstanding as of the date hereof does not exceed the maximum amount permitted to be outstanding pursuant to the terms of the Credit Agreement.

[Signature Page Follows]

  

  

  

IN WITNESS WHEREOF, the undersigned has executed this Notice of Conversion/Continuation as of the day and year first written above.

COMPX INTERNATIONAL INC.

	
                             By:

	  
	
                             Name:

	  
	
                             Title:

	  

  

  

  

EXHIBIT F

to

Amended and Restated Credit Agreement

dated as of January 13, 2012

by and among

COMPX INTERNATIONAL INC.,

as Borrower,

and

Wells Fargo Bank, National Association,

as Lender

FORM OF OFFICER’S COMPLIANCE CERTIFICATE

  

  

  

OFFICER’S COMPLIANCE CERTIFICATE

The undersigned, on behalf of CompX International Inc., a corporation organized under the laws of Delaware (the “Borrower”), hereby certifies to the Lender, each as defined in the Credit Agreement referred to below, as follows:

1.           This certificate is delivered to you pursuant to Section 7.2 of the Credit Agreement dated as of January 13, 2012 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among the Borrower and Wells Fargo Bank, National Association, as Lender.  Capitalized terms used herein and not defined herein shall have the meanings assigned thereto in the Credit Agreement.

2.           I have reviewed the financial statements of the Borrower and its Subsidiaries dated as of _______________ and for the _______________ period[s] then ended and such statements fairly present in all material respects the financial condition of the Borrower and its Subsidiaries as of the dates indicated and the results of their operations and cash flows for the period[s] indicated.

3.           I have reviewed the terms of the Credit Agreement, and the related Loan Documents and have made, or caused to be made under my supervision, a review in reasonable detail of the transactions and the condition of the Borrower and its Subsidiaries during the accounting period covered by the financial statements referred to in Paragraph 2 above.  Such review has not disclosed the existence during or at the end of such accounting period of any condition or event that constitutes a Default or an Event of Default, nor do I have any knowledge of the existence of any such condition or event as at the date of this certificate [except, if such condition or event existed or exists, describe the nature and period of existence thereof and what action the Borrower has taken, is taking and proposes to take with respect thereto].

4.           The Applicable Margins and calculations determining such figures are set forth on the attached Schedule 1, the Borrower and its Subsidiaries are in compliance with the financial covenants contained in Section 8.15 of the Credit Agreement as shown on such Schedule 1 and the Borrower and its Subsidiaries are in compliance with the other covenants and restrictions contained in the Credit Agreement.

[Signature Page Follows]

  

  

  

WITNESS the following signature as of the day and year first written above.

COMPX INTERNATIONAL INC.,

	
                             By:

	  
	
                             Name:

	  
	
                             Title:

	  

  

  

  

Schedule 1

to

Officer’s Compliance Certificate

[To be provided in a form acceptable to the Lender]

  

  

  

EXHIBIT G

to

Amended and Restated Credit Agreement

dated as of January 13, 2012

by and among

COMPX INTERNATIONAL INC.,

as Borrower,

and

Wells Fargo Bank, National Association,

as Lender

FORM OF SUBSIDIARY GUARANTY AGREEMENT

  

  

  

SUBSIDIARY GUARANTY AGREEMENT

THIS SUBSIDIARY GUARANTY AGREEMENT, dated as of January 13, 2012, is made by certain Domestic Subsidiaries of COMPX INTERNATIONAL INC., a Delaware corporation (the “Borrower”), as identified on the signature pages hereto and any Additional Guarantor (as defined below) who may become party to this Guaranty (such Subsidiaries and Additional Guarantors, collectively, the “Guarantors”), in favor of WELLS FARGO BANK, NATIONAL ASSOCIATION, as Lender (the “Lender”) in accordance with the Credit Agreement, dated as of January 13, 2012 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among the Borrower and the Lender.

Statement Of Purpose

Pursuant to the Credit Agreement, the Lender has agreed to make extensions of credit to the Borrower upon the terms and subject to the conditions set forth therein.

 

The Borrower and the Guarantors are part of a related corporate structure and therefore extensions of credit to the Borrower will directly benefit the Guarantors through increased working capital to the entire corporate structure.

 

It is a condition precedent to the obligation of the Lender to make its respective extensions of credit to the Borrower under the Credit Agreement that the Guarantors shall have executed and delivered this Guaranty to the Lender.

 

NOW, THEREFORE, in consideration of the premises and the mutual agreements set forth herein, and to induce the Lender to enter into and to make available extensions of credit pursuant to the Credit Agreement, each Guarantor hereby agrees with the Lender, as follows:

 

ARTICLE I

DEFINED TERMS

SECTION 1.1                           Defined Terms. The following terms when used in this Guaranty shall have the meanings assigned to them below:

 

“Additional Guarantor” means each Domestic Subsidiary of the Borrower which hereafter becomes a Guarantor pursuant to Section 4.16 hereof and Section 7.13 of the Credit Agreement.

 

“Applicable Insolvency Laws” means all Applicable Laws governing bankruptcy, reorganization, arrangement, adjustment of debts, relief of debtors, dissolution, insolvency, fraudulent transfers or conveyances or other similar laws (including, without limitation, 11 U.S.C. Sections 547, 548 and 550 and other “avoidance” provisions of Title 11 of the United States Code).

 

“Guaranteed Obligations” shall have the meaning set forth in Section 2.1(a) hereof.

 

  

1

  

“Guaranty” means this Subsidiary Guaranty Agreement, as amended, restated, supplemented or otherwise modified from time to time.

 

SECTION 1.2                           Other Definitional Provisions. Terms defined in the Credit Agreement and not otherwise defined herein shall have the meaning assigned thereto in the Credit Agreement. The words “hereof,” “herein”, “hereto” and “hereunder” and words of similar import when used in this Guaranty shall refer to this Guaranty as a whole and not to any particular provision of this Guaranty, and Section references are to this Guaranty unless otherwise specified.  The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. Where the context requires, terms relating to the Collateral or any part thereof, when used in relation to a Guarantor, shall refer to the Collateral of such Guarantor or the relevant part thereof

 

ARTICLE II

UNCONDITIONAL GUARANTY

SECTION 2.1                           Terms of the Guaranty.

 

(a)           Guaranty of Obligations of Guarantors.  Each Guarantor hereby, jointly and severally with the other Guarantors, unconditionally guarantees to the Lender, and its respective successors, endorsees, transferees and assigns, the prompt payment and performance of all Obligations of the Borrower, whether primary or secondary (whether by way of endorsement or otherwise), whether now existing or hereafter arising, whether or not from time to time reduced or extinguished (except by payment thereof) or hereafter increased or incurred, whether or not recovery may be or hereafter becomes barred by the statute of limitations, whether enforceable or unenforceable as against the Borrower, whether or not discharged, stayed or otherwise affected by any Applicable Insolvency Law or proceeding thereunder, whether created directly with the Lender or acquired by the Lender through assignment, endorsement or otherwise, whether matured or unmatured, whether joint or several, as and when the same become due and payable (whether at maturity or earlier, by reason of acceleration, mandatory repayment or otherwise), in accordance with the terms of any such instruments evidencing any such obligations, including all renewals, extensions or modifications thereof (all Obligations of the Borrower, including all of the foregoing, being hereinafter collectively referred to as the “Guaranteed Obligations”).

 

(b)           Notwithstanding anything to the contrary contained in subsection (a) above, it is the intention of each Guarantor and the Lender that, in any proceeding involving the bankruptcy, reorganization, arrangement, adjustment of debts, relief of debtors, dissolution or insolvency or any similar proceeding with respect to such Guarantor or its assets, the amount of such Guarantor’s obligations under this Guaranty shall not exceed the maximum amount thereof not subject to avoidance or recovery by operation of law after giving effect to subsection (c) below.  To that end, but only in the event and to the extent that after giving effect to subsection (c) below such Guarantor’s obligations under this Guaranty or any payment made pursuant hereto would, but for the operation of the first sentence of this subsection (b), be subject to avoidance or recovery in any such proceeding under Applicable Insolvency Laws after giving effect to subsection (c) below, the amount of such Guarantor’s obligations under this Guaranty shall be limited to the largest amount which, after giving effect thereto, would not, under Applicable Insolvency Laws, render such Guarantor’s obligations unenforceable or avoidable or otherwise subject to recovery under Applicable Insolvency Laws. To the extent any payment actually made exceeds the limitation of the first sentence of this subsection (b) and is otherwise subject to avoidance and recovery in any such proceeding under Applicable Insolvency Laws, the amount subject to avoidance shall in all events be limited to the amount by which such actual payment exceeds such limitation and the obligations of Guarantor hereunder, as limited by the first sentence of this subsection (b), shall in all events remain in full force and effect and be fully enforceable against such Guarantor. The first sentence of this subsection (b) is intended solely to preserve the rights of the Lender hereunder against such Guarantor in such proceeding to the maximum extent permitted by Applicable Insolvency Laws and neither such Guarantor, the Borrower, any of its Subsidiaries, any other guarantor nor any other Person shall have any right or claim under such sentence that would not otherwise be available under Applicable Insolvency Laws in such proceeding.

 

  

2

  

(c)           To the extent each Guarantor is required, by reason of its obligations hereunder, to pay to the Lender an amount greater than the amount of value (as determined in accordance with Applicable Insolvency Laws) actually made available to or for the benefit of such Guarantor on account of the Credit Agreement, this Guaranty or any other Loan Document, such Guarantor shall have an enforceable right of contribution against the Borrower and Guarantors.  Subject only to the subordination provided in the following subsection (d), such Guarantor shall be subrogated to any and all rights of the Lender against the other Guarantors to the extent of such excess payment.

 

(d)           Notwithstanding any payment or payments by each Guarantor hereunder, or any set-off or application of funds of such Guarantor by the Lender, or the receipt of any amounts by the Lender with respect to any of the obligations of such Guarantor hereunder, such Guarantor shall not be entitled to be subrogated to any of the rights of the Lender against the other Guarantors or any other guarantors or against any collateral security held by or for the benefit of the Lender for the payment of the Obligations nor shall such Guarantor seek any reimbursement from any of the other Guarantors in respect of payments made by such Guarantor in connection with such obligations of such Guarantor hereunder, until all amounts owing to the Lender on account of the Obligations are paid in full and the Aggregate Commitment is terminated. If any amount shall be paid to such Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full, such amount shall be held by such Guarantor in trust for the Lender, segregated from all other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Lender in the exact form received by such Guarantor (duly endorsed by such Guarantor to the Lender, if required) to be applied against the Guaranteed Obligations, whether matured or unmatured, in such order as set forth in the Credit Agreement.

(e)           This Guaranty is an absolute, unconditional, continuing and unlimited guaranty of the full and punctual payment and performance by the Borrower of the Obligations and not of their collectibility only and is in no way conditioned upon any requirement that the Lender first attempt to collect any of the Guaranteed Obligations from the Borrower, any other Guarantor, or any other person, or resort to any security for the Guaranteed Obligations or this Guaranty or to other means of obtaining payment of any of the Guaranteed Obligations which the Lender now has or may acquire after the date hereof, or upon any other contingency whatsoever, and the Lender may proceed hereunder against any Guarantor in the first instance to collect the Guaranteed Obligations when due, without first proceeding against the Borrower or any other Person and without first resorting to any security or other means of obtaining payment.  The obligations of each Guarantor hereunder are irrevocable, absolute and unconditional, irrespective of genuineness, validity, regularity or enforceability of the Guaranteed Obligations or any security given therefor or in connection therewith or any other circumstance (except payment to, or express, written waiver, release or consent by, the Lender pursuant to the terms of the Credit Agreement) which might otherwise constitute a legal or equitable discharge of a surety or guarantor.  The liability of each Guarantor hereunder shall in no way be affected or impaired by any acceptance by the Lender of any direct or indirect security for, or other guaranties of, the Guaranteed Obligations or any other indebtedness, liability or obligations of the Borrower, any Guarantor or other Person to the Lender or by any failure, delay, neglect or omission of the Lender to realize upon or protect any Guaranteed Obligations or any such other indebtedness, liability or obligation or any notes or other instruments evidencing the same or any direct or indirect security therefor, or by any approval, consent, waiver or other action taken or omitted to be taken by the Lender.

  

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(f)           Each Guarantor hereby agrees and acknowledges that its obligations under this Guaranty are not and shall not be subject to any counterclaims, offsets or defenses of any kind against the Lender or the Borrower whether now existing or which may arise in the future (except for those certain rights and defenses available at law and pursuant to the terms of this Guaranty, the Credit Agreement and the other Loan Documents; provided, that the availability of such rights and defenses shall be subject to any covenants, agreements, acknowledgement or waivers to the contrary which may be set forth in this Guaranty, the Credit Agreement or any other Loan Document).

 

(g)           Each Guarantor hereby agrees and acknowledges that the Guaranteed Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Guaranty, and all dealings between the Borrower and the Guarantors, on the one hand, and the Lender, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon this Guaranty.

 

SECTION 2.3 Waivers.  To the extent permitted by law, each Guarantor expressly waives all of the following rights and defenses (and agrees not to take advantage of or assert any such right or defense):

 

(a)           rights it may now or in the future have under any statute, or at law or in equity, or otherwise, to compel the Lender to proceed in respect of the Guaranteed Obligations against the Borrower or any other Person or against any security for or other guaranty of the payment and performance of the Guaranteed Obligations before proceeding against, or as a condition to proceeding against, such Guarantor;

 

(b)           any defense based upon the failure of the Lender to commence an action in respect of the Guaranteed Obligations against the Borrower, such Guarantor, any other guarantor or any other Person or any security for the payment and performance of the Guaranteed Obligations;

 

  

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(c)           any right to insist upon, plead or in any manner whatsoever claim or take the benefit or advantage of, any appraisal, valuation, stay, extension, marshalling of assets or redemption laws, or exemption, whether now or at any time hereafter in force, which may delay, prevent or otherwise affect the performance by such Guarantor of its obligations under, or the enforcement by the Lender of, this Guaranty;

 

(d)           any right of diligence, presentment, demand, protest and notice (except as specifically required herein) of whatever kind or nature with respect to any of the Guaranteed Obligations and waives, to the extent permitted by law, the benefit of all provisions of law which are or might be in conflict with the terms of this Guaranty; and

 

(e)           any and all right to notice of the creation, renewal, extension or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by the Lender upon, or acceptance of, this Guaranty.

 

Each Guarantor agrees that any notice or directive given at any time to the Lender which is inconsistent with any of the foregoing waivers shall be null and void and may be ignored by the Lender, and, in addition, may not be pleaded or introduced as evidence in any litigation relating to this Guaranty for the reason that such pleading or introduction would be at variance with the written terms of this Guaranty, unless the Lender has specifically agreed otherwise in writing.  The foregoing waivers are of the essence of the transaction contemplated by the Credit Agreement and the other Loan Documents and, but for this Guaranty and such waivers, the Lender would decline to enter into the Credit Agreement and the other Loan Documents.

SECTION 2.4                           Modification of Loan Documents etc.  The Lender shall not incur any liability to any Guarantor as a result of any of the following, and none of the following shall impair or release this Guaranty or any of the obligations of any Guarantor under this Guaranty:

 

(a)           any change or extension of the manner, place or terms of payment of, or renewal or alteration of all or any portion of, the Guaranteed Obligations;

 

(b)           any action under or in respect of the Credit Agreement or the other Loan Documents in the exercise of any remedy, power or privilege contained therein or available to any of them at law, in equity or otherwise, or the waiver of or refrain from exercising any such remedies, powers or privileges;

 

(c)           any amendment or modification, in any manner whatsoever, of the Credit Agreement or the other Loan Documents;

 

(d)           any extension or waiver of the time for performance by the Borrower, any Guarantor or any other Person of, or compliance with, any term, covenant or agreement on its part to be performed or observed under the Credit Agreement or any other Loan Document, or waiver of such performance or compliance or consent to a failure of, or departure from, such performance or compliance;

 

  

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(e)           any taking and holding security or collateral for the payment of the Guaranteed Obligations or any sale, exchange, release, disposal of, or other dealing with, any property pledged, mortgaged or conveyed, or in which the Lender have been granted a Lien, to secure any Debt of the Borrower, any Guarantor or any other Person to the Lender;

 

(f)           any release of anyone who may be liable in any manner for the payment of any amounts owed by the Borrower, any Guarantor or any other Person to the Lender;

 

(g)           any modification or termination of the terms of any intercreditor or subordination agreement pursuant to which claims of other creditors of the Borrower, any Guarantor or any other Person are subordinated to the claims of the Lender; or

 

(h)           any application of any sums by whomever paid or however realized to any amounts owing by the Borrower, any Guarantor or any other Person to the Lender on account of the Guaranteed Obligations in such manner as the Lender shall determine in its reasonable discretion.

 

SECTION 2.5                           Demand by the Lender.  In addition to the terms set forth in this Article II, and in no manner imposing any limitation on such terms, if all or any portion of the then outstanding Guaranteed Obligations under the Credit Agreement are declared to be immediately due and payable upon the occurrence of an Event of Default, then the Guarantors shall, upon demand in writing therefor by the Lender to the Guarantors, pay all or such portion of the outstanding Guaranteed Obligations then declared due and payable.  Notwithstanding the foregoing, each Guarantor agrees that, in the event of the dissolution or insolvency of the Borrower or any Guarantor, or the inability or failure of the Borrower or any Guarantor to pay debts as they become due, or an assignment by the Borrower or any Guarantor for the benefit of creditors, or the commencement of any case or proceeding in respect of the Borrower or any Guarantor under bankruptcy, insolvency or similar laws, and if such event shall occur at a time when any of the Guaranteed Obligations may not then be due and  payable, each Guarantor will pay to the Lender forthwith the full amount which would be payable hereunder by each Guarantor if all such Guaranteed Obligations were then due and payable.

 

SECTION 2.6                           Remedies.  Upon the occurrence and during the continuance of any Event of Default, the Lender may enforce against the Guarantors their respective obligations and liabilities hereunder and exercise such other rights and remedies as may be available to the Lender hereunder, under the Credit Agreement and the other Loan Documents or otherwise.

 

SECTION 2.7                           Benefits of Guaranty.  The provisions of this Guaranty are for the benefit of the Lender and its respective permitted successors, transferees, endorsees and assigns, and nothing herein contained shall impair, as between the Borrower and the Lender, the obligations of the Borrower under the Credit Agreement and the other Loan Documents. In the event all or any part of the Guaranteed Obligations are transferred, endorsed or assigned by the Lender to any Person or Persons as permitted under the Credit Agreement, any reference to an “Lender” herein shall be deemed to refer equally to such Person or Persons.

 

  

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SECTION 2.8                           Termination; Reinstatement.

 

(a)           Subject to subsection (c) below, this Guaranty shall remain in full force and effect until all of the Guaranteed Obligations and all the obligations of the Guarantors have been paid in full and the Commitments terminated.

 

(b)           No payment made by the Borrower, any Guarantor or any other Person received or collected by the Lender from the Borrower, any Guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Guaranteed Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment (other than any payment made by such Guarantor in respect of the obligations of the Guarantors or any payment received or collected from such Guarantor in respect of the obligations of the Guarantors), remain liable for the obligations of the Guarantors up to the maximum liability of such Guarantor hereunder until the Guaranteed Obligations and all the obligations of the Guarantors shall have been paid in full and the Commitments terminated.

 

(c)           Each Guarantor agrees that, if any payment made by the Borrower or any other Person applied to the Guaranteed Obligations is at any time annulled, set aside, rescinded, invalidated, declared to be fraudulent or preferential or otherwise required to be refunded or repaid or the proceeds of any collateral are required to be refunded by the Lender to the Borrower, its estate, trustee, receiver or any other Person, including, without limitation, any Guarantor, under any applicable law or equitable cause, then, to the extent of such payment or repayment, each Guarantor’s liability hereunder (and any Lien or collateral securing such liability) shall be and remain in full force and effect, as fully as if such payment had never been made, and, if prior thereto, this Guaranty shall have been canceled or surrendered (and if any Lien or collateral securing such Guarantor’s liability hereunder shall have been released or terminated by virtue of such cancellation or surrender), this Guaranty (and such Lien or collateral) shall be reinstated in full force and effect, and such prior cancellation or surrender shall not diminish, release, discharge, impair or otherwise affect the obligations of such Guarantor in respect of the amount of such payment (or any Lien or collateral securing such obligation).

 

SECTION 2.9                           Payments.  Payments by the Guarantors shall be made to the Lender, to be credited and applied upon the Guaranteed Obligations, in immediately available funds in the Permitted Currency in which the relevant Guaranteed Obligations are denominated to an account designated by the Lender or at the Lender’s Office or at any other address that may be specified in writing from time to time by the Lender.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

SECTION 3.1                           Representations and Warranties.  To induce the Lender to make any Extensions of Credit, each Guarantor hereby represents and warrants that:

 

  

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(a)           such Guarantor has the corporate, limited liability company or other organizational right, power and authority to execute, deliver and perform this Guaranty and has taken all necessary corporate, limited liability company or other organizational action to authorize the execution, delivery and performance of this Guaranty;

 

(b)           this Guaranty constitutes the legal, valid and binding obligation of such Guarantor enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by the availability of equitable remedies;

 

(c)           the execution, delivery and performance of this Guaranty by such Guarantor will not violate any Applicable Law relating to such Guarantor or contractual obligation of such Guarantor and will not result in the creation or imposition of any Lien (other than a Permitted Lien) upon or with respect to any property or revenues now owned or hereafter acquired by such Guarantor;

 

(d)           no consent or authorization of, filing with, or other act by or in respect of, any arbitrator, Governmental Authority or any other Person is required in connection with the execution, delivery, performance, validity or enforceability of this Guaranty;

 

(e)           no actions, suits or proceedings before any arbitrator or Governmental Authority are pending or, to the knowledge of such Guarantor, threatened by or against such Guarantor or against any of its properties with respect to this Guaranty or any of the transactions contemplated hereby;

 

(f)           such Guarantor has title to the real property owned by it and a valid leasehold interest in the real property leased by it, and has good and marketable title to all of its personal property sufficient to carry on its business free and clear of all Liens of any type whatsoever, except for Permitted Liens;

 

(g)           as of the Closing Date (or such later date upon which such Guarantor became a party hereto), such Guarantor is Solvent; and

 

(h)           such Guarantor shall comply with the provisions of Articles VII and VIII of the Credit Agreement as if a party thereto.

 

ARTICLE IV

MISCELLANEOUS

SECTION 4.1                           Enforcement Expenses; Indemnification.

 

(a)           Each Guarantor agrees to pay or reimburse the Lender for all reasonable costs and expenses incurred in connection with enforcing or preserving any rights under this Guaranty and the other Loan Documents to which such Guarantor is a party, including, without limitation, the reasonable fees and disbursements of counsel to the Lender.  All such costs and expenses shall be additional Guaranteed Obligations hereunder.

 

  

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(b)           Each Guarantor agrees to pay, and to save the Lender harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Guaranty.

 

(c)           Each Guarantor agrees to pay, and to save the Lender harmless from any and all liabilities, obligations, losses, damages, penalties, costs and expenses in connection with actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Guaranty to the extent that the Borrower would be required to do so pursuant to Section 10.3 of the Credit Agreement.

 

(d)           The agreements in this Section 4.1 shall survive repayment of the Guaranteed Obligations and all other amounts payable under the Credit Agreement and the other Loan Documents.

 

SECTION 4.2                           Notices.  All notices and communications hereunder shall be given to the addresses and otherwise made in accordance with Section 10.1 of the Credit Agreement; provided that notices and communications to the Guarantors shall be directed to the Guarantors at the address of the Company set forth in Section 10.1 of the Credit Agreement.

 

SECTION 4.3                           Successors and Assigns.  This Guaranty is for the benefit of the Lender and its successors and assigns.  This Guaranty shall be binding on each Guarantor and its successors and assigns; provided that no Guarantor may assign any of its rights or obligations hereunder without the prior written consent of the Lender.

 

SECTION 4.4                           Amendments, Waivers and Consents.  No term, covenant, agreement or condition of this Guaranty may be amended or waived, nor may any consent be given, except in the manner set forth in Section 10.2 of the Credit Agreement.

 

SECTION 4.5                           No Waiver by Course of Conduct; Cumulative Remedies.  The Lender shall not by any act (except by a written instrument pursuant to Section 4.4), be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default.  No failure to exercise, nor any delay in exercising on the part of the Lender, any right, power or privilege hereunder shall operate as a waiver thereof.  No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  A waiver by the Lender of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Lender would otherwise have on any future occasion.  The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law.

 

SECTION 4.6                           Set-Off.  Each Guarantor hereby irrevocably authorizes the Lender at any time and from time to time pursuant to Section 10.4 of the Credit Agreement, without prior notice to such Guarantor or any other Guarantor, any such prior notice being expressly waived by each Guarantor, to set-off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Lender to or for the credit or the account of such Guarantor, or any part thereof in such amounts as the Lender may elect, against and on account of the obligations and liabilities of such Guarantor to the Lender hereunder and claims of every nature and description of the Lender against such Guarantor, in any currency, whether arising hereunder, under the Credit Agreement, any other Loan Document or otherwise, as the Lender may elect, whether or not the Lender has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured.  The Lender shall notify such Guarantor promptly of any such set-off and the application made by the Lender of the proceeds thereof; provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Lender under this Section 4.6 are in addition to any other rights and remedies (including, without limitation, other rights of set-off) which the Lender may have.

 

  

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SECTION 4.7                           Integration.  This Guaranty and the other Loan Documents represent the agreement of the Guarantors, and the Lender with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Lender relative to the subject matter hereof and thereof not expressly set forth or referred to herein or in the other Loan Documents.

 

SECTION 4.8                           Acknowledgements.  Each Guarantor hereby acknowledges that:

 

(a)           it has been advised by counsel in the negotiation, execution and delivery of this Guaranty and the other Loan Documents to which it is a party;

 

(b)           the Lender has no fiduciary relationship with or duty to any Guarantor arising out of or in connection with this Guaranty or any of the other Loan Documents, and the relationship between the Guarantors, on the one hand, and the Lender, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and

 

(c)           no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lender or among the Guarantors and the Lender.

 

SECTION 4.9                           Powers Coupled with an Interest.  All powers of attorney and other authorizations herein contained shall be deemed coupled with an interest and irrevocable so long as the Guaranteed Obligation remains unpaid or unsatisfied, any of the Commitments remain in effect or the Credit Agreement has not been terminated.

 

SECTION 4.10                           Governing Law.  This Guaranty shall be governed by, construed and enforced in accordance with the laws of the State of South Carolina, without reference to the conflicts or choice of law principles thereof.

 

SECTION 4.11                           Jurisdiction and Venue.

 

(a)           Jurisdiction. The Guarantors hereby irrevocably consent to the personal jurisdiction of the state and federal courts located in Greenville County, South Carolina (and any courts from which an appeal from any of such courts must or may be taken), in any action, claim or other proceeding arising out of any dispute in connection with this Guaranty and the other Loan Documents, any rights or obligations hereunder or thereunder, or the performance of such rights and obligations.  The Guarantors hereby irrevocably consent to the service of a summons and complaint and other process in any action, claim or proceeding brought by the Lender in connection with this Guaranty or the other Loan Documents, any rights or obligations hereunder or thereunder, or the performance of such rights and obligations, on behalf of itself or its property, in the manner specified in Section 10.1 of the Credit Agreement. Nothing in this Section 4.11 shall affect the right of the Lender to serve legal process in any other manner permitted by Applicable Law or affect the right of the Lender to bring any action or proceeding against any Guarantor or its properties in the courts of any other jurisdictions.

 

  

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(b)           Venue.  The Guarantors hereby irrevocably waive any objection they may have now or in the future to the laying of venue in the aforesaid jurisdiction in any action, claim or other proceeding arising out of or in connection with this Guaranty or the rights and obligations of the parties hereunder or thereunder.  The Guarantors irrevocably waive, in connection with such action, claim or proceeding, any plea or claim that the action, claim or other proceeding has been brought in an inconvenient forum.

 

SECTION 4.12                           Binding Arbitration; Waiver of Jury Trial.

 

(a)           Binding Arbitration. Upon demand of any party, whether made before or after institution of any judicial proceeding, any dispute, claim or controversy arising out of, connected with or relating to this Guaranty (“Disputes”), between or among the parties hereto shall be resolved by binding arbitration as provided herein. Institution of a judicial proceeding by a party does not waive the right of that party to demand arbitration hereunder.  Disputes may include, without limitation, tort claims, counterclaims, claims brought as class actions, claims arising from this Guaranty, disputes as to whether a matter is subject to arbitration, or claims concerning any aspect of the past, present or future relationships arising out of or connected with this Guaranty.  Arbitration shall be conducted under and governed by the Commercial Financial Disputes Arbitration Rules (the “Arbitration Rules”) of the American Arbitration Association (the “AAA”) and the Federal Arbitration Act.  All arbitration hearings shall be conducted in South Carolina.  The expedited procedures set forth in Rule 51, et seq. of the Arbitration Rules shall be applicable to claims of less than $1,000,000.  All applicable statutes of limitations shall apply to any Dispute.  A judgment upon the award may be entered in any court having jurisdiction.  Notwithstanding anything foregoing to the contrary, any arbitration proceeding demanded hereunder shall begin within ninety (90) days after such demand thereof and shall be concluded within one-hundred twenty (120) days after such demand.  These time limitations may not be extended unless a party hereto shows cause for extension and then such extension shall not exceed a total of sixty (60) days.  The panel from which all arbitrators are selected shall be comprised of licensed attorneys selected from the Commercial Financial Dispute Arbitration Panel of the AAA.  The single arbitrator selected for expedited procedure shall be a retired judge from the highest court of general jurisdiction, state or federal, of the state where the hearing will be conducted.  The parties hereto do not waive any applicable Federal or state substantive law except as provided herein.

 

(b)           Jury Trial.  THE LENDER AND EACH GUARANTOR HEREBY ACKNOWLEDGE THAT BY AGREEING TO BINDING ARBITRATION THEY HAVE IRREVOCABLY WAIVED THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS GUARANTY, ANY RIGHTS OR OBLIGATIONS HEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.

 

  

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(c)           Preservation of Certain Remedies.  Notwithstanding the preceding binding arbitration provisions, the parties hereto preserve, without diminution, certain remedies that such Persons may employ or exercise freely, either alone, in conjunction with or during a Dispute. Each such Person shall have and hereby reserves the right to proceed in any court of proper jurisdiction or by self help to exercise or prosecute the following remedies, as applicable:  (i) all rights to foreclose against any real or personal property or other security by exercising a power of sale granted in this Guaranty or under Applicable Law or by judicial foreclosure and sale, including a proceeding to confirm the sale, (ii) all rights of self help including peaceful occupation of property and collection of rents, set off, and peaceful possession of property, (iii) obtaining provisional or ancillary remedies including injunctive relief, sequestration, garnishment, attachment, appointment of receiver and in filing an involuntary bankruptcy proceeding, and (iv) when applicable, a judgment by confession of judgment. Preservation of these remedies does not limit the power of an arbitrator to grant similar remedies that may be requested by a party in a Dispute.

 

SECTION 4.13                           Severability.  If any provision hereof is invalid and unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (a) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of the Lender in order to carry out the intentions of the parties hereto as nearly as may be possible; and (b) the invalidity or unenforceability of any provisions hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction.

 

SECTION 4.14                           Headings. The various headings of this Guaranty are inserted for convenience only and shall not affect the meaning or interpretation of this Guaranty or any provisions hereof.

 

SECTION 4.15                           Counterparts.  This Guaranty may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement.

 

SECTION 4.16                           Additional Guarantors.  Each Domestic Subsidiary of the Borrower that is required to become a party to this Guaranty pursuant to Section 7.13 of the Credit Agreement shall become a Guarantor for all purposes of this Guaranty upon execution and delivery by such Domestic Subsidiary of a supplement in form and substance satisfactory to the Lender.

 

SECTION 4.17                           Releases.  At such time as the Guaranteed Obligations shall have been paid in full and the Commitments and the Credit Agreement have been terminated, this Guaranty and all obligations (other than those expressly stated to survive such termination) of each Guarantor hereunder shall terminate, all without delivery of any instrument or performance of any act by any party.

[Remainder of page intentionally left blank]

  

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IN WITNESS WHEREOF, each of the Guarantors has executed and delivered this Guaranty as of the date first above written.

GUARANTORS:

[CORPORATE SEAL]                                                                COMPX SECURITY PRODUCTS INC.

By:                                                                           

Name:

Title:                                                                           

[CORPORATE SEAL]                                                                COMPX PRECISION SLIDES INC.

By:                                                                           

Name:

Title:                                                                           

[CORPORATE SEAL]                                                                COMPX MARINE INC.

By:                                                                           

Name:

Title:                                                                           

[CORPORATE SEAL]                                                                CUSTOM MARINE INC.

By:                                                                           

Name:

Title:                                                                           

[CORPORATE SEAL]                                                                LIVORSI MARINE, INC.

By:                                                                           

Name:

Title:                                                                           

  

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EXHIBIT H

to

Amended and Restated Credit Agreement

dated as of January 13, 2012

by and among

COMPX INTERNATIONAL INC.,

as Borrower,

and

Wells Fargo Bank, National Association,

as Lender

FORM OF COLLATERAL AGREEMENT

  

  

  

COLLATERAL AGREEMENT

dated as of January 13, 2012

by and among

COMPX INTERNATIONAL INC.,

and certain of its Subsidiaries

as Grantors,

in favor of

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Lender

  

  

  

TABLE OF CONTENTS

ARTICLE I                      DEFINED TERMS 

	
  

	
SECTION 1.1.

	
Terms Defined in the Uniform Commercial Code

	
 

	
  

	
SECTION 1.2.

	
Definitions

	
 

	
  

	
SECTION 1.3.

	
Other Definitional Provisions

	
 

ARTICLE II                         SECURITY INTEREST 

ARTICLE III                         REPRESENTATIONS AND WARRANTIES 

	
  

	
SECTION 3.1.

	
Existence

	
 

	
  

	
SECTION 3.2.

	
Authorization of Agreement; No Conflict

	
 

	
  

	
SECTION 3.3.

	
Consents

	
 

	
  

	
SECTION 3.4.

	
Perfected Liens

	
 

	
  

	
SECTION 3.5.

	
Title, No Other Liens

	
 

	
  

	
SECTION 3.6.

	
Exact Legal Name, State of Organization; Location of Inventory, Equipment and Fixtures; Other Information.

	
 

	
  

	
SECTION 3.7.

	
Investment Collateral

	
 

ARTICLE IV                         COVENANTS 

	
  

	
SECTION 4.1.

	
Maintenance of Perfected Security Interest; Further Information

	
 

	
  

	
SECTION 4.2.

	
Changes in Locations: Changes in Name or Structure

	
 

	
  

	
SECTION 4.3.

	
Required Notifications

	
 

	
  

	
SECTION 4.4.

	
Delivery Covenants

	
 

	
  

	
SECTION 4.5.

	
Filing Covenants

	
 

	
  

	
SECTION 4.6.

	
Investment Collateral.

	
 

	
  

	
SECTION 4.7.

	
Further Assurances

	
 

ARTICLE V                         REMEDIAL PROVISIONS 

	
  

	
SECTION 5.1.

	
General Remedies

	
 

	
  

	
SECTION 5.2.

	
Specific Remedies

	
 

	
  

	
SECTION 5.3.

	
Application of Proceeds

	
 

	
  

	
SECTION 5.4.

	
Waiver, Deficiency

	
 

ARTICLE VI                         MISCELLANEOUS 

	
  

	
SECTION 6.1.

	
Amendments in Writing

	
 

	
  

	
SECTION 6.2.

	
Notices

	
 

	
  

	
SECTION 6.3.

	
No Waiver by Course of Conduct, Cumulative Remedies

	
 

	
  

	
SECTION 6.4.

	
Enforcement Expenses, Indemnification

	
 

	
  

	
SECTION 6.5.

	
Binding Arbitration; Waiver of Jury Trial; Preservation of Remedies

	
 

	
  

	
SECTION 6.6.

	
Successors and Assigns

	
 

	
  

	
SECTION 6.7.

	
Counterparts

	
 

	
  

	
SECTION 6.8.

	
Severability

	
 

	
  

	
SECTION 6.9.

	
Section Heading

	
 

	
  

	
SECTION 6.10.

	
Integration

	
 

	
  

	
SECTION 6.11.

	
Governing Law

	
 

	
  

	
SECTION 6.12.

	
Consent to Jurisdiction

	
 

	
  

	
SECTION 6.13.

	
Acknowledgements

	
 

	
  

	
SECTION 6.14.

	
Additional Grantors

	
 

	
  

	
SECTION 6.15.

	
Releases

	
 

  

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SCHEDULES:

	
Schedule 3.6

	
Exact Legal Name; Jurisdiction of Organization; Taxpayer Identification Number; Mailing Address; Chief Executive Office and other Locations; Locations of Collateral

	
Schedule 3.7

	
Listing of Collateral

  

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COLLATERAL AGREEMENT

THIS COLLATERAL AGREEMENT (this “Agreement”), dated as of January 13, 2012, by and among COMPX INTERNATIONAL INC., a Delaware corporation (the “Borrower”), certain of its Subsidiaries as identified on the signature pages hereto and any Additional Grantor (as defined below) who may become party to this Agreement (such Subsidiaries and Additional Grantors, collectively, with the Borrower, the “Grantors”), in favor of WELLS FARGO BANK, NATIONAL ASSOCIATION, as Lender (in such capacity, the “Lender”) in accordance with the Credit Agreement dated as of January 13, 2012 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among the Borrower and the Lender.

STATEMENT OF PURPOSE

Pursuant to the Credit Agreement, the Lender has agreed to make Loans to the Borrower upon the terms and subject to the conditions set forth therein.

 

Pursuant to the terms of the Subsidiary Guaranty Agreement, certain Material Domestic Subsidiaries of the Borrower have guaranteed the payment and performance of the Obligations of the Borrower.

 

It is a condition precedent to the obligation of the Lender to make its Extensions of Credit to the Borrower under the Credit Agreement that the Grantors shall have executed and delivered this Collateral Agreement to the Lender.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, and to induce the Lender to enter into the Credit Agreement and to induce the Lender to make the Extensions of Credit to the Borrower thereunder, each Grantor hereby agrees with the Lender, as follows:

 

ARTICLE I

DEFINED TERMS

SECTION 1.1.                           Terms Defined in the Uniform Commercial Code.

 

Terms defined in the UCC (as defined in Section 1.2 below) and not otherwise defined herein or in the Credit Agreement shall have the meaning assigned in the UCC as in effect from time to time.

 

SECTION 1.2.                           Definitions.  The following terms when used in this Agreement shall have the meanings assigned to them below:

 

“Additional Grantor” means each Domestic Subsidiary of the Borrower which hereafter becomes a Grantor pursuant to Section 6.14 hereof and Section 6.13 of the Credit Agreement.

 

“Agreement” means this Collateral Agreement, as further amended, restated, supplemented or otherwise modified from time to time.

 

  

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“Applicable Percentage” means such percentage of a Material Foreign Subsidiary’s Stock or Partnership/LLC Interests, the granting of a security interest in shall not result in material adverse tax consequences to the Borrower or the applicable Grantor (it being acknowledged by the Grantors and the Lender that, as of the Closing Date, such percentage shall be sixty-five percent (65%)).

 

“Collateral” means the Stock Collateral and the Partnership/LLC Collateral.

 

“Control” means the manner in which “control” is achieved under the UCC with respect to any Collateral for which the UCC specifies a method of achieving “control.”

 

“Effective Endorsement and Assignment” means, with respect to any specific type of Collateral, all such endorsements, assignments and other instruments of transfer reasonably requested by the Lender with respect to the Security Interest granted in such Collateral, and in each case, in form and substance satisfactory to the Lender.

 

“Grantors” has the meaning set forth in the Preamble of this Agreement.

 

“Material Foreign Subsidiary” shall have the meaning assigned thereto in the Credit Agreement.

 

“Obligations” means with respect to the Borrower, the meaning assigned thereto in the Credit Agreement and with respect to each Subsidiary Guarantor, the obligations of such Subsidiary Guarantor under the Subsidiary Guaranty Agreement executed by such Subsidiary Guarantor.

 

“Partnership/LLC Collateral” means the Applicable Percentage of the Partnership/LLC Interests of the Grantors in any Material Foreign Subsidiary and all Proceeds therefrom.

 

“Partnership/LLC Interests” means, with respect to any Grantor, the entire partnership interest, membership interest or limited liability company interest, as applicable, of such Grantor in each Material Foreign Subsidiary, including, without limitation, such Grantor’s capital account, its interest as a partner or member, as applicable, in the net cash flow, net profit and net loss, and items of income, gain, loss, deduction and credit of any such Material Foreign Subsidiary, such Grantor’s interest in all distributions made or to be made by any such Material Foreign Subsidiary to such Grantor and all of the other economic rights, titles and interests of such Grantor as a partner or member, as applicable, of any such Material Foreign Subsidiary, whether set forth in the partnership agreement or membership agreement, as applicable, of such Material Foreign Subsidiary, by separate agreement or otherwise.

 

“Permitted Liens” shall mean those Liens on the assets of the Grantors which are permitted pursuant to Section 8.2 of the Credit Agreement.

 

“Securities Act” means the Securities Act of 1933, including all amendments thereto and regulations promulgated thereunder.

 

  

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“Security Interests” means the security interests granted pursuant to Article II, as well as all other security interests created or assigned as additional security for the Obligations pursuant to the provisions of the Credit Agreement.

 

“Stock” means, with respect to any Grantor, all shares of capital stock of each Material Foreign Subsidiary owned by such Grantor, together with all stock certificates, options or rights of any nature whatsoever that may be issued or granted by such Material Foreign Subsidiary to such Grantor while this Agreement is in effect.

 

“Stock Collateral” means the Applicable Percentage of the Stock and all Proceeds therefrom.

 

“Subsidiary Guarantors” means the collective reference to each Person executing the Subsidiary Guaranty Agreement.

 

“Subsidiary Guaranty Agreement” shall have the meaning assigned thereto in the Credit Agreement.

 

“UCC” means the Uniform Commercial Code as in effect in the State of South Carolina, as amended or modified from time to time.

 

SECTION 1.3.                           Other Definitional Provisions.  Terms defined in the Credit Agreement and not otherwise defined herein shall have the meaning assigned thereto in the Credit Agreement.  The words “hereof,” “herein”, “hereto” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section and Schedule references are to this Agreement unless otherwise specified.  The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.  Where the context requires, terms relating to the Collateral or any part thereof, when used in relation to a Grantor, shall refer to such Grantor’s Collateral or the relevant part thereof.  To the extent that there exists a direct conflict between the provisions of this Agreement and the provisions of the Credit Agreement (other than with respect to any provision of this Agreement relating to the grant, pledge and assignment of the Security Interest in the Collateral or the exercise of remedies with respect thereto), the Credit Agreement shall govern.

 

ARTICLE II

GRANT OF SECURITY INTEREST

Each Grantor hereby grants, pledges and collaterally assigns to the Lender, for the ratable benefit of itself and the Lender, a security interest in all of such Grantor’s right, title and interest in the Collateral now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest, and wherever located or deemed located, including all Proceeds therein, as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations.

 

  

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ARTICLE III

REPRESENTATIONS AND WARRANTIES

To induce the Lender to enter into the Credit Agreement and to induce the Lender to make their respective Extensions of Credit to the Borrower thereunder, each Grantor hereby represents and warrants to the Lender that:

 

SECTION 3.1.                           Existence.  Each Grantor is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, has the requisite power and authority to own, lease or operate its properties and to carry on its business, and is duly qualified and authorized to do business in each jurisdiction in which its business requires such qualification and authorization other than in any such jurisdiction where failure to so qualify could not reasonably be expected to have a Material Adverse Effect.

 

SECTION 3.2.                           Authorization of Agreement; No Conflict.  Each Grantor has the right, power and authority and has taken all necessary corporate and other action to authorize the execution, delivery and performance of this Agreement.  This Agreement has been duly executed and delivered by the duly authorized officers of each Grantor and this Agreement constitutes the legal, valid and binding obligation of the Grantors enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar state or federal debtor relief laws from time to time in effect which affect the enforcement of creditors’ rights in general and the availability of equitable remedies.  The execution, delivery and performance by the Grantors of this Agreement will not, by the passage of time, the giving of notice or otherwise, violate any material provision of any Applicable Law and will not result in the creation or imposition of any Lien on the Collateral, other than the Security Interests and Permitted Liens.

 

SECTION 3.3.                           Consents.  No consent or authorization of, filing with, or other act by or in respect of, any arbitrator or Governmental Authority and no consent of any other Person is required in connection with the execution, delivery, performance, validity or enforceability against any Grantor or any Material Foreign Subsidiary of this Agreement, except (a) as may be required by laws (i) affecting the offering and sale of securities generally and (ii) under foreign jurisdictions with respect to the perfection of the Security Interest in any Collateral, (b) filings under the UCC, or (c) where the failure to obtain such consent could not reasonably be expected to have a Material Adverse Effect.

 

SECTION 3.4.                           Perfected Liens.  The Security Interests granted pursuant to this Agreement (a) constitute valid perfected security interests in all of the Collateral in favor of the Lender, as collateral security for the Obligations, enforceable in accordance with the terms hereof against all creditors of any Grantor and any Persons purporting to purchase any Collateral from such Grantor and (b) are prior to all other Liens on the Collateral in existence on the date hereof except for Permitted Liens.

 

SECTION 3.5.                           Title, No Other Liens.  Except for the Security Interests and Permitted Liens, each Grantor owns each item of the Collateral to which it has title free and clear of any and all Liens or claims.  No financing statement under the UCC of any state which names a Grantor as debtor or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except such as no longer represent an enforceable security interest or have been filed in favor of the Lender, pursuant to this Agreement or in connection with Permitted Liens.  No Collateral is in the possession or Control of any Person asserting any claim thereto or security interest therein, except that the Lender or its designee may have possession or Control of Collateral as contemplated hereby.

 

  

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SECTION 3.6.                           Exact Legal Name, State of Organization; Other Information.

 

(a)           The exact legal name of each Grantor as it appears in its Articles of Incorporation, Articles of Organization or other organizational document is as set forth on Schedule 3.6.  Each Grantor was organized and remains organized under the laws of the state identified on Schedule 3.6 under such Grantor’s name.  The taxpayer identification number of each Grantor is set forth on Schedule 3.6 under such Grantor’s name.  Except as disclosed on Schedule 3.6 under such Grantor’s name, no Grantor has, during the past five (5) years, changed its identity or organizational structure.

 

(b)           The mailing address, chief place of business, chief executive office and office where each Grantor keeps its books and records relating to the Collateral in which it has any interest is located at the locations specified on Schedule 3.6 under such Grantor’s name.

 

SECTION 3.7.                           Listing of Collateral.

 

(a)           As of the date hereof, all Collateral owned by any Grantor is listed on Schedule 3.7.

 

(b)           All Collateral issued to any Grantor (i) has been duly and validly issued and, if applicable, are fully paid and nonassessable, and (ii) are owned of record and beneficially by such Grantor.

 

ARTICLE IV

COVENANTS

Until the Obligations shall have been paid in full and the Commitments terminated, unless consent has been obtained in the manner provided for in Section 6.1, each Grantor covenants and agrees that:

 

SECTION 4.1.                           Maintenance of Perfected Security Interest; Further Information.  Each Grantor shall take all actions necessary, or otherwise reasonably requested by the Lender, to enable the Lender to maintain the Security Interest created by this Agreement as a perfected Security Interest having at least the priority described in Section 3.4 and shall defend such Security Interest against the claims and demands of all Persons whomsoever (other than claims of priority in favor of any Person actually holding a Permitted Lien which is prior to such Security Interest).

 

SECTION 4.2.                           Changes in Locations: Changes in Name or Structure.  No Grantor will, except upon thirty (30) days’ prior written notice to the Lender and delivery to the Lender of (a) all additional financing statements (executed, if necessary, for any particular filing jurisdiction) and other instruments and documents reasonably requested by the Lender to maintain the validity, perfection and priority of the Security Interests and (b) if applicable, a written supplement to the Schedules of this Agreement:

 

  

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(i)           permit any Collateral to be held by or at any Person (including by or at the Borrower or its Subsidiaries), other than Certificated Securities delivered to the Lender pursuant to Section 4.4;

 

(ii)           change its jurisdiction of organization or the location of its chief executive office from that identified on Schedule 3.6; or

 

(iii)           change its name, identity or corporate or organizational structure to such an extent that any financing statement filed by the Lender in connection with this Agreement would become misleading.

 

SECTION 4.3.                           Required Notifications.  Each Grantor shall promptly notify the Lender, in writing, of:  (a) any Lien (other than the Security Interests or Permitted Liens) on any of the Collateral which would adversely affect in a material manner the ability of the Lender to exercise any of its remedies hereunder, (b) the occurrence of any other event which could reasonably be expected to have a Material Adverse Effect on the aggregate value of the Collateral or on the Security Interests, and (c) the acquisition or ownership by such Grantor of any Collateral after the date hereof.

 

SECTION 4.4.                           Delivery Covenants.  Each Grantor will (i) deliver and pledge to the Lender, for the ratable benefit of itself and the Lender, (a) all Certificated Securities, and (b) all Partnership/LLC Interests evidenced by a certificate,  in each case representing Collateral and owned or held by such Grantor, together with an Effective Endorsement and Assignment, and (ii) cause each Material Foreign Subsidiary that it has pledged Collateral in under the terms of this Agreement, to execute a counterpart signature page hereto as an Issuer.

 

SECTION 4.5.                           Filing Covenants.  Pursuant to Section 9-509 of the UCC and any other Applicable Law, each Grantor authorizes the Lender to file or record financing statements (including continuation statements) and other filing or recording documents or instruments with respect to the Collateral without the signature of such Grantor in such form and in such offices as the Lender determines appropriate to perfect the Security Interests of the Lender under this Agreement.  Such financing statements may describe the Collateral in the same manner as described herein or may contain an indication or description of Collateral that describes such property in any other manner as the Lender may determine, in its sole discretion, is necessary, advisable or prudent to ensure the perfection of the Security Interest in the Collateral granted herein.  Further, a photographic or other reproduction of this Agreement shall be sufficient as a financing statement or other filing or recording document or instrument for filing or recording in any jurisdiction.  Each Grantor hereby authorizes, ratifies and confirms all financing statements and other filing or recording documents or instruments filed by Lender with respect to the Collateral prior to the date of this Agreement.

 

SECTION 4.6.                           Limitations.

 

  

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(a)           Without the prior written consent of the Lender, no Grantor will (i) vote to enable, or take any other action to permit, any Material Foreign Subsidiary to issue any Collateral, except for such additional Collateral that will be subject to the Security Interest granted herein in favor of the Lender, or (ii) enter into any agreement or undertaking restricting the right or ability of such Grantor or the Lender to sell, assign or transfer any Collateral or Proceeds thereof.  The Grantors will defend the right, title and interest of the Lender in and to any Collateral against the claims and demands of all Persons whomsoever.

 

(b)           If any Grantor shall become entitled to receive or shall receive (i) any Certificated Securities (including, without limitation, any certificate representing a stock dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights in respect of the ownership interests of any Material Foreign Subsidiary, whether in addition to, in substitution of, as a conversion of, or in exchange for, any Collateral, or otherwise in respect thereof, or (ii) any sums paid upon or in respect of any Collateral upon the liquidation or dissolution of any Material Foreign Subsidiary, such Grantor shall accept the same as the agent of the Lender, segregated from all other funds of such Grantor, and promptly deliver the same to the Lender in accordance with the terms hereof to the extent the delivery does not exceed the Applicable Percentage.

 

SECTION 4.7.                           Further Assurances.  Upon the request of the Lender and at the sole expense of the Grantors, each Grantor will promptly and duly execute and deliver, and have recorded, such further instruments and documents and take such further actions as the Lender may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, (i) a foreign pledge agreement, in form and substance satisfactory to the Lender, duly executed by the applicable Grantor granting a security interest to the Lender in the applicable Collateral (including, without limitation, an opinion of counsel with respect thereto), and (ii) all applications, certificates, instruments, registration statements, and all other documents and papers the Lender may reasonably request and as may be required by law in connection with the obtaining of any consent, approval, registration, qualification, or authorization of any Person deemed necessary or appropriate for the effective exercise of any rights under this Agreement.

 

ARTICLE V

REMEDIAL PROVISIONS

SECTION 5.1.                           General Remedies.  If an Event of Default shall occur and be continuing, the Lender may exercise, in addition to all other rights and remedies granted to the Lender in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the UCC or any other Applicable Law.  Without limiting the generality of the foregoing, the Lender, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Grantor or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker’s board or office of the Lender or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk.  The Lender may disclaim any warranties of title.  The Lender shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in any Grantor, which right or equity is hereby waived and released.  Each Grantor further agrees, at the Lender’s request, to assemble the Collateral and make it available to the Lender at places which the Lender shall reasonably select, whether at such Grantor’s premises or elsewhere.  To the extent permitted by Applicable Law, each Grantor waives all claims, damages and demands it may acquire against the Lender arising out of the exercise by them of any rights hereunder except to the extent any such claims, damages, or demands result solely from the gross negligence or willful misconduct of the Lender, in each case against whom such claim is asserted.  If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least ten (10) days before such sale or other disposition.

 

  

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SECTION 5.2.                           Specific Remedies.

 

(a)           Upon the occurrence and during the continuance of an Event of Default:

 

(i)           the Lender shall have the right to receive any and all cash dividends, payments or distributions made in respect of any Collateral or other Proceeds paid in respect of any Collateral, and, immediately upon the request of the Lender, any or all of any Collateral shall be registered in the name of the Lender or its nominee, and the Lender or its nominee may thereafter exercise (A) all voting, corporate and other rights pertaining to such Collateral at any meeting of shareholders, partners or members of the relevant Material Foreign Subsidiary and (B) any and all rights of conversion, exchange and subscription and any other rights, privileges or options pertaining to such Collateral, as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Collateral upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate, partnership or company structure of any Material Foreign Subsidiary or upon the exercise by any Grantor or the Lender of any right, privilege or option pertaining to such Collateral, and in connection therewith, the right to deposit and deliver any and all of the Collateral with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the Lender may determine), all without liability except to account for property actually received by it; but the Lender shall have no duty to any Grantor to exercise any such right, privilege or option and the Lender shall not be responsible for any failure to do so or delay in so doing. In furtherance thereof, each Grantor hereby authorizes and instructs each Material Foreign Subsidiary with respect to any Collateral to (1) comply with any instruction received by it from the Lender in writing that (A) states that an Event of Default has occurred and is continuing and (B) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from such Grantor, and each Grantor agrees that each Material Foreign Subsidiary shall be fully protected in so complying, and (2) except as otherwise expressly permitted hereby, pay any dividends, distributions or other payments with respect to any Collateral directly to the Lender; and

 

  

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(ii)           the Lender shall be entitled to (but shall not be required to):  (A) do all acts which the Lender may deem necessary or proper to protect its Security Interest granted hereunder, provided such acts are not inconsistent with or in violation of the terms of any of the Credit Agreement, of the other Loan Documents or Applicable Law, and (B) sell, assign or otherwise transfer any Collateral in accordance with the Credit Agreement, the other Loan Documents and Applicable Law;

 

(b)           Unless an Event of Default shall have occurred and be continuing and the Lender shall have given notice to the relevant Grantor of the Lender’s intent to exercise its corresponding rights pursuant to Section 5.2(a), each Grantor shall be permitted to receive all cash dividends, payments or other distributions made in respect of any Collateral, in each case paid in the normal course of business of the relevant Issuer and consistent with past practice, to the extent permitted in the Credit Agreement, and to exercise all voting and other corporate, company and partnership rights with respect to any Collateral; provided that, no vote shall be cast or other corporate, company and partnership right exercised or other action taken which, in the Lender’s reasonable judgment, would impair the Collateral or which would result in a Default or Event of Default under any provision of the Credit Agreement, this Agreement or any other Loan Document.

 

SECTION 5.3.                           Application of Proceeds.  At such intervals as may be agreed upon by the Borrower and the Lender, or, if an Event of Default shall have occurred and be continuing, at any time at the Lender’s election, the Lender may apply all or any part of the Collateral or any Proceeds of the Collateral in payment in whole or in part of the Obligations (after deducting all reasonable costs and expenses of every kind incurred in connection therewith or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Lender hereunder, including, without limitation, reasonable attorneys’ fees and disbursements) in accordance with Section 4.4 of the Credit Agreement.  Any balance of such Proceeds remaining thereafter shall be paid over to the Borrower, on behalf of the Grantors, or to whomsoever (if such Person is not a Grantor) may be lawfully entitled to receive the same.  Only after (1) the payment by the Lender of any other amount required by any provision of law, including, without limitation, Section 9-610 and Section 9-615 of the UCC and (2) the payment in full of the Obligations and the termination of the Commitments, shall the Lender account for the surplus, if any, to any Grantor, or to whomever may be lawfully entitled to receive the same (if such Person is not a Grantor).

 

SECTION 5.4.                           Waiver, Deficiency.  Except to the extent prohibited under Applicable Law (including Section 9-602 of the UCC), each Grantor waives and agrees not to assert any rights or privileges which it may acquire under Sections 9-210, 9-607, 9-608, 9-610, 9-615, 9-620, 9-621, 9-623, 9-624, 9-625 or 9-627 of the UCC.  Each Grantor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay its Obligations and the fees and disbursements of any attorneys employed by the Lender to collect such deficiency.

 

  

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ARTICLE VI

MISCELLANEOUS

SECTION 6.1.                           Amendments in Writing.  None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except in accordance with Section 10.2 of the Credit Agreement.

 

SECTION 6.2.                           Notices.  All notices, requests and demands to or upon the Lender or any Grantor hereunder shall be effected in the manner provided for in Section 10.1 of the Credit Agreement.

 

SECTION 6.3.                           No Waiver by Course of Conduct, Cumulative Remedies.  The Lender shall not by any act (except by a written instrument pursuant to Section 6.1), be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default. No failure to exercise, nor any delay on the part of the Lender in exercising, any right, power or privilege hereunder shall operate as a waiver thereof.  No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  A waiver by the Lender of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Lender would otherwise have on any future occasion.  The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law.

 

SECTION 6.4.                           Enforcement Expenses, Indemnification.

 

(a)           Each Grantor agrees to pay or reimburse the Lender for all its costs and expenses incurred in connection with enforcing or preserving any rights under this Agreement and the other Loan Documents to which such Grantor is a party, (including, without limitation, in connection with any workout, restructuring, bankruptcy or other similar proceeding) including, without limitation, the reasonable fees and disbursements of counsel to the Lender and of counsel to the Lender.

 

(b)           Each Grantor agrees to pay, and to save the Lender harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes (in each case, subject to Section 4.11 of the Credit Agreement) which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement.

 

(c)           Each Grantor agrees to pay, and to save the Lender harmless from any and all liabilities, obligations, losses, damages, penalties, costs and expenses in connection with actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement to the extent any Grantor would be required to do so pursuant to Section 10.3 of the Credit Agreement.

 

  

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(d)           The agreements in this Section 6.4 shall survive termination of the Commitments and repayment of the Obligations and all other amounts payable under the Credit Agreement and the other Loan Documents.

 

SECTION 6.5.                           Binding Arbitration; Waiver of Jury Trial; Preservation of Remedies.

 

(a)           Binding Arbitration. Upon demand of any party, whether made before or after institution of any judicial proceeding, any dispute, claim or controversy arising out of, connected with or relating to this Agreement (“Disputes”), between or among parties to this Agreement shall be resolved by binding arbitration as provided herein. Institution of a judicial proceeding by a party does not waive the right of that party to demand arbitration hereunder.  Disputes may include, without limitation, tort claims, counterclaims, claims brought as class actions, claims arising from Loan Documents executed in the future, or claims concerning any aspect of the past, present or future relationships arising out of or connected with this Agreement. Arbitration shall be conducted under and governed by the Commercial Financial Disputes Arbitration Rules (the “Arbitration Rules”) of the American Arbitration Association (“AAA”) and Title 9 of the U.S. Code.  All arbitration hearings shall be conducted in Greenville, South Carolina.  The expedited procedures set forth in Rule 51, et seq. of the Arbitration Rules shall be applicable to claims of less than $1,000,000.  All applicable statutes of limitation shall apply to any Dispute.  A judgment upon the award may be entered in any court having jurisdiction.  Notwithstanding anything foregoing to the contrary, any arbitration proceeding demanded hereunder shall begin within ninety (90) days after such demand thereof and shall be concluded within one-hundred and twenty (120) days after such demand.  These time limitations may not be extended unless a party hereto shows cause for extension and then such extension shall not exceed a total of sixty (60) days.  The panel from which all arbitrators are selected shall be comprised of licensed attorneys selected from the Commercial Finance Dispute Panel of the AAA.  The single arbitrator selected for expedited procedure shall be a retired judge from the highest court of general jurisdiction, state or federal, of the state where the hearing will be conducted.  The parties hereto do not waive any applicable Federal or state substantive law except as provided herein.

 

(b)           Waiver of Jury Trial.  EACH GRANTOR HEREBY ACKNOWLEDGES THAT BY AGREEING TO BINDING ARBITRATION IT HAS IRREVOCABLY WAIVED ITS RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.

 

(c)           Preservation of Certain Remedies.  Notwithstanding the preceding binding arbitration provisions, the parties hereto and the other Loan Documents preserve, without diminution, certain remedies that such Persons may employ or exercise freely, either alone, in conjunction with or during a Dispute.  Each such Person shall have and hereby reserves the right to proceed in any court of proper jurisdiction or by self help to exercise or prosecute the following remedies, as applicable:  (i) all rights to foreclose against any personal property or other security by exercising a power of sale granted in the Loan Documents or under Applicable Law or by judicial foreclosure and sale, including a proceeding to confirm the sale, (ii) all rights of self help including peaceful possession of property, (iii) obtaining provisional or ancillary remedies including injunctive relief, sequestration, garnishment, attachment, appointment of receiver and in filing an involuntary bankruptcy proceeding, and (iv) when applicable, a judgment by confession of judgment. Preservation of these remedies does not limit the power of an arbitrator to grant similar remedies that may be requested by a party in a Dispute.

 

  

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SECTION 6.6.                           Successors and Assigns.  This Agreement shall be binding upon the successors and assigns of each Grantor and shall inure to the benefit of each Grantor (and shall bind all Persons who become bound as a Grantor to this Collateral Agreement), the Lender and its successors and assigns; provided that no Grantor may assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of the Lender (given in accordance with Section 6.1 above).

 

SECTION 6.7.                           Counterparts.  This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

 

SECTION 6.8.                           Severability.  Any provision of this Agreement or any other Loan Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remainder of such provision or the remaining provisions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction.

 

SECTION 6.9.                           Section Heading.  The Section headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.

 

SECTION 6.10.                           Integration.  This Agreement and the other Loan Documents represent the agreement of the Grantors, the Lender with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Lender relative to the subject matter hereof and thereof not expressly set forth or referred to herein or in the other Loan Documents.

 

SECTION 6.11.                           Governing Law.  This Agreement shall be governed by, and construed and interpreted in accordance with, the law of the State of South Carolina without reference to the conflict or choice of law principles thereof.

 

SECTION 6.12.                           Consent to Jurisdiction.  Each Grantor hereby irrevocably consents to the personal jurisdiction of the state and federal courts located in Greenville County, South Carolina, in any action, claim or other proceeding arising out of any dispute in connection with this Agreement, the Notes and the other Loan Documents, any rights or obligations hereunder or thereunder, or the performance of such rights and obligations.  Each Grantor hereby irrevocably consents to the service of a summons and complaint and other process in any action, claim or proceeding brought by the Lender in connection with this Agreement, the Notes or the other Loan Documents, any rights or obligations hereunder or thereunder, or the performance of such rights and obligations, on behalf of itself or its property, in the manner specified in Section 10.1 of the Credit Agreement.  Nothing in this Section 6.12 shall affect the right of the Lender to serve legal process in any other manner permitted by Applicable Law or affect the right of the Lender to bring any action or proceeding against any Grantor or its properties in the courts of any other jurisdictions.

 

  

12

  

SECTION 6.13.                           Acknowledgements.

 

(a)           Each Grantor hereby acknowledges that:  (i) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents to which it is a party, (ii) the Lender has no fiduciary relationship with or duty to any Grantor arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Grantors, on the one hand, and the Lender, on the other hand, in connection herewith or therewith is solely that of debtor and creditor, and (iii) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby or thereby among the Lender or among the Grantors and the Lender.

 

(b)           Each Issuer party to this Agreement acknowledges receipt of a copy of this Agreement and agrees to be bound thereby and to comply with the terms thereof insofar as such terms are applicable to it. Each Issuer agrees to provide such notices to the Lender as may be necessary to give full effect to the provisions of this Agreement.

 

SECTION 6.14.                           Additional Grantors.  Each Domestic Subsidiary of the Borrower that is required to become a party to this Agreement pursuant to Section 7.13 of the Credit Agreement shall become a Grantor for all purposes of this Agreement upon execution and delivery by such Subsidiary of a Joinder Agreement as provided in the Credit Agreement.

 

SECTION 6.15.                           Releases.

 

(a)           At such time as the Obligations shall have been paid in full and the Commitments have been terminated, the Collateral shall be released from the Liens created hereby, and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Lender and each Grantor hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Grantors. At the request and sole expense of any Grantor following any such termination, the Lender shall deliver to such Grantor any Collateral held by the Lender hereunder, and execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination

 

(b)           If any of the Collateral shall be sold, transferred or otherwise disposed of by any Grantor in a transaction permitted by the Credit Agreement, then the Lender, at the request and sole expense of such Grantor, shall execute and deliver to such Grantor all releases or other documents reasonably necessary or desirable for the release of the Liens created hereby on such Collateral.  In the event that all the capital stock of any Grantor shall be sold, transferred or otherwise disposed of in a transaction permitted by the Credit Agreement, then, at the request of the Borrower and at the expense of the Grantors, such Grantor shall be released from its obligations hereunder; provided that the Borrower shall have delivered to the Lender, at least ten (10) Business Days prior to the date of the proposed release, a written request for release identifying the relevant Grantor and the terms of the sale or other disposition in reasonable detail, including the price thereof and any expenses in connection therewith, together with a certification by the Borrower stating that such transaction is in compliance with the Credit Agreement and the other Loan Documents.

 

[Signature Pages to Follow]

  

13

  

IN WITNESS WHEREOF, the parties hereto have caused this Collateral Agreement to be executed under seal by their duly authorized officers, all as of the day and year first written above.

[CORPORATE SEAL]                                                                COMPX INTERNATIONAL INC., as Grantor

By:                                                                           

Name:                                                                 

Title:                                                                 

[CORPORATE SEAL]                                                                COMPX SECURITY PRODUCTS INC., as

Grantor

By:                                                                           

Name:                                                                 

Title:                                                                 

[CORPORATE SEAL]                                                                COMPX PRECISION SLIDES INC., as Grantor

By:                                                                           

Name:                                                                 

Title:                                                                 

[CORPORATE SEAL]                                                                COMPX MARINE INC., as Grantor

By:                                                                           

Name:                                                                 

Title:                                                                 

[CORPORATE SEAL]                                                                CUSTOM MARINE INC., as Grantor

By:                                                                           

Name:                                                                 

Title:                                                                 

  

14

  

[CORPORATE SEAL]                                                                LIVORSI MARINE INC., as Grantor

By:                                                                           

Name:                                                                 

Title:                                                                 

COMPX ASIA HOLDING CORPORATION,

as Issuer

By:                                                                           

Name:                                                                 

Title:                                                                 

WATERLOO FURNITURE COMPONENT

LIMITED, as Issuer

By:                                                                           

Name:                                                                 

Title:                                                                 

  

15

  

WELLS FARGO BANK, NATIONAL

ASSOCIATION

By:                                                                           

Name:                                                                 

Title:                                                                 

 

 

  

16

  

EXHIBIT I

to

Amended and Restated Credit Agreement

dated as of January 13, 2012

by and among

COMPX INTERNATIONAL INC.,

as Borrower,

and

Wells Fargo Bank, National Association,

as Lender

FORM OF JOINDER AGREEMENT

  

  

  

JOINDER AGREEMENT

THIS JOINDER AGREEMENT, dated as of the _____ day of ___________, 20___ (the “Agreement”), to the Subsidiary Guaranty Agreement referred to below is entered into by and among CompX International Inc., a corporation organized under the laws of Delaware (the “Applicable Grantor”), ______________, a corporation organized under the laws of __________ (the “New Subsidiary”), and Wells Fargo Bank, National Association, a national banking association, as Lender (the “Lender”) under the Credit Agreement referred to below.

 

Statement of Purpose

Reference is hereby made to the Credit Agreement dated as of January 13, 2012 (as supplemented hereby and as further amended, restated, supplemented or otherwise modified, the “Credit Agreement”) by and among the Borrower and the Lender.  In connection with the Credit Agreement, the Borrower and certain of its Subsidiaries have entered into the Collateral Agreement referred to therein and certain Subsidiaries of the Borrower have entered into the Subsidiary Guaranty Agreement referred to therein.

 

The New Subsidiary is a Wholly-Owned Material Domestic Subsidiary of the Applicable Grantor.  In connection therewith and pursuant to Section 7.13 of the Credit Agreement, (i) the New Subsidiary is required to execute, among other documents, a Joinder Agreement in order (A) to become a Guarantor under the Subsidiary Guaranty Agreement and (B) to become a Grantor under the Collateral Agreement.

 

NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the parties hereto hereby agree as follows:

 

Section 1.01                      Schedules to the Credit Agreement.  Attached hereto as Annex A are supplements to Schedules 6.1, 6.2, 6.8, 6.11, 6.17 and 6.18 referenced in the Credit Agreement (which supplements include as of the date hereof all information required to be provided therein only with respect to the New Subsidiary and do not include information with respect to the Applicable Grantor or any other Subsidiary).

 

Section 2.01                      Guaranty Agreement Supplement.

 

(a)           The New Subsidiary hereby agrees that by execution of this Agreement it is a Guarantor under the Subsidiary Guaranty Agreement, and the New Subsidiary (i) shall comply with, and be subject to, and have the benefit of, all of the terms, conditions, covenants, agreements and obligations set forth in the Subsidiary Guaranty Agreement and (ii) hereby makes each representation and warranty set forth in the Subsidiary Guaranty Agreement as of the date hereof.

 

(b)           The Applicable Grantor and the New Subsidiary hereby agree that each reference to a “Guarantor”, the “Guarantors”, a “Subsidiary Guarantor” or the “Subsidiary Guarantors” in the Credit Agreement, the Subsidiary Guaranty Agreement and other Loan Documents shall include the New Subsidiary, and each reference to the “Subsidiary Guaranty Agreement”, “Subsidiary Guaranty” or “Guaranty” as used therein shall mean the Subsidiary Guaranty Agreement as supplemented hereby.

 

  

  

  

Section 3.01                      Collateral Agreement.  In order to secure the Credit Agreement in accordance with the terms thereof, and to secure the payment and performance of all of the Obligations, the Applicable Grantor hereby confirms and reaffirms the Security Interests in and to all of the Collateral of the Applicable Grantor granted to the Lender under the Collateral Agreement.

 

Section 4.01                      Effectiveness.  This Agreement shall become effective upon receipt by the Lender of (a) an originally executed counterpart hereof, and (b) any other agreement or document required to be delivered in accordance with Section 7.13 of the Credit Agreement (including, without limitation, any other agreement or document required to be delivered in connection with the Credit Agreement or any other Loan Document).

 

Section 5.01                      General Provisions.

 

(a)           Representations and Warranties.

 

(i)           The Applicable Grantor hereby confirms that each representation and warranty made under the Loan Documents is true and correct as of the date hereof (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of the earlier date) and that no Default or Event of Default has occurred or is continuing under the Credit Agreement.

 

(ii)           The Applicable Grantor hereby represents and warrants that as of the date hereof there are no claims or offsets against or defenses or counterclaims to the obligations of the Borrower and its Subsidiaries under the Credit Agreement or any other Loan Document.

 

(iii)           The New Subsidiary hereby acknowledges it has received a copy of the Loan Documents (including, without limitation, the Subsidiary Guaranty Agreement) and that it has read and understands the terms thereof.

 

(b)           Limited Effect.  Except as supplemented hereby, the Credit Agreement and each other Loan Document shall continue to be, and shall remain, in full force and effect.  This Agreement shall not be deemed (i) to be a waiver of, or consent to, or a modification or amendment of, any other term or condition of the Credit Agreement or any other Loan Document or (ii) to prejudice any right or rights which the Lender may now have or may have in the future under or in connection with the Credit Agreement or the other Loan Documents or any of the instruments or agreements referred to therein, as the same may be amended or modified from time to time.

 

(c)           Costs and Expenses.  The Borrower hereby agrees that it shall pay or reimburse the Lender for all of its reasonable and customary out-of-pocket costs and expenses incurred in connection with the preparation, negotiation and execution of this Agreement including, without limitation, the reasonable fees and disbursements of counsel.

 

  

2

  

(d)           Counterparts.  This Agreement may be executed by one or more of the parties hereto in any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

 

(e)           Definitions.  All capitalized terms used and not defined herein shall have the meanings given thereto in the Credit Agreement or the applicable Security Document referred to therein.

 

(f)           Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF SOUTH CAROLINA, WITHOUT REFERENCE TO THE CONFLICTS OR CHOICE OF LAW PRINCIPLES THEREOF.

  

3

  

IN WITNESS WHEREOF the undersigned hereby causes this Agreement to be executed and delivered as of the date first above written.

APPLICABLE GRANTOR:

[CORPORATE SEAL]                                                                COMPX INTERNATIONAL INC.

By:           

Name:           

Title:           

NEW SUBSIDIARY:

[CORPORATE SEAL]                                                                ________________________

By:           

Name:           

Title:           

LENDER:

WELLS FARGO BANK, NATIONAL ASSOCIATION

By:           

Name:           

Title:           

  

4

  

Annex A

to Joinder Agreement

Supplement to Schedules 6.1, 6.2, 6.8, 6.11, 6.17 and 6.18 to the Credit Agreement (with respect to the New Subsidiary only)

[Attached Hereto]

  

5

  

Supplement to Schedule 6.1 to the Credit Agreement

(with respect to the New Subsidiary only)

Organization and Qualification

Name                                           Organization                                                      Qualification

  

6

  

Supplement to Schedule 6.2 to the Credit Agreement

(with respect to the New Subsidiary only)

Subsidiaries

  

7

  

Supplement to Schedule 6.8 to the Credit Agreement

(with respect to the New Subsidiary only)

Employee Benefit Plans

  

8

  

Supplement to Schedule 6.11 to the Credit Agreement

(with respect to the New Subsidiary only)

Labor and Collective Bargaining Agreements

  

9

  

Supplement to Schedule 6.17 to the Credit Agreement

(with respect to the New Subsidiary only)

Debt and Guaranty Obligations of the Borrower and its Subsidiaries

  

10

  

Supplement to Schedule 6.18 to the Credit Agreement

(with respect to the New Subsidiary only)

Litigation, Pending or Threatened

None

  

11

  

EXHIBIT J

to

Amended and Restated Credit Agreement

dated as of January 13, 2012

by and among

COMPX INTERNATIONAL INC.,

as Borrower,

and

Wells Fargo Bank, National Association,

as Lender

FORM OF FOREIGN SUBSIDIARY ALTERNATIVE CURRENCY LOAN NOTE

  

  

  

NOTICE:  THIS INSTRUMENT IS SUBJECT TO MANDATORY ARBITRATION 

PURSUANT TO THE FEDERAL ARBITRATION ACT AND IF THE FEDERAL 

ARBITRATION ACT IS INAPPLICABLE, THE UNIFORM ARBITRATION ACT, § 15-

48-10, ET SEQ., CODE OF LAWS OF SOUTH CAROLINA (1976), AS AMENDED

FOREIGN SUBSIDIARY ALTERNATIVE CURRENCY NOTE

[_______________]                                                                                                                                                                                                                                                                                                                       [________________, 20___]

FOR VALUE RECEIVED, the undersigned, [Foreign Subsidiary], a [___________ organized under the laws of _________ (“_________”)], promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (the “Lender”), at the places and times set forth below, the principal sum of [________________________ (_____________)] or, if less, the principal amount of all loans made by the Lender from time to time pursuant to this Note.  Reference is hereby made to that certain Credit Agreement, dated as of January 13, 2012 (as amended, restated, supplemented or otherwise modified, the “Credit Agreement”) by and among CompX International Inc. and the Lender.  Capitalized terms used herein and not defined herein shall have the meanings assigned thereto in the Credit Agreement.

 

The unpaid principal amount of this Note from time to time outstanding shall bear interest at the LIBOR Rate plus the Applicable Margin calculated in accordance with the terms and provisions of the Credit Agreement applicable to an Alternative Currency Loan with an Interest Period of one month.  Once repaid, [Foreign Subsidiary] may not reborrow amounts under this Note.  All payments of principal and interest on this Note shall be payable in the applicable Permitted Currency in immediately available funds in accordance with Sections 4.1(d) and 4.4(b) of the Credit Agreement; provided that references in such Sections to Borrower shall be construed to mean [Foreign Subsidiary] and references in such sections to Agreement shall be construed to mean this Note.

 

Interest accrued on this Note shall be due and payable on the last day of each Interest Period.  The outstanding principal balance of this Note, together with all accrued and unpaid interest, shall be due and payable in full on the Revolving Credit Maturity Date.

 

As of the date of this Note, [Foreign Subsidiary]: (1) represents and warrants that the representations and warranties contained in the Credit Agreement are true and correct in all material respects; and (2) covenants and agrees that the terms, conditions and agreements of Sections 2.4(c), 2.4(d), 4.1(d), 4.1(e), 4.4(b), 4.6, 4.7, 4.8, 4.9, 4.10, 4.11, 7.4 and 7.9 of the Credit Agreement, as the same are in effect on the date hereof, are incorporated herein by reference (including, where pertinent, the defined terms used in other sections of the Credit Agreement referenced in such sections) and from the date hereof and until payment in full of the indebtedness evidenced hereby, [Foreign Subsidiary] shall observe, perform and fulfill for the benefit of the Lender and this Note the terms, conditions and agreements contained in Sections 2.4(c), 2.4(d), 4.1(d), 4.1(e), 4.4(b), 4.6, 4.7, 4.8, 4.9, 4.10, 4.11, 7.4 and 7.9 of the Credit Agreement; provided that: (a) references in such sections to (i) the “Borrower” shall be construed to mean [Foreign Subsidiary]; (ii) the “Agreement” and “hereunder” shall be construed to mean this Note; (iii) “Base Rate Loan” shall mean the loan represented by this Note during such times it bears interest at a rate based upon the Base Rate as provided in Section 4.8; (iv) “LIBOR Rate Loan” shall mean the loan represented by this Note during such times it bears interest at a rate based upon the LIBOR Rate; and (v) “Alternative Currency Loan” and “Loan” shall mean the loan represented by this Note; and (b) the words  “Section 4.1(c)” in Section 4.6(a) shall be replaced with the phrase “the definition of Default Rate”.

 

  

1

  

If: (a) [Foreign Subsidiary] shall fail to pay when due any sums payable hereunder within five (5) Business Days after payment is due, or (b) an Event of Default under the Credit Agreement occurs, then Lender may, at its sole option, declare all sums owing under this Note immediately due and payable; provided, however, that to the extent the Credit Agreement provides for automatic acceleration of payment of the Obligations and other sums owing thereunder, all sums owing hereunder shall be automatically and immediately due and payable.  From and after the Revolving Credit Maturity Date, or such earlier date on which an Event of Default exists under the Credit Agreement or under any other Loan Document, then at the option of Lender, all sums owing on this Note shall bear interest at a rate per annum (the “Default Rate”) of two percent (2%) in excess of the rate (including the Applicable Margin) then applicable to this Note until the end of the applicable Interest Period and thereafter at a rate equal to two percent (2%) in excess of the rate equal to the Applicable Margin plus the then applicable Base Rate (calculated in accordance with the terms and provisions of the Credit Agreement applicable to a Base Rate Loan).  All accrued and unpaid interest at the Default Rate shall be due and payable on demand of the Lender.  The Default Rate shall also apply from acceleration until this Note or any judgment on this Note is paid in full.

 

THIS NOTE SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF SOUTH CAROLINA, WITHOUT REFERENCE TO THE CONFLICTS OR CHOICE OF LAW PRINCIPLES THEREOF.  [FOREIGN SUBSIDIARY] ALSO AGREES TO THE JURISDICTION, VENUE AND ARBITRATION PROVISIONS SET FORTH ON EXHIBIT A ATTACHED HERETO AND INCORPORATED HEREIN BY REFERENCE.

 

The debt evidenced by this Note is senior in right of payment to all Subordinated Debt referenced to in the Credit Agreement.

 

[Foreign Subsidiary] hereby waives all requirements as to diligence, presentment, demand of payment, protest and (except as required by the Credit Agreement) notice of any kind with respect to this Note.

 

[Foreign Subsidiary] hereby agrees that it shall pay or reimburse the Lender for all of its reasonable and customary out-of-pocket costs and expenses incurred in connection with the preparation, negotiation and execution of this Note including, without limitation, the reasonable fees and disbursements of counsel.

 

Except as expressly stated herein, this Note shall not be deemed (i) to be a waiver of, or consent to, or a modification or amendment of, any other term or condition of the Credit Agreement or any other Loan Document or (ii) to prejudice any right or rights which the Lender may now have or may have in the future under or in connection with the Credit Agreement or the other Loan Documents or any of the instruments or agreements referred to therein, as the same may be amended or modified from time to time.

 

  

2

  

Time is of the essence with respect to every provision hereof.

 

Notices related to this Note shall be in writing and sent to the parties identified above in accordance with the provisions of Section 10.1 of the Credit Agreement with any notices to [Foreign Subsidiary] hereunder being sent to CompX International Inc. in accordance with Section 10.1.

 

The indebtedness represented by this Note shall be unconditionally guaranteed by CompX International Inc. in accordance with a separate guaranty agreement acceptable to Lender in all respects.

 

[signature page follows]

  

3

  

IN WITNESS WHEREOF, the undersigned has executed this Note under seal as of the day and year first above written.

	
[CORPORATE SEAL]

	
[FOREIGN SUBSIDIARY]

By:           _____________________________(SEAL)

Name:           ______________________________

Title:           ______________________________

	
  Acknowledged and Agreed:

	
 

[CORPORATE SEAL]                                                                COMPX INTERNATIONAL INC.

By:           _____________________________(SEAL)

Name:           ______________________________

Title:           ______________________________

  

4

  

	
  

	
EXHIBIT A

	
1.  

	
 Jurisdiction and Venue

(a)           Submission to Jurisdiction.  [Foreign Subsidiary] irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the courts of the State of South Carolina sitting in Greenville County and of the United States District Court of the District of South Carolina, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Note, thee Credit Agreement or any other Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such South Carolina state court or, to the fullest extent permitted by Applicable Law, in such Federal court.  Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  Nothing in this Agreement or in any other Loan Document shall affect any right that the Lender may otherwise have to bring any action or proceeding relating to this Note, the Credit Agreement or any other Loan Document against [Foreign Subsidiary] or its properties in the courts of any jurisdiction.

(b)           Waiver of Venue.  [Foreign Subsidiary] irrevocably and unconditionally waives, to the fullest extent permitted by Applicable Law, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Note, the Credit Agreement or any other Loan Document in any court referred to in paragraph (a) of this Section.  [Foreign Subsidiary] irrevocably waives, to the fullest extent permitted by Applicable Law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(c)           Service of Process.  [Foreign Subsidiary] irrevocably consents to service of process in the manner provided for notices in Section 10.1 of the Credit Agreement.  Nothing in this Note will affect the right of any party hereto to serve process in any other manner permitted by Applicable Law.

	
2.  

	
Binding Arbitration.

(a) Agreement to Arbitrate.  Upon demand of any party, whether made before or after institution of any judicial proceeding, any Disputes between or among parties hereto and to the other Loan Documents shall be resolved by binding arbitration as provided herein.  Institution of a judicial proceeding by a party does not waive the right of that party to demand arbitration hereunder.  Disputes may include, without limitation, tort claims, counterclaims, claims brought as class actions, claims arising from Loan Documents executed in the future, disputes as to whether a matter is subject to arbitration, or claims concerning any aspect of the past, present or future relationships arising out of or connected with the Loan Documents.  The parties hereto do not waive any applicable Federal or state substantive law (including the protections afforded to banks under 12 U.S.C. Section 91 or any similar applicable state law) except as provided herein.  A judgment upon the award may be entered in any court having jurisdiction.

 

  

5

  

(b) General Rules of Arbitration.  Any arbitration proceeding will (A) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the Loan Documents between the parties, (B) be conducted by the American Arbitration Association (the “AAA”), or such other administrator as the parties shall mutually agree upon, in accordance with the commercial dispute resolution procedures of the AAA, unless the claim or counterclaim is at least $1,000,000 exclusive of claimed interest, arbitration fees and costs, in which case the arbitration shall be conducted in accordance with the AAA’s optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to, as applicable, as the “Arbitration Rules”) and (C) proceed in a location in South Carolina selected by the AAA.  The expedited procedures set forth in Rule 51, et seq. of the Arbitration Rules shall be applicable to claims of less than $1,000,000.  All applicable statutes of limitations shall apply to any Dispute.  If there is any inconsistency between the terms hereof and the Arbitration Rules, the terms and procedures set forth herein shall control.  Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any Dispute.  Notwithstanding anything in the foregoing to the contrary, any arbitration proceeding demanded hereunder shall begin within ninety (90) days after such demand thereof and shall be concluded within one hundred twenty (120) days after such demand.  These time limitations may not be extended unless a party hereto shows cause for extension and then such extension shall not exceed a total of sixty (60) days.

(c) Arbitrators.  Any arbitration proceeding in which the amount in controversy is $5,000,000 or less will be decided by a single arbitrator selected according to the Arbitration Rules, and who shall not render an award of greater than $5,000,000.  Any dispute in which the amount in controversy exceeds $5,000,000 shall be decided by majority vote of a panel of three arbitrators; provided that all three arbitrators must actively participate in all hearings and deliberations.  The arbitrator will be a neutral attorney licensed in the jurisdiction of the state where the hearing will be conducted or a neutral retired judge of the jurisdiction, state or federal, of the state where the hearing will be conducted, in either case with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated.  In any arbitration proceeding, the arbitrator will decide (by documents only or with a hearing at the arbitrator’s discretion) any pre-hearing motions that are similar to motions to dismiss for failure to state a claim or motions for summary adjudication.  The arbitrator shall resolve all Disputes in accordance with the substantive law of South Carolina and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award.  The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure or other Applicable Law.

  

6

  

(d) Preservation of Certain Remedies.  Notwithstanding the preceding binding arbitration provisions, the parties hereto and to the other Loan Documents preserve, without diminution, certain remedies that such Persons may employ or exercise freely, either alone, in conjunction with or during a Dispute.  Each such Person shall have and hereby reserves the right to proceed in any court of proper jurisdiction or by self help to exercise or prosecute the following remedies, as applicable: (A) all rights to foreclose against any real or personal property or other security by exercising a power of sale granted in the Loan Documents or under Applicable Law or by judicial foreclosure and sale, including a proceeding to confirm the sale, (B) all rights of self help including peaceful occupation of property and collection of rents, set off, and peaceful possession of property, (C) obtaining provisional or ancillary remedies including injunctive relief, sequestration, garnishment, attachment, appointment of receiver and in filing an involuntary bankruptcy proceeding, and (D) when applicable, a judgment by confession of judgment.  Preservation of these remedies does not limit the power of an arbitrator to grant similar remedies that may be requested by a party in a Dispute.

	
  

	
Dated:  ____________  ___, 20___

	
  

	
[FOREIGN SUBSIDIARY]

By:           _____________________________(SEAL)

Name:           ______________________________

Title:           ______________________________

  

7

  

EXHIBIT K

to

Amended and Restated Credit Agreement

dated as of January 13, 2012

by and among

COMPX INTERNATIONAL INC.,

as Borrower,

and

Wells Fargo Bank, National Association,

as Lender

FORM OF FOREIGN SUBSIDIARY LOAN GUARANTY AGREEMENT

  

  

  

FOREIGN SUBSIDIARY LOAN GUARANTY AGREEMENT

 

 

THIS FOREIGN SUBSIDIARY LOAN GUARANTY AGREEMENT (this “Guaranty”) is made as of the [____] day of [_____________], 20[___], by COMPX INTERNATIONAL INC. (“Guarantor”), to and for the benefit of WELLS FARGO BANK, NATIONAL ASSOCIATION, as Lender.

 

WHEREAS, the Guarantor has requested the Lender to extend credit to [Foreign Subsidiary] (“_________”) under the terms of the certain promissory note of even date herewith in the aggregate principal amount of [____________] (the “Note”) and the Lender have agreed to extend such credit by reason of such request and in reliance upon this Guaranty.  Reference is also made to the Credit Agreement dated as of January 13, 2012 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”) among CompX International Inc. and Wells Fargo Bank, National Association;

 

WHEREAS, capitalized terms used but not defined herein shall have the respective meanings ascribed thereto in the Credit Agreement; and

 

WHEREAS, the Guarantor acknowledges the receipt of substantial direct benefits by the making of certain advances to [Foreign Subsidiary].

 

NOW THEREFORE, in consideration of the advances extended and/or to be extended by the Lender to [Foreign Subsidiary] under the Note, and for other consideration, the receipt and sufficiency of which are hereby acknowledged, the Guarantor agrees as follows:

 

1,           Guaranty.  The Guarantor hereby unconditionally and absolutely guarantees to the Lender and its respective successors, endorsees and assigns the due and punctual payment by [Foreign Subsidiary] of the principal of and interest on the Note, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, and any renewals, modifications or extensions thereof, in whole or in part.

 

2.           Guaranty Absolute.  This Guaranty is an absolute, unconditional, continuing and unlimited guaranty of the full and punctual payment and performance by [Foreign Subsidiary] of its obligations under the Note and not of their collectibility only and is in no way conditioned upon any requirement that the Lender first attempt to collect any of the obligations from [Foreign Subsidiary], or upon any other contingency whatsoever, and the Lender may proceed hereunder against the Guarantor in the first instance to collect the obligations under the Note when due, without first proceeding against [Foreign Subsidiary] or any other Person and without first resorting to any security or other means of obtaining payment.  The obligations of the Guarantor hereunder are irrevocable, absolute and unconditional, irrespective of genuineness, validity, regularity or enforceability of the obligations under the Note or any other circumstance (except payment to, or express, written waiver, release or consent by, the Lender) which might otherwise constitute a legal or equitable discharge of a surety or guarantor.  The liability of the Guarantor hereunder shall in no way be affected or impaired by any acceptance by the Lender of any direct or indirect security for, or other guaranties of, the obligations under the Note, or by any failure, delay, neglect or omission of the Lender to realize upon or protect any obligations or any such other indebtedness, liability or obligation or any of the Note or other instruments evidencing the same or any direct or indirect security therefor, or by any approval, consent, waiver or other action taken or omitted to be taken by the Lender.  Upon any default by [Foreign Subsidiary] in the payment and performance of the obligations under the Note, the liabilities and obligations of the Guarantor hereunder shall become forthwith due and payable to the Lender without demand or notice of any nature, all of which are expressly waived by the Guarantor. Payments by the Guarantor may be required by the Lender on any number of occasions.

 

  

  

  

3.           No Impairment.  The Guarantor agrees that its obligations hereunder shall not be impaired, modified, changed, released or limited in any manner whatsoever by any impairment, modification, change, release or limitation of liability of [Foreign Subsidiary] or its estate by reason of the commencement of any case, proceeding or other action seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of [Foreign Subsidiary] or its property under any law relating to bankruptcy, insolvency, reorganization, relief of debtors or seeking appointment of a receiver, trustee, custodian or similar official for [Foreign Subsidiary] or for all or part of its property.

 

4.           Guarantor’s Further Agreement to Pay.  The Guarantor further agrees to pay to the Lender forthwith upon demand, in funds immediately available to the Lender, all costs and expenses (including court costs and reasonable attorneys’ fees) incurred or expended by the Lender in connection with the enforcement of this Guaranty.

 

5.           Termination of Guaranty.  It is the intention hereof that the Guarantor shall remain liable under this Guaranty until all of the obligations under the Note have been fully paid and performed notwithstanding any act, omission or thing (except payment to, or express, written waiver, release or consent by, the Lender) which might otherwise operate as a legal or equitable discharge of the Guarantor.  Notwithstanding anything contained herein to the contrary, the Guarantor agrees that to the extent all or any part of any payment of any of the obligations under the Note previously received by the Lender is subsequently invalidated, voided, declared to be fraudulent or preferential, set aside, recovered, rescinded or is required to be retained by or repaid to a trustee, receiver, or any other person under any bankruptcy code, common law, or equitable cause, or otherwise required to be returned by the Lender for any reason, whether by court order, administrative order or settlement, this Guaranty and the obligation or part thereof intended to be satisfied shall be revived and reinstated and continued in full force and effect as to the Guarantor’s obligations hereunder, and the Guarantor agrees that it shall immediately pay to such Lender the amount of such payment, notwithstanding any termination of this Guaranty or any cancellation of the Note.

 

6.           Events of Default.  Each of the following shall constitute an “Event of Default” hereunder:

 

(a)           Failure of the Guarantor to pay on demand by the Lender any principal of, premium, if any, or interest on the obligations under the Note after the same shall become due, whether by acceleration or otherwise; or

 

(b)           The occurrence of an Event of Default (as defined in the Note).

 

  

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Whenever any Event of Default shall have occurred, the Lender may declare the entire unpaid principal of, premium, if any, and interest on the obligations under the Note to be immediately due and payable without presentation, demand, protest and notice of any kind, all of which are hereby expressly waived.

 

No failure or delay by the Lender to exercise any right, power or privilege hereunder shall operate as a waiver of any such right, power or privilege nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof.  The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law.

 

7.           Demands and Notices. All notices, requests and other communications to the parties hereunder shall be in writing and shall be given as set forth in the Credit Agreement.

 

8.           Amendments, Waiver, Etc.  No provision of this Guaranty can be changed, waived, discharged or terminated except by an instrument in writing signed by the Guarantor and the Lender.  No course of dealing or delay or omission on the part of any party in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto.

 

9.           Counterparts.  This Guaranty may be executed in any number of counterparts.  Each of the counterparts will be considered an original, and all counterparts constitute but one and the same instrument.

 

10.           Miscellaneous Provisions.  This Guaranty is intended to take effect as a sealed instrument to be governed by and construed in accordance with the laws of the State of South Carolina (but not including the choice of law rules thereof).  This Guaranty shall bind the successors and assigns of the Guarantor and shall inure to the benefit of the Lender, its successors and assigns.  All words used herein shall be deemed to refer to the singular, plural, masculine, feminine or neuter as the identity of the person or entity may require.

 

 

[Remainder of this page intentionally left blank]

 

  

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IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as of the day and year first above written.

GUARANTOR:

[CORPORATE SEAL]                                                                COMPX INTERNATIONAL INC.

By:           _____________________________(SEAL)

Name:           ______________________________

Title:           ______________________________

  

4exhibit10_1.htm

REVOLVING CREDIT AGREEMENT

 

dated as of

 

October 21, 2011

 

among

 

NATIONAL RURAL UTILITIES

COOPERATIVE FINANCE CORPORATION,

 

THE BANKS LISTED HEREIN,

 

THE ROYAL BANK OF SCOTLAND PLC,

as Administrative Agent and Initial Issuing Bank,

 

JPMORGAN CHASE BANK, N.A.,

as Syndication Agent,

 

and

 

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.,

 

KEYBANK NATIONAL ASSOCIATION,

 

and

 

ROYAL BANK OF CANADA

 

as Co-Documentation Agents

 

_________________________

RBS SECURITIES INC.,

J.P. MORGAN SECURITIES LLC,

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.,

KEYBANK NATIONAL ASSOCIATION,

and

RBC CAPITAL MARKETS

as Co-Lead Arrangers and Joint Bookrunners

(NY) 27011/233/CA/RBS.CA.doc

  

  

  

  

TABLE OF CONTENTS

Page

 

ARTICLE 1

Definitions

 

	
Section 1.01.  Definitions

	
1

	
Section 1.02.  Accounting Terms and Determinations

	
20

	
Section 1.03.  Types of Borrowings

	
20

	
Section 1.04.  Letter of Credit

	
20

 

ARTICLE 2

The Credits

 

	
Section 2.01.  Commitments to Lend and Issue Letters of Credit

	
21

	
Section 2.02.  Notice of Committed Borrowings

	
23

	
Section 2.03.  Money Market Borrowings

	
24

	
Section 2.04. Notice to Banks; Funding of Loans

	
27

	
Section 2.05.  Notes

	
29

	
Section 2.06.  Maturity of Loans

	
29

	
Section 2.07.  Interest Rates

	
29

	
Section 2.08.  Method of Electing Interest Rates

	
32

	
Section 2.09.  Fees

	
33

	
Section 2.10.  Optional Termination or Reduction of Commitments

	
34

	
Section 2.11.  Mandatory Termination of Commitments

	
35

	
Section 2.12.  Optional Prepayments

	
35

	
Section 2.13.  General Provisions as to Payments

	
35

	
Section 2.14.  Funding Losses

	
36

	
Section 2.15.  Computation of Interest and Fees

	
36

	
Section 2.16.  Taxes

	
36

	
Section 2.17.  Increase of Commitments

	
40

	
Section 2.18.  Replacement of Banks

	
42

	
Section 2.19.  Defaulting Banks

	
43

	
Section 2.20.  Issuance of Letters of Credit; Drawings and Reimbursements; Auto-Extension Letters of Credit; Funding of Participations.

	
46

 

ARTICLE 3

Conditions

 

	
Section 3.01.  Effectiveness

	
54

	
Section 3.02.  Prior Credit Agreement

	
56

	
Section 3.03.  Borrowings and L/C Credit Extensions

	
56

 

 

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i

  

  

 

 

ARTICLE 4

REPRESENTATIONS AND WARRANTIES

 

	
Section 4.01.  Corporate Existence, Power and Authority

	
57

	
Section 4.02.  Financial Statements

	
58

	
Section 4.03.  Litigation

	
59

	
Section 4.04.  Governmental Authorizations

	
59

	
Section 4.05.  Members’ Subordinated Certificates

	
59

	
Section 4.06.  No Violation of Agreements

	
59

	
Section 4.07.  No Event of Default under the Indentures

	
60

	
Section 4.08.  Compliance with ERISA

	
60

	
Section 4.09.  Compliance with Other Laws

	
61

	
Section 4.10.  Tax Status

	
61

	
Section 4.11.  Investment Company Act

	
61

	
Section 4.12.  Disclosure

	
61

	
Section 4.13.  Subsidiaries

	
61

	
Section 4.14.  Environmental Matters

	
61

 

ARTICLE 5

Covenants

 

	
Section 5.01.  Corporate Existence

	
62

	
Section 5.02.  Disposition of Assets, Merger, Character of Business, etc

	
62

	
Section 5.03.  Financial Information

	
62

	
Section 5.04.  Default Certificates

	
64

	
Section 5.05.  Notice of Litigation and Defaults

	
64

	
Section 5.06.  ERISA

	
65

	
Section 5.07.  Payment of Charges

	
65

	
Section 5.08.  Inspection of Books and Assets

	
66

	
Section 5.09.  Indebtedness

	
66

	
Section 5.10.  Liens

	
67

	
Section 5.11.  Maintenance of Insurance

	
67

	
Section 5.12.  Subsidiaries and Joint Ventures

	
68

	
Section 5.13.  Minimum TIER

	
69

	
Section 5.14.  Retirement of Patronage Capital

	
69

	
Section 5.15.  Use of Proceeds

	
69

 

ARTICLE 6

Defaults

 

	
Section 6.01.  Events of Default

	
69

	
Section 6.02.  Actions In Respect Of Letters Of Credit Upon Default

	
72

	
Section 6.03.  Notice of Default

	
72

 

ARTICLE 7

THE ADMINISTRATIVE AGENT

 

	
Section 7.01.  Appointment and Authorization

	
72

 

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Section 7.02.  Administrative Agent and Affiliates

	
72

	
Section 7.03.  General Nature of the Adminstrative Agent’s Duties

	
73

	
Section 7.04.  Consultation with Experts

	
73

	
Section 7.05.  Liability of Administrative Agent

	
73

	
Section 7.06.  Indemnification

	
74

	
Section 7.07.  Credit Decision

	
74

	
Section 7.08.  Successor Administrative Agent

	
75

	
Section 7.09.  Co-Documentation Agents, Syndication Agent and Co-Lead Arrangers Not Liable.

	
75

	
Section 7.10.  Calculations

	
75

 

ARTICLE 8

Change in Circumstances

 

	
Section 8.01.  Basis for Determining Interest Rate Inadequate or Unfair

	
75

	
Section 8.02.  Illegality

	
76

	
Section 8.03.  Increased Cost and Reduced Return

	
77

	
Section 8.04.  Base Rate Loans Substituted for Affected Euro-Dollar Loans

	
79

 

ARTICLE 9

Miscellaneous

 

	
Section 9.01.  Notices

	
79

	
Section 9.02.  No Waivers

	
81

	
Section 9.03.  Expenses; Documentary Taxes; Indemnification

	
81

	
Section 9.04.  Sharing of Set-offs

	
82

	
Section 9.05.  Amendments and Waivers

	
82

	
Section 9.06.  Successors and Assigns

	
83

	
Section 9.07.  Collateral

	
86

	
Section 9.08.  Governing Law

	
86

	
Section 9.09.  Counterparts; Integration

	
87

	
Section 9.10.  Several Obligations

	
87

	
Section 9.11.  Severability

	
87

	
Section 9.12.  Confidentiality

	
87

	
Section 9.13.  WAIVER OF JURY TRIAL

	
88

	
Section 9.14. USA Patriot Act

	
88

	
Section 9.15.  ICC Transactions

	
88

 

 

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Schedules

Agent Schedule

Commitment Schedule

Pricing Schedule

Schedule 2.01                                             Existing Letters of Credit

Schedule 5.03(a)                                        Non-GAAP Subsidiaries

Schedule 9.15                                             ICC Transactions

Exhibits

Exhibit A                                  -           Form of Note

Exhibits B-1 and B-2               -           Forms of RUS Guarantee

Exhibit C                                   -           Money Market Quote Request

Exhibit D                                   -           Invitation for Money Market Quotes

Exhibit E                                   -           Money Market Quote

Exhibit F                                   -           Opinion of General Counsel for the Borrower

Annex A - Legal Actions

Annex B - Subsidiaries and Joint Ventures

Exhibit G                                   -           Assignment and Assumption Agreement

Exhibit H                                   -           U.S. Tax Certificates

 

 

(NY) 27011/233/CA/RBS.CA.doc

  

iv

  

  

 

REVOLVING CREDIT AGREEMENT

 

REVOLVING CREDIT AGREEMENT dated as of October 21, 2011, among NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION, a not-for-profit cooperative association incorporated under the laws of the District of Columbia, as Borrower, the BANKS listed on the signature pages hereof, THE ROYAL BANK OF SCOTLAND PLC, as Administrative Agent and as Initial Issuing Bank for the Letters of Credit issued or to be issued pursuant to this Agreement, JPMORGAN CHASE BANK, N.A., as Syndication Agent, and THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., KEYBANK NATIONAL ASSOCIATION and ROYAL BANK OF CANADA, as Co-Documentation Agents.

 

The parties hereto agree as follows:

 

 

ARTICLE 1

Definitions

 

Section 1.01 .  Definitions.  The following terms, as used herein, have the following meanings:

 

“1994 Indenture” means the Indenture dated as of February 15, 1994 and as amended as of September 16, 1994 between the Borrower and U.S. Bank National Association, as trustee, as amended and supplemented from time to time, providing for the issuance in series of certain collateral trust bonds of the Borrower.

 

“2007 Indenture” means the Indenture dated as of October 25, 2007 between the Borrower and U.S. Bank National Association, as trustee, as amended and supplemented from time to time, providing for the issuance in series of certain collateral trust bonds of the Borrower.

 

“Absolute Rate Auction” means a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.03.

 

“Adjusted London Interbank Offered Rate” has the meaning set forth in Section 2.07(b).

 

“Administrative Agent” means The Royal Bank of Scotland plc, in its capacity as administrative agent for the Banks hereunder, and its successors in such capacity.

 

“Administrative Questionnaire” means, with respect to each Bank, the administrative questionnaire in the form submitted to such Bank by the Administrative Agent and submitted to the Administrative Agent (with a copy to the Borrower) duly completed by such Bank.

 

  

  

  

  

“Agreement” means this Revolving Credit Agreement, as the same may be amended from time to time.

 

“Applicable Law” means, with respect to any Person, any and all laws, statutes, regulations, rules, orders, injunctions, decrees, judgments, writs determinations or awards having the force or effect of binding such Person at law and issued by any Governmental Authority, applicable to such Person, including all Environmental Laws.

 

“Applicable Lending Office” means, with respect to any Bank, (i) in the case of its Base Rate Loans, its Domestic Lending Office, (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its Money Market Loans, its Money Market Lending Office.

 

“ASC 815” means Accounting Standards Codification No. 815 Derivatives and Hedging, as amended from time to time (or any successor provision thereto).

 

“ASC 830” means Accounting Standards Codification No. 830 Foreign Currency Matters, as amended from time to time (or any successor provision thereto).

 

“Assignee” has the meaning set forth in Section 9.06(c).

 

“Auto-Extension Letter of Credit” has the meaning specified in Section 2.20(a)(iii).

 

“Back-Up Letter of Credit” has the meaning set forth in Section 2.01(b).

 

“Bank” means each bank listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective successors.

 

“Bankruptcy Event” means, with respect to any Person, such Person becomes the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its business appointed for it, or, in the good faith determination of the Administrative Agent, has taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any such proceeding or appointment, provided that a Bankruptcy Event shall not result solely by virtue of any ownership interest, or the acquisition of any ownership interest, in such Person by a Governmental Authority or instrumentality thereof, provided, further, that such ownership interest does not result in or provide such Person with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Person (or such Governmental Authority or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Person.

 

  

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“Bank Parties” mean the Banks and the Issuing Banks.

 

“Base Rate” means, for any day, a rate per annum equal to the highest of (i) the Prime Rate for such day, (ii) the Federal Funds Rate for such day plus 0.50% and (iii) the Adjusted London Interbank Offered Rate for a one month Interest Period on such day (or if such day is not a Euro-Dollar Domestic Business Day, the immediately preceding Euro-Dollar Business Day) plus 1.00%.

 

“Base Rate Loan” means a Committed Loan that bears interest at the Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or the last sentence of Section 2.08(a) or Article 8.

 

“Base Rate Margin” has the meaning set forth in the Pricing Schedule hereto.

 

“Bonds” means any bonds issued pursuant to any of the Indentures, as the context may require.

 

“Borrower” means the National Rural Utilities Cooperative Finance Corporation, a not-for-profit cooperative association incorporated under the laws of the District of Columbia, and its successors.

 

“Borrowing” has the meaning set forth in Section 1.03.

 

“Cash Collateral Account” means a deposit account or a non-interest bearing securities account (as contemplated by Section 2.20(e)) opened, or to be opened, by the Administrative Agent and in which a Lien has been granted to the Administrative Agent for the benefit of each Bank and each Issuing Bank pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent and each Issuing Bank (which documents are hereby consented to by the Banks) to the extent that any Letter of Credit is required to be Cash Collateralized in accordance with this Agreement.

 

“Cash Collateralize” means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of each Issuing Bank and each Bank, as collateral for the L/C Obligations, cash or deposit account balances, and “Cash Collateral” shall refer to such cash or deposit account balances.

 

“Central Banking Authority” means any central bank, reserve bank or monetary authority that is principally engaged in the regulation of the currency, money supply or commercial banking system of any given sovereign state or states.

 

“Change in Law” means (a) the adoption of any law, rule, regulation or treaty after the date of this Agreement, (b) any change in any law, rule, regulation or treaty or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Bank Party (or, for purposes of Section 8.03(b), by its Applicable Lending Office or by such 

 

  

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Bank Party’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement; provided however, that notwithstanding anything therein to the contrary, (i) any requirements imposed under the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, regulations, guidelines or directives thereunder or enacted, adopted or issued in connection therewith and (ii) any requests, rules, guidelines or directives concerning capital adequacy promulgated by the Bank for International Settlements, the Basel Committee on Banking Regulations and Supervisory Practices (or any successor or similar authority) or the United States financial regulatory authorities, in each case pursuant to Basel III, shall be deemed to be a “Change in Law”, regardless of the date adopted, issued, promulgated or implemented, but only if any such requirements are generally applicable to (and for which reimbursement is generally being sought by the Banks in respect of) credit transactions similar to this transaction from borrowers similarly situated to the Borrower.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Co-Documentation Agents” means The Bank of Tokyo-Mitsubishi UFJ, Ltd., KeyBank National Association, and Royal Bank of Canada, each in their respective capacity as documentation agent hereunder, and their respective successors in such capacity.

 

“Co-Lead Arrangers” means RBS Securities Inc., J.P. Morgan Securities LLC, The Bank of Tokyo-Mitsubishi UFJ, Ltd., KeyBank National Association, and RBC Capital Markets, 1 each in their capacity as co-lead arranger and joint bookrunner.

 

“Commitment” means (i) with respect to each Bank listed on the signature pages hereof, the amount set forth opposite the name of such Bank on the Commitment Schedule hereto and (ii) with respect to any Assignee that becomes a Bank pursuant to Section 9.06(c), the amount of the transferor Bank’s Commitment assigned to it pursuant to Section 9.06(c), in each case as such amount may from time to time be reduced pursuant to Sections 2.10 and 2.11; provided that, if the context so requires, the term “Commitment” means the obligation of a Bank to make loans pursuant to Section 2.01(a) and purchase participations in L/C Obligations up to, in the aggregate, such amount to the Borrower hereunder.

 

“Committed Borrowing” means a Borrowing under Section 2.01(a).

 

  

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“Committed Loan” means a Revolving Loan; provided that, if any such loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term “Committed Loan” shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be.

 

“Commitment Termination Date” means October 21, 2015 or, if such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day.

 

“Consolidated Entity” means at any date any Subsidiary, and any other entity the accounts of which would be combined or consolidated with those of the Borrower in its combined or consolidated financial statements if such statements were prepared as of such date.

 

“Credit Documentation” has the meaning set forth in Section 9.15.

 

“Credit Exposure” means with respect to any Bank at any time, (i) the aggregate principal amount of the Loans outstanding and (ii) the Outstanding Amount of all L/C Obligations (with the aggregate amount of each Bank’s participation in L/C Obligations deemed “held” by such Bank for purposes of this definition).

 

“Default” means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both (as specified in Section 6.01) would, unless cured or waived, become an Event of Default.

 

“Defaulting Bank” means any Bank that (a) has failed, within two Domestic Business Days of the date required to be funded or paid, to (i) fund any portion of its Loans, (ii) fund any portion of its participations in Letters of Credit or (iii) pay over to the Administrative Agent or any Bank Party any other amount required to be paid by it hereunder, unless, in the case of clause (i) above, such Bank notifies the Administrative Agent and the Borrower, in writing that such failure is the result of such Bank’s good faith determination that a condition precedent to funding (specifically identified and including the particular default, if any) has not been satisfied, (b) has notified the Borrower, the Administrative Agent or any Bank Party in writing, or has made a public statement to the effect, that it does not intend or expect to comply with any of its funding obligations under this Agreement (unless such writing or public statement indicates that such position is based on such Bank’s good faith determination that a condition precedent (specifically identified and including the particular default, if any) to funding a loan under this Agreement cannot be satisfied) or generally under other agreements in which it commits to extend credit, (c) has failed, within three Domestic Business Days after request by the Administrative Agent (the Administrative Agent hereby agreeing to make any such written request upon a request from the Borrower) or any Bank Party, acting in good faith, to provide a certification in writing from an authorized officer of such Bank (with a copy of such certification to be provided to the Borrower) that it will comply with its 

 

  

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obligations to fund prospective Loans and participations in then outstanding Letters of Credit under this Agreement, provided that such Bank shall cease to be a Defaulting Bank pursuant to this clause (c) upon such Bank Party’s receipt of such certification in form and substance satisfactory to it and the Administrative Agent, or (d) has, or has a Parent, that has become the subject of a Bankruptcy Event.

 

“Derivative Cash Settlements” means, for any period, the line item “derivative cash settlements” as it appears on the statement of operations of the Borrower and its Consolidated Entities for such period delivered to the Banks pursuant to Section 5.03(b), calculated in accordance with generally accepted accounting principles as in effect from time to time.

 

“Derivatives Obligations” of any Person means all obligations of such Person in respect of any rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of the foregoing transactions) or any combination of the foregoing transactions.

 

“Determination Date” has the meaning set forth in Section 5.09.

 

“Dollars” or “$” refers to lawful money of the United States of America.

 

“Domestic Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close.

 

“Domestic Lending Office” means, as to each Bank Party, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank Party may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Administrative Agent.

 

“Effective Date” means the date this Agreement becomes effective in accordance with Section 3.01.

 

“Environmental Laws” means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and governmental restrictions relating to the environment, the effect of the environment on human health or to emissions, discharges or releases of pollutants, contaminants, Hazardous Substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, 

 

  

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storage, disposal, transport or handling of pollutants, contaminants, Hazardous Substances or wastes or the clean-up or other remediation thereof.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute.

 

“ERISA Group” means the Borrower, any Subsidiary and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any Subsidiary, are treated as a single employer under Section 414(b) or (c) of the Internal Revenue Code or, for purposes of Section 412 of the Internal Revenue Code, under Section 414(b), (c), (m) or (o) of the Internal Revenue Code.

 

“Euro-Dollar Business Day” means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London.

 

“Euro-Dollar Lending Office” means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower and the Administrative Agent.

 

“Euro-Dollar Loan” means a Committed Loan that bears interest at a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election.

 

“Euro-Dollar Margin” means a rate per annum determined in accordance with the Pricing Schedule.

 

“Euro-Dollar Rate” means, for any day, a rate per annum determined in accordance with Section 2.07(b).

 

“Euro-Dollar Reference Banks” means the principal London offices of JPMorgan Chase Bank, N.A. and The Royal Bank of Scotland plc.

 

 “Euro-Dollar Reserve Percentage” has the meaning set forth in Section 2.07(b).

 

“Event of Default” has the meaning set forth in Section 6.01.

 

“Excluded Taxes” means, with respect to any payment made by the Borrower under this Agreement or the Notes, any of the following Taxes imposed on or with respect to a Recipient:

 

(a) income or franchise Taxes imposed on (or measured by) net income by the United States of America, or by the jurisdiction under the laws of which such 

 

  

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Recipient is organized or in which its principal office is located or, in the case of any Bank Party, in which its applicable lending office is located, (b) any branch profits Taxes imposed by the United States of America or any similar Taxes imposed by any other jurisdiction in which the Borrower is located and (c) in the case of a Non U.S. Bank Party (other than an assignee pursuant to a request by the Borrower under Section 2.19(b)), any U.S. Federal withholding Taxes resulting from any law in effect (including FATCA) on the date such Non U.S. Bank Party becomes a party to this Agreement (or designates a new lending office) or is attributable to such Non U.S. Bank Party’s failure to comply with Section 2.16(f), except to the extent that such Non U.S. Bank Party (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 Taxes pursuant to Section 2.17(a).

 

“Existing Letters of Credit” means any letter of credit listed on Schedule 2.01 hereto which has been issued by The Bank of Nova Scotia, in its capacity as the issuing bank under the Revolving Credit Agreement dated as of March 10, 2010 among the Borrower, the banks named therein, Royal Bank of Canada, The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, and U.S. Bank National Association, as Co-Documentation Agents, The Royal Bank of Scotland plc, as Syndication Agent, and The Bank of Nova Scotia, as Administrative Agent.  The Borrower shall be deemed to have requested the issuance of each Existing Letter of Credit for purposes hereof.

 

“Facility Fee Rate” means a rate per annum determined in accordance with the Pricing Schedule.

 

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement and any regulations or official interpretations thereof.

 

“Federal Funds Rate” means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day; provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to The Royal Bank of Scotland plc on such day on such transactions as determined by the Administrative Agent.

 

“Fixed Rate Borrowing” means either a Euro-Dollar Borrowing or a  Money Market LIBOR Borrowing.

 

  

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“Fixed Rate Loans” means Euro-Dollar Loans or Money Market Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate pursuant to Section 8.01) or any combination of the foregoing.

 

“Foreclosed Asset” has the meaning set forth in Section 5.12.

 

“Fronting Fee” has the meaning specified in Section 2.09(d).

 

“Governmental Authority” means any national, state, county, city, town, village, municipal or other government department, commission, board, bureau, agency, authority or instrumentality of a country or any political subdivision thereof, exercising executive, legislative, judicial, regulatory or administrative powers or functions of or pertaining to government.

 

“Group of Loans” means, at any time, a group of Loans consisting of (i) all Committed Loans which are Base Rate Loans at such time or (ii) all Euro-Dollar Loans having the same Interest Period at such time; provided that if a Committed Loan of any particular Bank is converted to or made as a Base Rate Loan pursuant to Article 8, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been in if it had not been so converted or made.

 

“Guarantee” by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Indebtedness or lease payments of any other Person or otherwise in any manner assuring the holder of any Indebtedness of, or the obligee under any lease of, any other Person through an agreement, contingent or otherwise, to purchase Indebtedness or the property subject to such lease, or to purchase goods, supplies or services primarily for the purpose of enabling the debtor or obligor to make payment of the Indebtedness or under such lease or of assuring such Person against loss, or to supply funds to or in any other manner invest in the debtor or obligor, or otherwise; provided that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business.  The term “Guarantee” when used as a verb has a correlative meaning.

 

“Guaranteed Portion” has the meaning set forth in the definition of RUS Guaranteed Loan.

 

“Hazardous Substances” means any toxic, radioactive, caustic or otherwise hazardous substance, including petroleum, its derivatives, by-products and other hydrocarbons, or any substance having any constituent elements displaying any of the foregoing characteristics.

 

“Honor Date” has the meaning specified in Section 2.20(b)(i).

 

“Increased Amount Date” has the meaning set forth in Section 2.17.

 

“Incremental Bank” has the meaning set forth in Section 2.17.

 

  

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“Incremental Commitments” has the meaning set forth in Section 2.17 .

 

“Indebtedness” with respect to any Person means:

 

(1)           all indebtedness which would appear as indebtedness on a balance sheet of such Person prepared in accordance with generally accepted accounting principles (i) for money borrowed, (ii) which is evidenced by securities sold for money or (iii) which constitutes purchase money indebtedness;

 

(2)           all indebtedness of others Guaranteed by such Person;

 

(3)           all indebtedness secured by any Lien upon property owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness; and

 

(4)           all indebtedness of such Person created or arising under any conditional sale or other title retention agreement (including any lease in the nature of a 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 of such property), but only if such property is included as an asset on the balance sheet of such Person;

 

provided that, in computing the “Indebtedness” of such Person, there shall be excluded any particular indebtedness if, upon or prior to the maturity thereof, there shall have been deposited with the proper depositary in trust money (or evidences of such indebtedness) in the amount necessary to pay, redeem or satisfy such indebtedness, and thereafter such money and evidences of indebtedness so deposited shall not be included in any computation of the assets of such Person; and provided further that no provision of this definition shall be construed to include as “Indebtedness” of the Borrower or its Consolidated Entities any indebtedness by virtue of any agreement by the Borrower or its Consolidated Entities to advance or supply funds to Members.

 

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by the Borrower under this Agreement or the Notes and (b) Other Taxes.

 

“Indenture” means either the 1994 Indenture, the 2007 Indenture or any other Indenture that provides for borrowing on terms not materially more disadvantageous to the Borrower’s unsecured creditors than the borrowings under the 1994 Indenture or the 2007 Indenture, and “Indentures” means all such Indentures.

 

“Initial Issuing Bank” means The Royal Bank of Scotland plc, in its capacity as initial issuing bank for the letters of credit issued or to be issued pursuant to this Agreement, and its successors in such capacity as provided in Section 2.20(b).

 

  

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“Interest Expense” means, for any period, the line item “interest expense” as it appears on the statement of operations of the Borrower and its Consolidated Entities for such period delivered to the Banks pursuant to Section 5.03(b), calculated in accordance with generally accepted accounting principles as in effect from time to time.

 

“Interest Period” means: (1) with respect to each Euro-Dollar Borrowing, the period commencing on the date of such Borrowing and ending one, two, three or six months thereafter, as the Borrower may elect in the applicable Notice of Borrowing; provided that:

 

(a)           any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day;

 

(b)           any Interest Period which begins on the last Euro-Dollar 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 (c) below, end on the last Euro-Dollar Business Day of a calendar month; and

 

(c)           any Interest Period of any Euro-Dollar Loan included in such Borrowing which would otherwise end after the Maturity Date shall, with respect to such Euro-Dollar Loan, end on such Maturity Date;

 

(2)           with respect to each Base Rate Borrowing, the period commencing on the date of such Borrowing and ending 30 days thereafter; provided that:

 

(a)           any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and

 

(b)           any Interest Period of any Base Rate Loan included in such Borrowing which would otherwise end after the Maturity Date shall, with respect to such Base Rate Loan, end on such Maturity Date;

 

(3)           with respect to each Money Market LIBOR Borrowing, the period commencing on the date of such Borrowing and ending any whole number of months thereafter (but not less than one month) as the Borrower may elect in the applicable Notice of Borrowing; provided that:

 

(a)           any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day;

 

  

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(b)           any Interest Period which begins on the last Euro-Dollar 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 (c) below, end on the last Euro-Dollar Business Day of a calendar month; and

 

(c)           any Interest Period which would otherwise end after the Commitment Termination Date shall end on the Commitment Termination Date; and

 

(4)           with respect to each Money Market Absolute Rate Borrowing, the period commencing on the date of such Borrowing and ending such number of days thereafter (but not less than 30 days) as the Borrower may elect in the applicable Notice of Borrowing; provided that:

 

(a)           any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and

 

(b)           any Interest Period which would otherwise end after the Commitment Termination Date shall end on the Commitment Termination Date.

 

“Investments” has the meaning set forth in Section 5.12.

 

“IRS” means the United States Internal Revenue Service.

 

“ISP” means, with respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance of such Letter of Credit).

 

“Issuer Documents” means, with respect to any Letter of Credit, the Letter of Credit Application and any other document, agreement and instrument entered into by any Issuing Bank and the Borrower (or any Consolidated Entity of the Borrower) or in favor of any Issuing Bank and relating to any such Letter of Credit.

 

“Issuing Bank” means the Initial Issuing Bank, The Bank of Nova Scotia and any Bank appointed by the Borrower (with the consent of the Administrative Agent) as such and each Person that shall become an Issuing Bank hereunder pursuant to Section 2.20(l) or Section 9.06(f).  Each Issuing Bank may, with the consent of the Borrower (such consent not to be unreasonably withheld), arrange for one or more Letters of Credit to be issued by affiliates of such Issuing Bank, in which case the term “Issuing Bank” shall include any such affiliate with respect to Letters of Credit issued by such affiliate.

 

“Joint Venture” means any corporation, partnership, association, joint venture or other entity in which the Borrower, directly or indirectly through 

 

  

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Subsidiaries or Joint Ventures, has an equity interest at the time of 10% or more but which is not a Subsidiary; provided that no Person whose only assets are RUS Guaranteed Loans and investments incidental thereto shall be deemed a Joint Venture; provided further that any investment by the Borrower, directly or indirectly through Subsidiaries or Joint Ventures, in (or any of their other interests in) any equity securities of the Federal Agricultural Mortgage Corporation shall not be deemed a Joint Venture.

 

“L/C Advance” means, with respect to each Bank, such Bank’s funding of its participation in any L/C Borrowing in accordance with its Pro Rata Share.

 

“L/C Borrowing” means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when made or refinanced as a Borrowing.

 

“L/C Credit Extension” means, with respect to any Letter of Credit, the issuance thereof, the extension of the expiry date thereof or the increase of the amount thereof.

 

“L/C Obligations” means, as at any date of determination, the aggregate undrawn amount of all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings.  For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn.

 

“Letter of Credit Application” means an application and agreement for the issuance or amendment of a Letter of Credit to be issued hereunder by any Issuing Bank in the form from time to time in use by such Issuing Bank.

 

“Letter of Credit Expiration Date” means the day that is five Domestic Business Days prior to the Commitment Termination Date.

 

“Letter of Credit Fee” has the meaning specified in Section 2.09(c).

 

“Letter of Credit Sublimit” means $100,000,000.  The Letter of Credit Sublimit is part of , and not in addition to, the aggregate Commitments.

 

“Letters of Credit” means letters of credit issued by any Issuing Bank pursuant to Section 2.01(b).

 

“LIBOR Auction” means a solicitation of Money Market Quotes setting forth Money Market Margins based on the London Interbank Offered Rate pursuant to Section 2.03.

 

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset.  For 

 

  

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the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset.

 

“Loan” means a Base Rate Loan or a Euro-Dollar Loan or a Money Market Loan and “Loans” means Base Rate Loans or Euro-Dollar Loans or Money Market Loans or any combination of the foregoing.

 

“London Interbank Offered Rate” has the meaning set forth in Section 2.07(b).

 

“Maturity Date” means (i) with respect to any Revolving Loan, the Commitment Termination Date and (ii) with respect to any Money Market Loan, the last day of the Interest Period applicable thereto.

 

“Member” means any Person which is a member or a patron of the Borrower.

 

“Members’ Subordinated Certificate” means a note of the Borrower or its Consolidated Entities substantially in the form of the membership subordinated subscription certificates and the loan and guarantee subordinated certificates outstanding on the date of the execution and delivery of this Agreement and any other Indebtedness of the Borrower or its Consolidated Entities having substantially similar provisions as to subordination as those contained in said outstanding membership subordinated subscription certificates and loan and guarantee subordinated certificates.

 

“Money Market Absolute Rate” has the meaning set forth in Section 2.03(d).

 

“Money Market Absolute Rate Loan” means a loan to be made by a Bank pursuant to an Absolute Rate Auction.

 

“Money Market Lending Office” means, as to each Bank, its Domestic Lending Office or such other office, branch or affiliate of such Bank as it may hereafter designate as its Money Market Lending Office by notice to the Borrower and the Administrative Agent; provided that any Bank may from time to time by notice to the Borrower and the Administrative Agent designate separate Money Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate Loans, on the other hand, in which case all references herein to the Money Market Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require.

 

“Money Market LIBOR Loan” means a loan to be made by a Bank pursuant to a LIBOR Auction (including such a loan bearing interest at the Prime Rate pursuant to Section 8.01(a)).

 

  

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“Money Market Loan” means a Money Market LIBOR Loan or a Money Market Absolute Rate Loan.

 

“Money Market Margin” has the meaning set forth in Section 2.03(d).

 

“Money Market Quote” means an offer by a Bank to make a Money Market Loan in accordance with Section 2.03.

 

“Moody’s” means Moody’s Investors Service, Inc., and its successors.

 

“Multiple Employer Plan” means a single employer plan, as defined in Section 4001 of ERISA and subject to Title IV of ERISA, which has two or more contributing sponsors, one of whom is the Borrower or a Subsidiary of the Borrower or any member of the ERISA Group, at least two of whom are not under common control, within the meaning of Section 4063 of ERISA.

 

“Net Income” means, for any period, the line item “net income” on the consolidated statement of operations of the Borrower and its Consolidated Entities, as it appears in the financial statements for such period delivered to the Banks pursuant to Section 5.03(b), and each calculated in accordance with generally accepted accounting principles as in effect from time to time; provided that non-cash adjustments (whether positive or negative) required to be made pursuant to ASC 815 and ASC 830 on each such line item shall be excluded from the calculation thereof to the extent otherwise included therein.

 

“Non-Extension Notice Date” has the meaning specified in ‎Section 2.20(a)(iii).

 

“Non-U.S. Bank Party” means a Bank Party that is not a U.S. Person.

 

“Notes” means promissory notes of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loans, and “Note” means any one of such promissory notes issued hereunder.

 

“Notice of Borrowing” means a Notice of Committed Borrowing or a Notice of Money Market Borrowing.

 

“Notice of Committed Borrowing” has the meaning set forth in Section 2.02.

 

“Notice of Interest Rate Election” has the meaning set forth in Section 2.08.

 

“Notice of Money Market Borrowing” has the meaning set forth in Section 2.03(f).

 

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such 

 

  

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Recipient and the jurisdiction imposing such Taxes (other than a connection arising from such Recipient having executed, delivered, enforced, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, or engaged in any other  transaction pursuant to, or enforced, this Agreement or the Notes, or sold or assigned an interest in this Agreement or the Notes).

 

“Other Taxes” means any present or future stamp, court, documentary, intangible, recording, filing or similar excise or property Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, or from the registration, receipt or perfection of a security interest under, or otherwise with respect to, this Agreement or the Notes, except any such Taxes that are Other Connection Taxes imposed with respect to an  assignment (other than an assignment under Section 2.18).

 

“Outstanding Amount” means with respect to any L/C Obligations on any date, the amount of such L/C Obligations on such date after giving effect to any relevant L/C Credit Extension occurring on such date and any other changes in the aggregate amount of such L/C Obligations as of such date, including as a result of any reimbursements of outstanding unpaid drawings under any relevant Letters of Credit or any reductions in the maximum amount available for drawing under any relevant Letters of Credit taking effect on such date.

 

“Parent” means, with respect to any Bank, any Person as to which such Bank is, directly or indirectly, a subsidiary.

 

“Participant” has the meaning set forth in Section 9.06(b).

 

“Patronage Capital Certificates” means those certificates that evidence the portion of Net Income allocated by the Borrower among its Members in accordance with applicable cooperative principles.

 

“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.

 

“Performance Letter of Credit” means any letter of credit issued in order to guarantee performance under a contract.

 

“Person” means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

 

“Plan” means any multiemployer plan or single employer plan (including any Multiple Employer Plan), as defined in Section 4001 and subject to Title IV of ERISA, which is maintained or contributed to by, or at any time during the five calendar years preceding the date of this Agreement was maintained or contributed to by, the Borrower or a Subsidiary of the Borrower or any member of the ERISA Group.

 

  

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“Pricing Schedule” means the Pricing Schedule attached hereto.

 

“Prime Rate” means the rate of interest publically announced by The Royal Bank of Scotland plc as its prime rate in effect at such time at its principal office in New York City; provided that if The Royal Bank of Scotland plc ceases to publically announce such rate of interest, then the Prime Rate shall mean the rate of interest published by the Wall Street Journal from time to time as the "Prime Rate".

 

“Prior 5-Year Credit Agreement” means the Revolving Five Year Credit Agreement dated as of March 16, 2007, among the Borrower, the banks named therein, The Royal Bank of Scotland N.V. (formerly known as ABN AMRO Bank N.V.), The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, and The Royal Bank of Scotland plc, as Co-Documentation Agents, The Bank of Nova Scotia, as Syndication Agent, and JPMorgan Chase Bank, N.A., as Administrative Agent.

 

“Pro Rata Share” means, with respect to each Bank at any time, a fraction (expressed as a percentage, carried out to the ninth decimal place), the numerator of which is the amount of the Commitment of such Bank and the denominator of which is the total amount of the Commitments, subject to adjustment as provided in Section 2.19(a)(iv); provided that if the commitment of each Bank to make Revolving Loans and the obligation of each Issuing Bank to make L/C Credit Extensions have been terminated pursuant to Section 2.10 or 6.01, then the Pro Rata Share of each Bank shall be determined based on the Pro Rata Share of such Bank immediately prior to such termination and after giving effect to any subsequent assignments made pursuant to the terms hereof.

 

“Qualified Subordinated Indebtedness” means the Borrower’s  (i) 6.10% Subordinated Deferrable Interest Notes Due 2044, (ii) 5.95% Subordinated Deferrable Interest Notes Due 2045, and (iii) any other Indebtedness of the Borrower having substantially similar terms as to subordination as those contained in the instruments and documents relating to the foregoing Indebtedness or that would be junior to any of the foregoing; provided that such Indebtedness (a) will not mature prior to the Maturity Date and (b) does not require payments of principal prior to the Commitment Termination Date, except pursuant to acceleration or at the option of the Borrower.

 

“Recipient” means, as applicable, (a) the Administrative Agent, (b) any Bank and (c) the Issuing Bank.

 

“REDLG Program Liens” means Liens on any asset of the Borrower required to be pledged as collateral to support obligations of the Borrower with respect to any government Guarantee provided pursuant to regulations issued under the Rural Electrification Act of 1936, 7 U.S.C. 901 et. seq., and the Food, Conservation and Energy Act of 2008, Pub. L. 110-234 Stat. 923 (“REDLG Obligations”) so long as such Guarantee supports long-term Indebtedness issued by the Borrower and permitted by Section 5.09.

 

  

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“REDLG Obligations” has the meaning set forth in the definition of REDLG Program Liens.

 

“Regulation U” means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time.

 

“Regulation X” means Regulation X of the Board of Governors of the Federal Reserve System, as in effect from time to time.

 

“Reportable Event” means an event described in Section 4043(c) of ERISA or regulations promulgated by the Department of Labor thereunder (with respect to which the 30 day notice requirement has not been waived by the PBGC).

 

“Required Banks” means at any time Banks having at least 51% of the sum of (i) the aggregate amount of the unused Commitments, (ii) the aggregate principal outstanding amount of the Loans and (iii) the Outstanding Amount of all L/C Obligations (with the aggregate amount of each Bank’s participation in L/C Obligations deemed “held” by such Bank for purposes of this definition).

 

“Responsible Officer” means (i) with respect to the Borrower, the Chief Financial Officer, the Chief Executive Officer, the Treasurer, an Assistant Secretary-Treasurer, the Controller, the Vice President, Capital Markets Funding or, in each case, an authorized signatory of such Person and (ii) with respect to any other Person, the president, any vice-president, the chief financial officer, any assistant-treasurer or, in each case, an authorized signatory of such Person.

 

“Revolving Credit Period” means the period from and including the Effective Date to but excluding the Commitment Termination Date.

 

“Revolving Loan” means a loan made by a Bank pursuant to Section 2.01(a).

 

“RUS” means the Rural Utilities Service of the Department of Agriculture of the United States of America (as successor to the Rural Electrification Administration of the Department of Agriculture of the United States of America) or any other regulatory body which succeeds to its functions.

 

“RUS Guaranteed Loan” means any loan made by any Person, which loan is guaranteed, in whole or in part, as to principal and interest by the United States of America through the RUS pursuant to a guarantee, which guarantee contains provisions no less favorable to the holder thereof than the provisions set forth in the form of Exhibit B-1 or Exhibit B-2 hereto; and “Guaranteed Portion” of any RUS Guaranteed Loan means that portion of principal of, and interest on, such RUS Guaranteed Loan which is guaranteed by the United States of America through the RUS.

 

  

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“S&P” means Standard and Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and its successors.

 

“Securities and Exchange Commission” means the Securities and Exchange Commission or any other U.S. federal governmental authority succeeding to any or all of the functions of the Securities and Exchange Commission.

 

“Special Purpose Subsidiary” has the meaning set forth in Section 5.12.

 

“Standby Letter of Credit” means any Letter of Credit issued under this Agreement, other than (i) a Trade Letter of Credit, (ii) a Performance Letter of Credit or (iii) a Backup Letter of Credit in support of either a performance letter of credit or a trade letter of credit issued by the Borrower.

 

“Start-up Investments” has the meaning set forth in Section 5.12.

 

“Subsidiary” of any Person means (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through its Subsidiaries, and (ii) any other Person in which such Person directly or indirectly through Subsidiaries has more than a 50% voting and equity interest; provided that no Person whose only assets are RUS Guaranteed Loans and investments incidental thereto shall be deemed a Subsidiary.

 

“Superior Indebtedness” means all Indebtedness of the Borrower and its Consolidated Entities (other than Members’ Subordinated Certificates and Qualified Subordinated Indebtedness), but excluding (i) Indebtedness of the Borrower or any of its Consolidated Entities to the extent that the proceeds of such Indebtedness are used to fund Guaranteed Portions of RUS Guaranteed Loans and (ii) any indebtedness of any Member Guaranteed by the Borrower or any of its Consolidated Entities (“Guaranteed Indebtedness”), to the extent that either (x) the long-term unsecured debt of such Member is rated at least BBB+ by S&P or Baal by Moody’s, (y) the long-term secured debt of such Member is rated at least A- by S&P or A3 by Moody’s or (z) the payment of principal and interest by the Borrower or any of its Consolidated Entities in respect of such Guaranteed Indebtedness is covered by insurance or reinsurance provided by an insurer having an insurance financial strength rating of AAA by S&P or a financial strength rating of Aaa by Moody’s.

 

“Syndication Agent” means The Royal Bank of Scotland plc, in its capacity as Syndication Agent hereunder, and its successors in such capacity.

 

“Taxes” means any present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any

 

  

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 Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

 

“TIER” means, for any period, the ratio of (x) Net Income plus Interest Expense plus Derivative Cash Settlements to (y) Interest Expense plus Derivative Cash Settlements, in each case for such period.

 

“Trade Letter of Credit” means any letter of credit that is issued for the benefit of a supplier of goods or services to effect payment for such goods or services.

 

“Type” refers to whether a Loan is a Base Rate Loan, a Euro-Dollar Loan, a Money Market Absolute Rate Loan or a Money Market LIBOR Loan.

 

“Unreimbursed Amount” has the meaning specified in Section 2.20(b)(i).

 

“U.S. Person” means a “United States person” within the meaning of Section 7701(a)(30) of the Code.

 

“U.S. Tax Certificate” has the meaning assigned to such term in Section 2.17(f)(ii)(D)(2).

 

“Withholding Agent” means the Borrower and the Administrative Agent.

 

Section 1.02 .  Accounting Terms and Determinations.   Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Borrower’s independent public accountants) with the most recent audited financial statements of the Borrower and its Consolidated Entities delivered to the Bank Parties.

 

Section 1.03 .  Types of Borrowings.  The term “Borrowing” denotes the aggregation of Loans of one or more Banks to be made to the Borrower pursuant to Article 2 on a single date and for a single Interest Period.  Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing (e.g., a “Euro-Dollar Borrowing” is a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions of Article 2 under which participation therein is determined (i.e., a “Revolving  Borrowing” is a Borrowing under Section 2.01(a) in which all Banks participate in proportion to their Commitments, while a “Money Market Borrowing” is a Borrowing under Section 2.03 in which the Bank participants are determined on the basis of their bids in accordance therewith).

 

Section 1.04 .  Letter of Credit.  Unless otherwise specified, all references herein to the amount of a Letter of Credit at any time shall be deemed to mean the 

 

  

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stated face amount of such Letter of Credit in effect at such time; provided, however, that with respect to any Letter of Credit that, by its terms or the terms of any Issuer Document related thereto, provides for one or more automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be deemed the maximum stated amount of such Letter of Credit after giving effect to all increases thereof, whether or not such maximum face amount is in effect at such time.

 

 

ARTICLE 2

The Credits

 

Section 2.01 .  Commitments to Lend and Issue Letters of Credit.  (a) Revolving Loans.  During the Revolving Credit Period each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans to the Borrower pursuant to this Section from time to time in amounts such that the sum of (x) the aggregate principal amount of Revolving Loans by such Bank at any one time outstanding plus (y) such Bank’s Pro Rata Share of the Outstanding Amount of all L/C Obligations shall not exceed the amount of its Commitment.  Each Borrowing shall be in an aggregate principal amount of $10,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing may be in the maximum aggregate amount available in accordance with Section 3.03(d)) and shall be made from the several Banks ratably in proportion to their respective Commitments.  Within the foregoing limits, the Borrower may borrow under this Section, repay or, to the extent permitted by Section 2.12, prepay Loans and reborrow at any time during the Revolving Credit Period under this Section.

 

(b)  Letters of Credit.  Subject to the terms and conditions set forth herein, (i) each Issuing Bank agrees, in reliance upon the agreements of the other Banks set forth in Section 2.20, (A) from time to time on any Domestic Business Day during the period from the Effective Date until the Letter of Credit Expiration Date, to make L/C Credit Extensions either (i) for the account of the Borrower, its Consolidated Entities, its Members or members of its Consolidated Entities or (ii) in support of a letter of credit issued by the Borrower as a back-up confirmation or backup credit support of such letter of credit ("Back-Up Letter of Credit"), and to amend or extend Letters of Credit previously issued by it, in accordance with Section 2.20(a)(i) and (ii), and (B) to honor drawings under the Letters of Credit issued by it; and (ii) the Banks severally agree to participate in Letters of Credit issued for the account of the Borrower, its Consolidated Entities, its Members or members of its Consolidated Entities and any L/C Borrowings thereunder; provided that after giving effect to any L/C Credit Extension with respect to any Letter of Credit, (1) the sum of (x) the aggregate principal amount of Revolving Loans of any Bank, plus (y) such Bank’s Pro Rata Share of the Outstanding Amount of all L/C Obligations shall not exceed such Bank’s Commitment and (2) the Outstanding Amount of all L/C Obligations shall not exceed the Letter of Credit Sublimit.  Each request by the Borrower for the issuance of, or an amendment to increase the amount of, any Letter of Credit shall 

 

  

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be deemed to be a representation by the Borrower that the L/C Credit Extension so requested complies with the condition set forth in the proviso to the preceding sentence.  Within the foregoing limits, and subject to the terms and conditions hereof, the Borrower’s ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed.  Notwithstanding anything to the contrary herein, no Issuing Bank shall issue any Letter of Credit other than a Standby Letter of Credit.

 

(b)  Letters of Credit Generally.  (i) No Issuing Bank shall issue any Letter of Credit if the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless all the Banks have approved such expiry date; provided that in no event shall the expiry date of any requested Letter of Credit occur on or after the Domestic Business Day immediately preceding the Commitment Termination Date.

 

(i)  No Issuing Bank shall be under any obligation to make any L/C Credit Extension if:

 

(A) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain such Issuing Bank from issuing such Letter of Credit, or any Applicable Law applicable to such Issuing Bank or any request or directive (whether or not having the force of law, but if not having the force of law, being a request or directive which is generally complied with by comparable financial institutions) from any Governmental Authority with jurisdiction over such Issuing Bank shall prohibit, or request that the Issuing Bank refrain from the issuance of Letters of Credit generally or such Letter of Credit in particular or shall impose upon such Issuing Bank with respect to such Letter of Credit any restriction, reserve or capital requirement (for which such Issuing Bank is not otherwise compensated hereunder) not in effect on the Effective Date, or shall impose upon such Issuing Bank any unreimbursed loss, cost or expense which was not applicable on the Effective Date and which such Issuing Bank in good faith reasonably deems material to it; provided, however, that in the event a Bank Party participating in the Letters of Credit is not affected by any such restriction, requirement or imposition, and is able to issue such Letter of Credit and expressly agrees in its sole discretion to issue such Letter of Credit, such Bank Party, subject to the consent of the Administrative Agent, such consent not to be unreasonably withheld, conditioned or delayed, shall issue such Letter of Credit and shall be deemed the Issuing Bank with regard to such Letter of Credit for all purposes of this Agreement;

 

  

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(B) the making of such L/C Credit Extension would violate any Applicable Laws;

 

(C) except as otherwise agreed by the Administrative Agent and such Issuing Bank, such Letter of Credit is in an initial face amount less than $25,000;

 

(D) such L/C Credit Extension is to be denominated in a currency other than Dollars;

 

(E) such L/C Credit Extension contains any provisions for automatic reinstatement of the stated amount after any L/C Borrowing thereunder; or

 

(F) a default of any Bank’s obligations to fund under Section 2.20 exists, or any Bank is then a Defaulting Bank, unless, after giving effect to Section 2.19(a)(iv)) with respect to such Bank, such Issuing Bank has entered into satisfactory arrangements, including the delivery of Cash Collateral satisfactory to the Issuing Bank (in its sole discretion) with the Borrower or such Bank to eliminate such Issuing Bank’s risk.

 

(ii)  No Issuing Bank shall be under the obligation to amend any Letter of Credit if (A) such Issuing Bank would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.

 

(c)   Existing Letters of Credit. The parties hereto agree that the Existing Letters of Credit will automatically, without any further action on the part of any Person, be deemed to be Letters of Credit hereunder issued hereunder on the Effective Date for the account of the Borrower.  Without limiting the foregoing, (i) each such Existing Letter of Credit shall be included in the calculation of the L/C Obligations and (ii) each Lender shall have reimbursement and participation obligations with respect to such Existing Letters of Credit as provided in Sections 2.20(a) and (b) hereof.

 

Section 2.02 .  Notice of Committed Borrowings.  The Borrower shall give the Administrative Agent notice (a “Notice of Committed Borrowing”) not later than 12:00 noon (New York City time) on (x) the date of such Borrowing, in the case of each Base Rate Borrowing, and (y) the third Euro-Dollar Business Day before such Borrowing, in the case of each Euro-Dollar Borrowing, specifying:

 

(a)  the date of such Borrowing, which shall be a Domestic Business Day in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing,

 

(b)  the aggregate amount of such Borrowing,

 

  

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(c)  whether the Loans comprising such Borrowing are to bear interest initially at the Base Rate or a Euro-Dollar Rate, and

 

(d)  in the case of a Euro-Dollar Borrowing, the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period.

 

Notwithstanding the foregoing, no more than 15 Fixed Rate Borrowings  shall be outstanding at any one time, and any Borrowing which would exceed such limitation shall be made as a Base Rate Borrowing.

 

Section 2.03 .  Money Market Borrowings.  (a) In addition to Committed Borrowings pursuant to Section 2.01(a), the Borrower may, as set forth in this Section, request the Banks during the Revolving Credit Period to make offers to make Money Market Loans to the Borrower.  The Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section.

 

(a)  Money Market Quote Request.  When the Borrower wishes to request offers to make Money Market Loans under this Section, it shall transmit to the Administrative Agent by telex or facsimile transmission a Money Market Quote Request substantially in the form of Exhibit C hereto so as to be received no later than 10:00 A.M. (New York City time) on (x) the fourth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y) the Domestic Business Day next preceding the date of Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying:

 

(i)  the proposed date of Borrowing, which shall be a Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic Business Day in the case of an Absolute Rate Auction,

 

(ii)  the aggregate amount of such Borrowing, which shall be $10,000,000 or any larger multiple of $1,000,000,

 

(iii)  the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and

 

(iv)  whether the Money Market Quotes requested are to set forth a Money Market Margin or a Money Market Absolute Rate.

 

The Borrower may request offers to make Money Market Loans for more than one Interest Period in a single Money Market Quote Request.  No Money Market Quote Request shall be given within four Euro-Dollar Business Days (or 

 

  

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such other number of days as the Borrower and the Administrative Agent may agree) of any other Money Market Quote Request.

 

(b)  Invitation for Money Market Quotes.  Promptly upon receipt of a Money Market Quote Request, the Administrative Agent shall send to the Banks by telex or facsimile transmission an Invitation for Money Market Quotes substantially in the form of Exhibit D hereto, which shall constitute an invitation by the Borrower to each Bank to submit Money Market Quotes offering to make the Money Market Loans to which such Money Market Quote Request relates in accordance with this Section.

 

(c)  Submission and Contents of Money Market Quotes.  (i) Each Bank may submit a Money Market Quote containing an offer or offers to make Money Market Loans in response to any Invitation for Money Market Quotes.  Each Money Market Quote must comply with the requirements of this subsection (d) and must be submitted to the Administrative Agent by telex or facsimile transmission at its offices specified in or pursuant to Section 9.01 not later than (x) 9:30 A.M. (New York City time) on the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) 9:30 A.M. (New York City time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective); provided that Money Market Quotes submitted by the Administrative Agent (or any affiliate of the Administrative Agent) in the capacity of a Bank may be submitted, and may only be submitted, if the Administrative Agent or such affiliate notifies the Borrower of the terms of the offer or offers contained therein not later than (x) 8:30 A.M. (New York City time) on the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) 9:15 A.M. (New York City time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction.  Subject to Articles 3 and 6, any Money Market Quote so made shall be irrevocable except with the written consent of the Administrative Agent given on the instructions of the Borrower.

 

(i)  Each Money Market Quote shall be in substantially the form of Exhibit E hereto and shall in any case specify:

 

(A) the proposed date of Borrowing,

 

(B) the principal amount of the Money Market Loan for which each such offer is being made, which principal amount (w) may be greater than or less than the Commitment of the quoting Bank, (x) must be $1,000,000 or any larger multiple thereof, (y) may not exceed the principal amount of Money Market Loans for which offers were requested and (z) may be subject to an aggregate limitation as to principal amount of Money 

 

  

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Market Loans for which offers being made by such quoting Bank may be accepted,

 

(C) in the case of a LIBOR Auction, the margin above or below the applicable London Interbank Offered Rate (the “Money Market Margin”) offered for each such Money Market Loan, expressed as a percentage (rounded to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate,

 

(D) in the case of an Absolute Rate Auction, the rate of interest per annum (rounded to the nearest 1/10,000th of 1%) (the “Money Market Absolute Rate”) offered for each such Money Market Loan, and

 

(E) the identity of the quoting Bank.

 

A Money Market Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Money Market Quotes.

 

(ii)  Any Money Market Quote shall be disregarded if it:

 

(A) is not substantially in conformity with Exhibit E hereto or does not specify all of the information required by subsection (d)(ii),

 

(B) contains qualifying, conditional or similar language,

 

(C) proposes terms other than or in addition to those set forth in the applicable Invitation for Money Market Quotes, or

 

(D) arrives after the time set forth in subsection (d)(i).

 

(e)  Notice to Borrower.  The Administrative Agent shall promptly notify the Borrower of the terms (x) of any Money Market Quote submitted by a Bank that is in accordance with subsection (d) and (y) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Bank with respect to the same Money Market Quote Request.  Any such subsequent Money Market Quote shall be disregarded by the Administrative Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote.  The Administrative Agent’s notice to the Borrower shall specify (A) the aggregate principal amount of Money Market Loans for which offers have been received for each Interest Period specified in the related Money Market Quote Request, (B) the respective principal amounts and Money Market Margins or Money Market Absolute Rates, as the case may be, so offered and (C) if 

 

  

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applicable, limitations on the aggregate principal amount of Money Market Loans for which offers in any single Money Market Quote may be accepted.

 

(f)  Acceptance and Notice by Borrower.  Not later than 10:30 A.M. (New York City time) on (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), the Borrower shall notify the Administrative Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e).  In the case of acceptance, such notice (a “Notice of Money Market Borrowing”) shall specify the aggregate principal amount of offers for each Interest Period that are accepted.  The Borrower may accept any Money Market Quote in whole or in part; provided that:

 

(i)  the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Money Market Quote Request,

 

(ii)  the aggregate principal amount of each Money Market Borrowing must be $10,000,000 or any larger multiple of $1,000,000,

 

(iii)  acceptance of offers may only be made on the basis of ascending Money Market Margins or Money Market Absolute Rates, as the case may be, and

 

(iv)  the Borrower may not accept any offer that is described in subsection (d)(iii) or that otherwise fails to comply with the requirements of this Agreement.

 

(g)  Allocation by Agent.  If offers are made by two or more Banks with the same Money Market Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Administrative Agent among such Banks as nearly as possible (in such multiples, not greater than $100,000, as the Administrative Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers.  Determinations by the Administrative Agent of the amounts of Money Market Loans shall be conclusive in the absence of manifest error.

 

Section 2.04 . Notice to Banks; Funding of Loans.  (a) Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly notify each Bank on the same Domestic Business Day of the contents thereof and of such Bank’s share (if any) of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower.

 

  

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(b)  Not later than 2:00 P.M. (New York City time) on the date of each Borrowing, each Bank participating therein shall (except as provided in subsection (c) of this Section) make available its share of such Borrowing, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address specified in or pursuant to Section 9.01.  Unless the Administrative Agent determines that any applicable condition specified in Article 3 has not been satisfied, the Administrative Agent will thereafter make the funds so received from the Banks available to the Borrower at the Administrative Agent’s aforesaid address, provided, however, that the Administrative Agent shall first make a portion of such funds equal to the aggregate principal amount of any L/C Borrowings made by any Issuing Bank and by any Bank, as the case may be, and outstanding on the date of such Borrowing, plus interest accrued and unpaid thereon to and as of such date, available to such Issuing Bank or such other Bank, as the case may be, for repayment of such L/C Borrowing.

 

(c)  If any Bank makes a new Loan hereunder on a day on which the Borrower is to repay all or any part of an outstanding Loan from such Bank, such Bank shall apply the proceeds of its new Loan to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed and the amount being repaid shall be made available by such Bank to the Administrative Agent as provided in subsection (b), or remitted by the Borrower to the Administrative Agent as provided in Section 2.13, as the case may be.

 

(d)  Unless the Administrative Agent shall have been notified by any Bank prior to the date of Borrowing (or prior to 2:00 P.M. (New York City time) on the date of Borrowing in the case of a Base Rate Borrowing) that such Bank does not intend to make available to the Administrative Agent such Bank’s portion of the Borrowing to be made on such date, the Administrative Agent may assume that such Bank has made such amount available to the Administrative Agent on such date and the Administrative Agent may (but shall have no obligation to), in reliance upon such assumption, make available to the Borrower a corresponding amount, subject to the provisions of subsection (c).  If such corresponding amount is not in fact made available to the Administrative Agent by such Bank, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Bank.  If such Bank does not pay such corresponding amount forthwith upon the Administrative Agent’s demand therefor, the Administrative Agent shall promptly notify the Borrower and the Borrower shall promptly pay such corresponding amount to the Administrative Agent.  The Administrative Agent shall also be entitled to recover from such Bank or the Borrower interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Borrower to the date such corresponding amount is recovered by the Administrative Agent, at a rate per annum equal to (x) in the case of a Bank, the Federal Funds Rate for each such day and (y) in the case of the Borrower, the then applicable rate for Base Rate Loans, Euro-Dollar Loans or Money Market Loans, as appropriate.  Nothing herein shall be deemed to relieve

 

  

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 any Bank from its obligation to fulfill its Commitment hereunder or to prejudice any rights which the Borrower may have against any Bank as a result of any default by such Bank hereunder.  For purposes of this subsection (d), no amount paid to the Administrative Agent hereunder shall be considered to have been recovered by the Administrative Agent on the date of payment unless such amount shall have been received by the Administrative Agent by 2:30 P.M. (New York City time) on such date.

 

Section 2.05 .  Notes.  (a) Any Bank Party may request that the Loans and/or L/C Borrowings of such Bank be evidenced by a single Note payable to the order of such Bank Party for the account of its Applicable Lending Office in an amount equal to the aggregate unpaid principal amount of such Bank Party’s Loans and/or L/C Borrowings.

 

(b)  Each Bank Party that has requested that its Loans and/or L/C Borrowings be evidenced by a Note may, by notice to the Borrower and the Administrative Agent, request that its Loans and/or L/C Borrowings of a particular Type be evidenced by a separate Note in an amount equal to the aggregate unpaid principal amount of such Loans and/or L/C Borrowings.  Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Loans and/or L/C Borrowings of the relevant Type.  Each reference in this Agreement to the “Note” of such Bank Party shall be deemed to refer to and include any or all of such Notes, as the context may require.

 

(c)  Upon receipt of each Bank Party’s Note pursuant to Section 3.01(b), the Administrative Agent shall forward such Note to such Bank Party.  Each Bank Party shall record the date, amount, type and maturity of each Loan and/or L/C Borrowings made by it and the date and amount of each payment of principal made by the Borrower with respect thereto, and may, if such Bank Party so elects in connection with any transfer or enforcement of its Note, endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan and/or L/C Borrowings then outstanding; provided that the failure of any Bank Party to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Notes.  Each Bank Party is hereby irrevocably authorized by the Borrower so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required.

 

Section 2.06 .  Maturity of Loans.  Each Loan hereunder shall mature, and the principal amount thereof shall be due and payable on the Maturity Date with respect to such Loan.

 

Section 2.07 .  Interest Rates.  (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate plus the applicable Base Rate Margin for such day.  Such interest shall be payable for each Interest Period on the last day thereof and, with respect to the principal amount of 

 

  

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any Base Rate Loan that is prepaid or converted to a Euro-Dollar Loan, on the date of such prepayment or conversion.  Any overdue principal of or interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the rate otherwise applicable to Base Rate Loans for such day.

 

(a)  Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin plus the applicable Adjusted London Interbank Offered Rate.  Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, three months after the first day thereof and, with respect to the principal amount of any Euro-Dollar Loan that is prepaid or converted to a Base Rate Loan, on the date of such prepayment or conversion.

 

The “Adjusted London Interbank Offered Rate” applicable to any Interest Period means a rate per annum equal to the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage.

 

The “London Interbank Offered Rate” applicable to any Interest Period means the rate appearing on Reuters BBA Libor Rates Page 3750 (or on any successor or substitute page of such Reuters Service, or if the Reuters Service ceases to be available, any successor to or substitute for such Reuters Service, providing rate quotations comparable to those currently provided on such page of such Reuters Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days prior to the commencement of such Interest Period, as the rate for the offering of dollar deposits with a maturity comparable to such Interest Period; provided that, if such rate is not available, such rate shall be the average rate per annum (rounded upward, if necessary, to the next higher 1/16th of 1%) at which deposits in Dollars are offered to each of the Euro-Dollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period.

 

“Euro-Dollar Reserve Percentage” means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion Dollars in respect of “Eurocurrency liabilities” (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on

 

  

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 Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents).  The Adjusted London Interbank Offered Rate shall be adjusted automatically on and as of the effective date of any change in the Euro-Dollar Reserve Percentage.

 

(c)  Any overdue principal of or interest on any Euro-Dollar Loan and any other overdue amount payable hereunder (other than in respect of any Money Market Loan as provided in the following paragraph) shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 2% plus (i) in the case of principal, the rate otherwise applicable to Euro-Dollar Loans for such day or (ii) in the case of interest and any other overdue amount payable hereunder (other than in respect of any Money Market Loan as provided in the following paragraph), the sum of the Base Rate plus the applicable Base Rate Margin for such day.

 

(d)  Subject to Section 8.01(a), each Money Market LIBOR Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.07(b)) plus (or minus) the Money Market Margin quoted by the Bank making such Loan in accordance with Section 2.03.  Each Money Market Absolute Rate Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by the Bank making such Loan in accordance with Section 2.03.  Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof.  Any overdue principal of or interest on any Money Market Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the Prime Rate for such day.

 

(e)  The Administrative Agent shall determine each interest rate applicable to the Loans hereunder.  The Administrative Agent shall give prompt notice to the Borrower and the participating Banks of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error.

 

(f)  To the extent required by this Section, each Euro-Dollar Reference Bank agrees to use its commercially reasonable efforts to furnish individual quotations to the Administrative Agent.  If either Euro-Dollar Reference Bank does not furnish a timely quotation, the Administrative Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Euro-Dollar Reference Bank or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply.

 

  

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Section 2.08 .  Method of Electing Interest Rates.  (a)  The Loans included in each Committed Borrowing shall bear interest initially at the type of rate specified by the Borrower in the applicable Notice of Committed Borrowing.  Thereafter, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject to Section 2.08(d) and the provisions of Article 8), as follows:

 

(i)  if such Loans are Base Rate Loans, the Borrower may elect to convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day;

 

(ii)  if such Loans are Euro-Dollar Loans, the Borrower may elect to convert such Loans to Base Rate Loans as of any Domestic Business Day, subject to Section 2.14 if any such conversion is effective on any day other than the last day of an Interest Period applicable to such Loans, or may elect to continue such Loans as Euro-Dollar Loans, as of the end of any Interest Period applicable thereto, for an additional Interest Period.

 

Each such election shall be made by delivering a notice (a “Notice of Interest Rate Election”) to the Administrative Agent not later than 10:30 A.M. (New York City time) on the third Euro-Dollar Business Day before the conversion or continuation selected in such notice is to be effective.  A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans; provided that (i) such portion is allocated ratably among the Loans comprising such Group and (ii) such portion, and the remaining portion to which such Notice does not apply, are each at least $10,000,000 (unless such portion is comprised of Base Rate Loans).  If no such notice is timely received before the end of an Interest Period for any Group of Euro-Dollar Loans, the Borrower shall be deemed to have elected that such Group of Loans be converted to Base Rate Loans at the end of such Interest Period.

 

(b)  Each Notice of Interest Rate Election shall specify:

 

(i)  the Group of Loans (or portion thereof) to which such notice applies;

 

(ii)  the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of Section 2.08(a);

 

(iii)  if the Loans comprising such Group are to be converted to Euro-Dollar Loans, the duration of the next succeeding Interest Period applicable thereto; and

 

  

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(iv)  if such Loans are to be continued as Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period.

 

Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of Interest Period.

 

(c)  Promptly after receiving a Notice of Interest Rate Election from the Borrower pursuant to Section 2.08(a), the Administrative Agent shall notify each Bank of the contents thereof and such notice shall not thereafter be revocable by the Borrower.

 

(d)  The Borrower shall not be entitled to elect to convert any Committed Loans to, or continue any Committed Loans for an additional Interest Period as, Euro-Dollar Loans if (i) the aggregate principal amount of any Group of Euro-Dollar Loans created or continued as a result of such election would be less than $10,000,000 or (ii) a Default shall have occurred and be continuing when the Borrower delivers notice of such election to the Administrative Agent.

 

(e)  If any Committed Loan is converted to a different Type of Loan, the Borrower shall pay, on the date of such conversion, the interest accrued to such date on the principal amount being converted.

 

Section 2.09 .  Fees.  (a) Facility Fee.  Subject to Section 2.19(a)(i), the Borrower shall pay to the Administrative Agent for the account of each Bank facility fees accruing at the Facility Fee Rate on the daily average amount of such Bank’s Commitment (whether used or unused), for the period from and including the Effective Date to but excluding the date such Bank’s Commitment is terminated; provided that, if such Bank continues to have any Committed Loans outstanding after its Commitment terminates, then such facility fee shall continue to accrue on the daily outstanding principal amount of such Bank’s Committed Loans from and including the date on which its Commitment terminates to but excluding the date on which such Bank ceases to have any Committed Loans outstanding.  Accrued facility fees shall be payable on each January 1, April 1, July 1, and October 1 and on the date the Commitment of such Bank is terminated (and, if later, on the date the Loans of such Bank shall be repaid in their entirety); provided that any facility fees accruing after the first anniversary of the Commitment Termination Date shall be payable on demand.

 

(b)  Agents’ Fees.  The Borrower shall pay to the Administrative Agent and the Syndication Agent, each for its own account, one or more fees in such amounts and at such times as has been previously agreed between the Borrower and each of them.

 

(c)  Letter of Credit Fees.  Upon the issuance of each Letter of Credit pursuant to Section 2.01(b) and until termination, cancellation or expiration of such Letter of Credit, the Borrower agrees to pay to the Administrative Agent for the account of each Bank in accordance with its Pro Rata Share a Letter of Credit 

 

  

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fee (the “Letter of Credit Fee”) for each Letter of Credit equal to a rate per annum equal to  the Euro-Dollar Margin in effect from time to time; provided, however, any Letter of Credit Fees otherwise payable for the account of a Defaulting Bank with respect to any Letter of Credit as to which Cash Collateral has not been provided satisfactory to the Issuing Bank pursuant to Section 2.19 shall be payable, to the maximum extent permitted by Applicable Law, to the other Banks in accordance with the upward adjustments in their respective Pro Rata Share allocable to such Letter of Credit pursuant to Section 2.19(a)(iv), with the balance of such fee, if any, payable to the Issuing Bank for its own account.  Letter of Credit Fees shall be (i) computed on a quarterly basis in arrears on the basis of the actual number of days elapsed in a year of 360 days (including the first day but excluding the last day), as pro-rated for any partial quarter, as applicable, and (ii) subject to Section 2.19(a)(ii), due and payable on each January 1, April 1, July 1 and October 1, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand.  Notwithstanding anything to the contrary contained herein, upon the request of the Required Banks, while any payment-related Event of Default exists, all Letter of Credit Fees shall accrue at a rate per annum equal to the Euro-Dollar Margin plus 2%.

 

(c)  Fronting Fee and Documentary and Processing Charges Payable to Issuing Banks, Etc.  The Borrower shall pay directly to the relevant Issuing Bank for its own account a fronting fee with respect to each Letter of Credit issued hereunder on the average daily maximum amount available to be drawn under such Letter of Credit in an amount to be agreed between the Borrower and the applicable Issuing Bank of the L/C Obligations (whether or not such maximum amount is then in effect under such Letter of Credit) (the “Fronting Fee”).  The Fronting Fee shall be computed on a quarterly basis in arrears on the basis of the actual number of days elapsed in a year of 360 days (including the first day but excluding the last day), as pro-rated for any partial quarter, as applicable, and shall be due and payable on each January 1, April 1, July 1 and October 1, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand.  In addition, the Borrower shall, with respect to all Letters of Credit issued at its request, pay directly to each Issuing Bank for its own account the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of such Issuing Bank relating to letters of credit as from time to time in effect.  Such customary fees and standard costs and charges are due and payable on demand and are nonrefundable.

 

Section 2.10 .  Optional Termination or Reduction of Commitments.  During the Revolving Credit Period, the Borrower may, upon at least three Domestic Business Days’ notice to the Administrative Agent (which notice the Administrative Agent will promptly deliver to the Banks), (i) terminate the Commitments at any time, if no Loans are outstanding at such time or (ii) ratably reduce from time to time by an aggregate amount of $10,000,000 or any larger 

 

  

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multiple of $1,000,000, the aggregate amount of the Commitments in excess of the aggregate outstanding principal amount of the Loans.

 

Section 2.11 .  Mandatory Termination of Commitments.  The Commitments shall terminate on the Commitment Termination Date.

 

Section 2.12 .  Optional Prepayments.  (a) Subject in the case of Euro-Dollar Loans to Section 2.14, the Borrower may (i) on any Domestic Business Day, upon notice to the Administrative Agent, prepay any Group of Base Rate Loans (or any Money Market Borrowing bearing interest at the Base Rate pursuant to Section 8.01(a)) or (ii) upon at least three Euro-Dollar Business Days’ notice to the Administrative Agent, prepay any Group of Euro-Dollar Loans, in each case in whole at any time, or from time to time in part in amounts aggregating $10,000,000 or any larger multiple of $1,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment.  Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Group of Loans (or such Money Market Borrowing).

 

(b)  Except as provided in Section 2.12(a), the Borrower may not prepay all or any portion of the principal amount of any Money Market Loan prior to the maturity thereof.

 

(c)  Upon receipt of a notice of prepayment pursuant to this Section, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank’s ratable share (if any) of such prepayment and such notice shall not thereafter be revocable by the Borrower.

 

Section 2.13 .  General Provisions as to Payments.  (b) The Borrower shall make each payment of principal of, and interest on, the Loans or L/C Obligations and of fees hereunder, not later than 1:00 P.M. (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address referred to in Section 9.01.  The Administrative Agent will promptly distribute to each Bank Party its ratable share of each such payment received by the Administrative Agent for the account of the Bank Parties.  Whenever any payment of principal of, or interest on, the Base Rate Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day.  Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day.  Whenever any payment of principal of, or interest on, the Money Market Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day.  If the date for any payment of principal is 

 

  

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extended by operation of law or otherwise, interest thereon shall be payable for such extended time.

 

(b)  Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Bank Parties hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may (but shall have no obligation to), in reliance upon such assumption, cause to be distributed to each Bank Party on such due date an amount equal to the amount then due such Bank Party.  If and to the extent that the Borrower shall not have so made such payment, each Bank Party shall repay to the Administrative Agent forthwith on demand such amount distributed to such Bank Party together with interest thereon, for each day from the date such amount is distributed to such Bank Party until the date such Bank Party repays such amount to the Administrative Agent, at the Federal Funds Rate.

 

Section 2.14 .  Funding Losses.  If the Borrower makes any payment of principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is converted to a different type of Loan (whether such payment or conversion is pursuant to Article 2, 6 or 8 or otherwise) on any day other than the last day of the Interest Period applicable thereto, or the end of an applicable period fixed pursuant to Section 2.07(c), or if the Borrower fails to borrow, prepay, convert or continue any Fixed Rate Loans after notice has been given to any Bank in accordance with Section 2.04(a), 2.08(c) or 2.12(c) the Borrower shall reimburse each Bank within 15 days after demand for any resulting loss or expense incurred by it (or by an existing Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or conversion or failure to borrow, prepay, convert or continue; provided that such Bank shall have delivered to the Borrower a certificate as to the amount of such loss or expense, setting forth in reasonable detail the calculation thereof, which certificate shall be conclusive in the absence of manifest error.

 

Section 2.15 .  Computation of Interest and Fees.  Interest based on the Prime Rate and fees pursuant to Section 2.09(a) hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day).  All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day).

 

Section 2.16 .  Taxes.  (a) Withholding of Taxes; Gross-Up.  Each payment by the Borrower under this Agreement or the Notes shall be made without withholding for any Taxes, unless such withholding is required by any law.  If any Withholding  Agent determines, in its sole discretion exercised in good faith, that it is so required to withhold Taxes, then such Withholding Agent may so withhold 

 

  

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and shall timely pay the full amount of withheld Taxes to the relevant Governmental Authority in accordance with applicable law.  If such Taxes are Indemnified Taxes, then the amount payable by the Borrower shall be increased as necessary so that, net of such withholding (including withholding applicable to additional amounts payable under this Section), the applicable Recipient receives the amount it would have received had no such withholding been made.

 

(b)  Payment of Other Taxes by the Borrower.  The Borrower shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

 

(c)  Evidence of Payments.  As soon as practicable after any payment of Indemnified Taxes by the Borrower to a Governmental Authority, such Borrower shall deliver to the Administrative 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 Administrative Agent.

 

(d)  Indemnification by the Borrower.  The Borrower shall indemnify each Recipient for any Indemnified Taxes that are paid or payable by such Recipient in connection with this Agreement or the Notes (including amounts paid or payable under this Section 2.16(d)) and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  The indemnity under this Section 2.16(d) shall be paid within 10 days after the Recipient delivers to the Borrower a certificate stating the amount of any Indemnified Taxes so paid or payable by such Recipient and describing, in reasonable detail, the basis for the indemnification claim.  Such certificate shall be conclusive of the amount so paid or payable absent manifest error.  Such Recipient shall deliver a copy of such certificate to the Administrative Agent.

 

(e)  Indemnification by the Bank Parties.  Each Bank Party shall severally indemnify the Administrative Agent for any Taxes (but, in the case of any Indemnified Taxes, only to the extent that the Borrower has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Borrower to do so) attributable to such Bank Party that are paid or payable by the Administrative Agent in connection with this Agreement and the Notes and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  The indemnity under this Section 2.16(e) shall be paid within 10 days after the Administrative Agent delivers to the applicable Bank Party a certificate stating the amount of Taxes so paid or payable by the Administrative Agent.  Such certificate shall be conclusive of the amount so paid or payable absent manifest error.

 

(f)  Status of Bank Parties.  (i) Any Bank Party that is entitled to an exemption from, or  reduction of, any applicable withholding Tax with respect to any payments under this Agreement or the Notes shall deliver to the Borrower

 

  

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 and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without, or at a reduced rate of, withholding.  In addition, any Bank Party, if requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Bank Party is subject to any withholding (including backup withholding) or information reporting requirements.  Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 2.16(f)(ii)(A) through (E) below) shall not be required if in the Bank Party’s judgment such completion, execution or submission would subject such Bank Party to any material unreimbursed cost or expense (or, in the case of a Change in Law, any incremental material unreimbursed cost or expense) or would materially prejudice the legal or commercial position of such Bank Party.  Upon the reasonable request of such Borrower or the Administrative Agent, any Bank Party shall update any form or certification previously delivered pursuant to this Section 2.16(f).  If any form or certification previously delivered pursuant to this Section expires or  becomes obsolete or inaccurate in any respect with respect to a Bank Party, such Bank Party shall promptly (and in any event within 10 days after such expiration, obsolescence or inaccuracy) notify such Borrower and the Administrative Agent in writing of such expiration, obsolescence or inaccuracy and update the form or certification if it is legally eligible to do so.

 

(ii)  Without limiting the generality of the foregoing, if the Borrower is a U.S. Person, any Bank Party with respect to such Borrower shall, if it is legally eligible to do so, deliver to such Borrower and the Administrative Agent (in such number of copies reasonably requested by such Borrower and the Administrative Agent) on or prior to the  date on which such Bank Party becomes a party hereto, duly completed and executed copies of whichever of the following is applicable:

 

(A) in the case of a Bank Party that is a U.S. Person, IRS Form W-9 certifying that such Bank Party is exempt from U.S. Federal backup withholding tax;

 

(B) in the case of a Non-U.S. Bank Party claiming the benefits of an income tax treaty to which the United States is a party (1) with respect to payments of interest under any this Agreement or the Notes, IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. Federal withholding Tax pursuant to the “interest” article of such tax treaty and (2) with respect to any other applicable payments under this Agreement, IRS Form W-8BEN establishing an exemption from, or reduction 

 

  

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of, U.S. Federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

 

(C) in the case of a Non-U.S. Bank Party for whom payments under this Agreement constitute income that is effectively connected with such Bank Party’s conduct of a trade or business in the United States, IRS Form W-8ECI;

 

(D) in the case of a Non-U.S. Bank Party claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code both (1) IRS Form W-8BEN and (2) a certificate substantially in the form of Exhibit C (a “U.S. Tax Certificate”) to the effect that such Bank Party is not (a) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (b) a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code (c) a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code and (d) conducting a trade or business in the United States with which the relevant interest payments are effectively connected;

 

(E) in the case of a Non-U.S. Bank Party that is not the beneficial owner of payments made under this Agreement (including a partnership or a participating Bank Party) (1) an IRS Form W-8IMY on behalf of itself and (2)  the relevant forms prescribed in clauses (A), (B), (C), (D) and (F) of this paragraph (f)(ii) that would be required of each such beneficial owner or partner of such partnership if such beneficial owner or partner were a Bank Party; provided, however, that if the Bank Party is a partnership and one or more of its partners are claiming the exemption for portfolio interest under Section 881(c) of the Code, such Bank Party may provide a U.S. Tax Certificate on behalf of such partners; or

 

(F) any other form prescribed by law as a basis for claiming exemption  from, or a reduction of, U.S. Federal withholding Tax together with such supplementary documentation necessary to enable the Borrower or the Administrative Agent to determine the amount of Tax (if any) required by law to be withheld.

 

(iii)  If a payment made to a Bank Party under this Agreement or the Notes would be subject to U.S. Federal withholding Tax imposed by FATCA if such Bank Party were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Bank Party shall deliver to the Withholding Agent, at the time or times prescribed by law and at such time or times reasonably requested by the Withholding Agent, such documentation prescribed by applicable law (including as 

 

  

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prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Withholding Agent as may be necessary for the Withholding Agent to comply with its obligations under FATCA, to determine that such Bank Party has or has not complied with such Bank Party’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.  Solely for purposes of this Section 2.16(f)(iii), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

 

(g)  Treatment of Certain Refunds.  If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.16 (including additional amounts paid pursuant to this Section 2.16), it shall pay the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made, under this Section with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including any Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund).  Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid such indemnified party pursuant to the previous sentence (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event such indemnified party is required to repay such refund to such Governmental Authority.  Notwithstanding anything to the contrary in this Section 2.16(g), in no event will any indemnified party be required to pay any amount to any indemnifying party pursuant to  this Section 2.16(g) if such payment would place such indemnified party in a less favorable position (on a net after-Tax basis) than such indemnified party would have been in if the indemnification payments or additional amounts giving rise to such refund had never been paid.  This Section 2.16(g) shall not be construed to require indemnified party to make available its Tax returns (or any other information relating to its Taxes which it deems confidential) to the indemnifying party or any other Person.

 

(h)  Survival.  Each party’s obligations under this Section 2.16 shall survive any assignment of rights by, or the replacement of, a Bank Party, the termination of the Commitments and the repayment, satisfaction or discharge of all other obligations under this Agreement or the Notes.

 

Section 2.17 .  Increase of Commitments.  (a) Upon at least five days’ prior notice to the Administrative Agent (which notice the Administrative Agent shall promptly transmit to each of the Banks), the Borrower shall have the right, subject to the terms and conditions set forth below, to increase the aggregate amount of the Commitments in multiples of $5,000,000; provided that (i) the amount of such increase when added to the aggregate amount of all such prior increases in the Commitments hereunder (including by way of creating new Commitments), on or after the Effective Date, does not exceed the sum of $415,125,000 and the amount of any Commitments terminated by the Borrower

 

  

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 pursuant to Section 2.19(c) and (ii) the total aggregate amount of Commitments hereunder does not, at any time, exceed $1,300,000,000.

 

(b)  Any such increase in the Commitments (the “Incremental Commitments”) hereunder shall apply, at the option of the Borrower, (x) to the Commitment of one or more Banks; provided that (i) the Administrative Agent, each Issuing Bank and each Bank the Commitment of which is to be increased shall consent to such increase, (ii) the amount set forth on the Commitment Schedule opposite the name of each Bank the Commitment of which is being so increased shall be amended to reflect the increased Commitment of such Bank and (iii) if any Committed Loans are outstanding at the time of such an increase, the Borrower will, notwithstanding anything to the contrary contained in this Agreement, on the date of such increase, incur and repay or prepay one or more Committed Loans from the Banks in such amounts so that after giving effect thereto the Committed Loans shall be outstanding on a pro rata basis (based on the Commitments of the Banks after giving effect to the changes made pursuant to this Section 2.17 on such date) from all the Banks or (y) to the creation of a new Commitment of one or more institutions not then a Bank hereunder; provided that (i) such institution becomes a party to this Agreement as a Bank by execution and delivery to the Borrower and the Administrative Agent of counterparts of this Agreement, (ii) the Commitment Schedule shall be amended to reflect the Commitment of such new Bank, (iii) if requested by such new Bank, the Borrower shall issue a Note to such new Bank in conformity with the provisions of Section 2.05, (iv) if any Committed Loans are outstanding at the time of the creation of such Commitment of such Bank, the Borrower will, notwithstanding anything to the contrary contained in this Agreement, on the date of the creation of such Commitment, incur and repay or prepay one or more Committed Loans from the Banks in such amounts so that after giving effect thereto the Committed Loans shall be outstanding on a pro rata basis (based on the Commitments of the Banks after giving effect to the changes made pursuant to this Section 2.17 on such date) from all the Banks and (v) if such institution is neither a banking institution nor an affiliate of a Bank, such institution must be consented to by the Administrative Agent. The date on which the conditions set forth in this paragraph are satisfied is the “Increased Amount Date” and each such Bank providing an Incremental Commitment, an “Incremental Bank”.

 

(c)  On any Increased Amount Date on which any Incremental Commitments are effective, subject to the satisfaction of the foregoing conditions, each Incremental Bank shall become a Bank hereunder with respect to its Incremental Commitment and the Incremental Loans made pursuant thereto.

 

(d)  The Administrative Agent shall notify the Banks promptly upon receipt of the Borrower’s notice of the Increased Amount Date and in respect thereof of Incremental Commitments and the Incremental Banks.

 

(e)  The terms and provisions of the Incremental Commitments and any Borrowing in respect of such Incremental Commitments shall be, except as 

 

  

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otherwise set forth herein, identical to the Commitments on the Effective Date and any other Loans made under this Agreement.

 

(f)  It is understood that any increase in the amount of the Commitments pursuant to this Section 2.17 shall not constitute an amendment of this Agreement or the Notes.

 

Section 2.18 .  Replacement of Banks.  (a)  If (i) any Bank requests payment of, or the Borrower is otherwise required to pay to any Bank, any amount pursuant to Section 8.01(b) or Section 8.03, (ii) any Bank becomes a Defaulting Bank or (iii) any Bank notifies the Administrative Agent pursuant to Section 8.02 of its inability to make, maintain or fund Euro-Dollar Loans, then the Borrower may, at its sole expense and effort, upon notice to such Bank and the Administrative Agent, require such Bank to assign and delegate, without recourse, all its interests, rights and obligations under this Agreement to an Assignee (which Assignee may be another Bank, if such other Bank agrees to accept such assignment) that shall assume such obligations pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit G hereto which shall be executed by such Assignee and (except as otherwise provided in this) Section 2.18(a) such transferor Bank; provided, that (A) the Borrower shall have received the prior written consent of the Administrative Agent (and if a Commitment is being assigned, the Issuing Bank), which consent shall not unreasonably be withheld, conditioned or delayed, (B) such transferor Bank shall have received payment of an amount equal to the outstanding principal of its Loans and participations in L/C Obligations, accrued interest thereon, accrued fees and all other amounts payable to it hereunder (in each case, if any), from the Assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts), which amounts shall be the only amounts payable to such transferor Bank in respect of such assignment and delegation, (C) any Bank being replaced pursuant to this  Section 2.18(a) shall be deemed to have granted to the Administrative Agent the authority to act as its attorney-in-fact solely for the purpose of executing such Assignment and Assumption Agreement, and (D) in the case of any such assignment and delegation resulting from a request or claim for payment under Section 8.03, such assignment will result in a reduction in any payments due to such transferor Bank on a dollar-for-dollar basis to the extent that such assignment eliminates or reduces the amount that such transferor Bank is entitled to receive under Section 8.03.  A Bank shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Bank or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.  Upon execution and delivery by the Assignee and (except as otherwise provided in this Section 2.18(a)) the transferor Bank of the Assignment and Assumption Agreement referred to above and payment by such Assignee to such transferor Bank of the amount (if any) payable by such Assignee pursuant to clause (B) above: (1) such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment equal to such transferor Bank’s Commitment immediately prior to the effectiveness of 

 

  

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such assignment and delegation (or, if there is more than one Assignee, the respective portion of such Commitment agreed to be assumed by each such Assignee). Upon the consummation of any such assignment and delegation, the transferor Bank, the Administrative Agent and the Borrower shall make appropriate arrangements so that, if required, a new Note is issued to the Assignee.  If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall, prior to the first date on which interest or fees are payable hereunder for its account, deliver to the Borrower and the Administrative Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 2.16. In connection with any assignment pursuant to this Section 2.18(a), (I) the Borrower shall cause to be paid to the Administrative Agent an administrative fee for processing such assignment in the amount of $3,500, and (II) notwithstanding anything to the contrary set forth herein, if the transferor Bank does not execute and deliver to the Administrative Agent a duly completed Assignment and Assumption Agreement reflecting such assignment within five Domestic Business Days of the date on which the Assignee executes and delivers such Assignment and Assumption Agreement to the transferor Bank, then such transferor Bank shall be deemed to have executed and delivered such Assignment and Assumption Agreement.

 

(b)  If (i) any Bank requests payment of, or the Borrower is otherwise required to pay to any Bank, any amount pursuant to Section 8.01(b) or Section 8.03 or (ii) any Bank becomes a Defaulting Bank, the Borrower may, upon at least two Domestic Business Days’ written notice to the Administrative Agent, and provided that no Default or Event of Default has occurred and is continuing, terminate the Commitment of such Bank (without affecting the Commitment of any other Bank) and, in connection therewith, prepay the outstanding Loans and L/C Advances of such Bank in full at par, together with accrued interest thereon, accrued fees and any other amounts payable hereunder for the account of such Bank; provided that in connection with such termination, the parties hereto shall comply with the procedures set forth in Section 2.19(a)(iv) (it being understood that for purposes of this proviso, such Bank shall be deemed to be a Defaulting Bank).  Any such prepayment pursuant to this Section 2.18(b) shall be subject to the provisions of Section 2.14 hereof.

 

(c)  With respect to a demand for compensation from a Bank pursuant to Section 8.03(a), the Borrower’s rights under Section 2.18(a) shall be an alternative to the Borrower’s rights under Section 8.04.

 

Section 2.19 .  Defaulting Banks.  (a) Notwithstanding any provision of this Agreement to the contrary, if any Bank becomes a Defaulting Bank, then the following provisions shall apply for so long as such Bank is a Defaulting Bank:

 

(i)  facility fees shall cease to accrue, or to be payable by the Borrower, on the unfunded portion of the Commitment of such Defaulting

 

  

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 Bank pursuant to Section 2.09(a) for the account of such Defaulting Bank or otherwise;

 

(ii)  Letter of Credit Fees shall cease to accrue, or to be payable by the Borrower, on the Pro Rata Share of a Letter of Credit of such Defaulting Bank pursuant to Section 2.09(c) for the account of such Defaulting Bank or otherwise;

 

(iii)  the Commitment or Credit Exposure of such Defaulting Bank shall not be included in determining whether all Banks or the Required Banks have taken or may take any action hereunder (including any consent to any amendment, waiver or other modification pursuant to Section 9.05); provided, however, that this clause (iii) shall not (subject to Section 9.05) apply to the vote of a Defaulting Bank in the case of an amendment, waiver or other modification specifically requiring the consent of such Bank or each Bank affected thereby (and in circumstances where the consent of “all Banks” is required, such Defaulting Bank’s vote shall not be included except (A) such Defaulting Bank’s Commitment may not be increased or extended without its consent and (B) the principal amount of, or interest or fees payable on, Loans or L/C Borrowings may not be reduced or excused or the scheduled date of payment may not be postponed as to such Defaulting Bank without such Defaulting Bank’s consent); and

 

(iv)  if any L/C Obligations exists at the time such Bank becomes a Defaulting Bank then:

 

(A) provided that no Default or Event of Default exists, all or any part of such Defaulting Bank’s Pro Rata Share of the Outstanding Amount of all L/C Obligations shall be reallocated among the non-Defaulting Banks in accordance with their respective Pro Rata Shares but only to the extent the aggregate principal amount of Revolving Loans of all non-Defaulting Bank’s plus such Defaulting Bank’s Pro Rata Share of the Outstanding Amount of all L/C Obligations do not exceed the total of all non-Defaulting Banks’ Commitments;

 

(B) if the reallocation described in clause (A) above cannot, or can only partially, be effected, the Borrower shall within one Domestic Business Day following notice by the Administrative Agent Cash Collateralize for the benefit of the Issuing Bank such Defaulting Bank’s Pro Rata Share of the Outstanding Amount of all L/C Obligations (after giving effect to any partial reallocation pursuant to clause (i) above) in accordance with the procedures set forth in Section 2.20(e)(i) for so long as such L/C Obligations are outstanding;

 

  

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(C) if the Borrower Cash Collateralizes any portion of such Defaulting Bank’s L/C Obligations pursuant to clause (B) above, the Borrower shall not be required to pay any fees to such Defaulting Bank pursuant to Section 2.09(c) with respect to such L/C Obligations during the period such Defaulting Bank’s L/C Obligations are Cash Collateralized;

 

(D) if the L/C Obligations of the non-Defaulting Banks are reallocated pursuant to clause (A) above, then the fees payable to the Banks pursuant to Section 2.09(a) and Section 2.09(c) shall be adjusted in accordance with such non-Defaulting Banks’ Pro Rata Shares; and

 

(E) if all or any portion of such Defaulting Bank’s L/C Obligations are neither reallocated nor Cash Collateralized pursuant to clause (A) or (B) above, then, without prejudice to any rights or remedies of the Issuing Bank or any other Bank hereunder, all facility fees that otherwise would have been payable to such Defaulting Bank (solely with respect to the portion of such Defaulting Bank’s Commitment that was utilized by such L/C Obligations) and letter of credit fees payable under Section 2.09(c) with respect to such Defaulting Bank’s L/C Obligations shall be payable to the Issuing Bank until and to the extent that such L/C Obligations are reallocated and/or Cash Collateralized; and

 

(b)  So long as any Bank is a Defaulting Bank, the Issuing Bank shall not be required to issue, amend or increase any Letter of Credit, unless it is satisfied that the Defaulting Bank's related exposure and its then outstanding L/C Advance will be 100% covered in accordance with the terms of this Agreement by the Commitments of the non-Defaulting Banks and/or cash collateral will be provided by the Borrower in accordance with Section 2.19(a)(iv), and participating interests in any newly issued or increased Letter of Credit shall be allocated among non-Defaulting Banks in a manner consistent with Section 2.19(a)(iv)(A) (and such Defaulting Bank shall not participate therein).

 

In the event that the Administrative Agent, the Borrower, and the Issuing Bank each agrees that a Defaulting Bank has adequately remedied all matters that caused such Bank to be a Defaulting Bank, then the L/C Obligations of the Banks shall be readjusted to reflect the inclusion of such Bank’s Commitment and on such date such Bank shall purchase at par such of the Loans of the other Banks as the Administrative Agent shall determine may be necessary in order for such Bank to hold such Loans in accordance with its Pro Rata Share.

 

(c)  At the Borrower’s option, the Borrower may elect to terminate the Commitment of any Defaulting Bank upon notice to such Defaulting Bank and 

 

  

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the Administrative Agent (irrespective of whether such Defaulting Bank holds any outstanding Loans) and such notice shall be effective upon receipt by both the Defaulting Bank and the Administrative Agent; provided that, for the avoidance of doubt, if such Defaulting Bank holds any Loans, and such Loans are not assigned pursuant to Section 2.18 or otherwise, then such Defaulting Bank shall continue to hold such Loans until such time as such Loans are repaid by the Borrower or assigned pursuant to this Agreement.  Upon termination of a Bank’s Commitment under this Section 2.19, the Borrower shall (x) to the extent applicable after giving effect to Section 2.19(a)(iv) and any Cash Collateral provided by the Defaulting Bank, Cash Collateralize such Defaulting Bank’s Pro Rata Share of the aggregate undrawn amount of all outstanding Letters of Credit, (y) subject to Section 2.19(a), pay or cause to be paid all accrued facility fees or Letter of Credit Fees payable to such Bank and all other amounts due and payable to such Bank hereunder and (z) if such Bank is an Issuing Bank, the Borrower shall pay to the Administrative Agent for deposit an amount equal to the available amount of all Letters of Credit issued by such Issuing Bank, and upon such payments, the obligations of such Bank hereunder with respect to such unused Commitment which have been terminated shall, by the provisions hereof, be released and discharged.

 

Section 2.20 .  Issuance of Letters of Credit; Drawings and Reimbursements; Auto-Extension Letters of Credit; Funding of Participations.

 

(a)  Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension Letters of Credit. (i) Each Letter of Credit shall be issued or amended, as the case may be, from time to time upon the request of the Borrower delivered to an Issuing Bank (with a copy to the Administrative Agent) in the form of a Letter of Credit Application, appropriately completed and signed by a Responsible Officer of the Borrower and may, at the request of the Borrower, include the issuance of a Letter of Credit confirming a letter of credit issued by the Borrower. For the avoidance of doubt, the Borrower shall be the sole party to any Letter of Credit Application notwithstanding that any Letter of Credit may be issued or amended, as the case may be, for the account of the Borrower, its Consolidated Entities, its Members or any member of its Consolidated Entities.  Such Letter of Credit Application must be received by such Issuing Bank and the Administrative Agent not later than 2:00 p.m. (New York City time) at least one (1) Domestic Business Day (or such later date and time as the Administrative Agent and the Issuing Bank may agree in a particular instance in their sole discretion) prior to the proposed issuance date or date of amendment, as the case may be.  In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the respective Issuing Bank: (A) the proposed issuance date of the requested Letter of Credit (which shall be a Domestic Business Day); (B) the amount thereof; (C) the expiry date thereof (which date shall be not later than the earlier of (1) the date which is twelve (12) months after the proposed issuance date and (2) the Letter of Credit Expiration Date (or such later date as may be agreed by the Banks in accordance with Section 2.01(c)(i)); (D) the name and address of the beneficiary

 

  

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 thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; and (G) such other matters as such Issuing Bank may require.  In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the respective Issuing Bank (w) the Letter of Credit to be amended; (x) the proposed date of amendment thereof (which shall be a Domestic Business Day); (y) the nature of the proposed amendment; and (z) such other matters as such Issuing Bank may require.  Additionally, the Borrower shall furnish to the Issuing Bank and the Administrative Agent such other documents and information pertaining to such requested Letter of Credit issuance or amendment, including any Issuer Documents, as the Issuing Bank or the Administrative Agent may reasonably require; provided that furnishing such documents shall not adversely affect the timing of such Letter of Credit issuance or amendment.

 

(ii)  Promptly after receipt of any Letter of Credit Application, the Issuing Bank will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of such Letter of Credit Application from the Borrower and, if not, such Issuing Bank will provide the Administrative Agent with a copy thereof.  Unless such Issuing Bank has received written notice from any Bank, the Administrative Agent or the Borrower, at least one (1) Domestic Business Day prior to the requested date of issuance or amendment of the applicable Letter of Credit, that one or more applicable conditions contained in Article 3 shall not then be satisfied, then, subject to the terms and conditions hereof, such Issuing Bank shall, on the requested date, make an L/C Credit Extension for the account of the Borrower, its Consolidated Entities, its Members or any member of its Consolidated Entities, or enter into the applicable amendment, as the case may be, in each case in accordance with such Issuing Bank’s usual and customary business practices.  Immediately upon the making of each L/C Credit Extension, each Bank shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from such Issuing Bank a risk participation in such L/C Credit Extension in an amount equal to the product of such Bank’s Pro Rata Share times the amount of such L/C Credit Extension.

 

(iii)  If the Borrower so requests in any applicable Letter of Credit Application, (i) upon the expiration of the initial term of each Letter of Credit, such Letter of Credit shall terminate or (ii) upon the expiration of the initial and each successive term of each Letter of Credit, such Letter of Credit shall then be automatically extended for successive one-year terms (each such automatically extending Letter of Credit, an “Auto-Extension Letter of Credit”), except that the last term in each case shall in any event expire not later than the Letter of Credit Expiration Date (or such later date as may be agreed by the Banks in accordance with Section 2.01(c)(i)); provided that any such Auto-Extension Letter of Credit must 

 

  

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permit such Issuing Bank to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) or upon notice to such Issuing Bank by the Administrative Agent or the Borrower of an Event of Default pursuant to ‎Section 6.01(i), by giving prior notice to the beneficiary thereof not later than a day (the “Non-Extension Notice Date”) in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued.  Unless otherwise directed by such Issuing Bank, the Borrower shall not be required to make a specific request to such Issuing Bank for any such extension.  Once an Auto-Extension Letter of Credit has been issued, the Banks shall be deemed to have authorized (but may not require) such Issuing Bank to permit the extension of such Letter of Credit at any time to an expiry date not later than the Letter of Credit Expiration Date (or such later date as may be agreed by the Banks in accordance with Section 2.01(c)(i)); provided, however, that such Issuing Bank shall not permit any such extension if such Issuing Bank has determined that it would not be permitted, or would have no obligation at such time to issue such Letter of Credit in its revised form (as extended) under the terms hereof (by reason of the provisions of ‎Section 2.01(c)(i), or otherwise), or it has received notice (which may be by telephone or in writing) on or before the day that is five Domestic Business Days before the Non-Extension Notice Date from the Administrative Agent that the Required Banks have elected not to permit such extension or from the Administrative Agent or any Bank that one or more of the applicable conditions specified in ‎Section 3.03 is not then satisfied, and in each such case directing such Issuing Bank not to permit such extension.

 

(iv)  Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, such Issuing Bank will also deliver to the Borrower and the Administrative Agent a true and complete copy of such Letter of Credit or amendment thereof.

 

(b)  Drawings and Reimbursements; Funding of Participations.  (i) On the date of receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the Issuing Bank shall notify the Administrative Agent and the Borrower thereof (and simultaneously deliver a copy of the applicable site draft/drawing notice to the Borrower and the Administrative Agent thereof).  Not later than (A) the Domestic Business Day the Borrower receives notice from the Issuing Bank that payment under a Letter of Credit will be made on such date, if the Borrower shall have received such notice on or prior to 11:00 a.m. (New York City time) on such date, or (B) on the immediately following Domestic Business Day, if the Borrower shall have received such notice after 11:00 a.m. (New York City time) (either of such dates, as applicable, the “Honor Date”), the Borrower shall reimburse such Issuing Bank through the Administrative Agent whether with its own funds or with the proceeds of Loans in an amount equal to the amount of such drawing.  If the 

 

  

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Borrower fails to so reimburse such Issuing Bank by such time, the Administrative Agent shall promptly notify each Bank of the Honor Date, the amount of the unreimbursed drawing (the “Unreimbursed Amount”), and the amount of such Bank’s Pro Rata Share thereof.  In such an event, the Borrower shall be deemed to have requested a Borrowing of Base Rate Loans to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, and, so long as no Default has occurred and is continuing, such disbursement shall be deemed to occur automatically without further act and without regard to the minimum and multiples specified in Section 2.01 for the principal amount of Base Rate Loans (but subject to the other conditions set forth in Section 2.01) and without need to satisfy the conditions set forth in Section 3.03.  Any notice given by such Issuing Bank or the Administrative Agent pursuant to this Section 2.20(b) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

 

(ii)  Each Bank (including the Bank acting as Issuing Bank) shall upon any notice pursuant to Section 2.20(b)(i) make funds available to the Administrative Agent for the account of such Issuing Bank in an amount equal to its Pro Rata Share of the Unreimbursed Amount with respect to such Letter of Credit not later than 1:00 p.m. (New York City time) on the Domestic Business Day specified in such notice by the Administrative Agent, whereupon, subject to the provisions of Section 2.20(b)(iii), each Bank that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrower in such amount.  The Administrative Agent shall remit the funds so received to such Issuing Bank.

 

(iii)  With respect to any Unreimbursed Amount that is not fully refinanced by a Borrowing of Base Rate Loans because the conditions set forth in Section 2.20(b)(i) have not been satisfied or for any other reason, the Borrower shall be deemed to have incurred from the Issuing Bank an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at a rate equal to the sum of (A) the Base Rate in effect from time to time, plus (B) the Base Rate Margin in effect from time to time, plus (C) 2% per annum.  In such an event, each Bank’s payment to the Administrative Agent for the account of such Issuing Bank pursuant to Section 2.20(b)(ii) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Bank in satisfaction of its participation obligation under this Section 2.20.

 

(iv)  Until each Bank funds its Loan or L/C Advance pursuant to this Section 2.20(b) to reimburse such Issuing Bank for any Unreimbursed Amount in respect of such Letter of Credit, interest in 

 

  

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respect of such Bank’s Pro Rata Share of the related Unreimbursed Amount shall be solely for the account of such Issuing Bank.

 

(v)  Each Bank’s obligation to make Loans or L/C Advances to reimburse any Issuing Bank for Unreimbursed Amounts in respect of such Letter of Credit, as contemplated by this Section 2.20(b), shall be irrevocable, absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Bank may have against the Issuing Bank, the Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing.  No such making of an L/C Advance shall relieve or otherwise impair the obligation of the Borrower to reimburse any Issuing Bank for the amount of any payment made by the Issuing Bank under any Letter of Credit, together with interest as provided herein.

 

(vi)  If any Bank fails to make available to the Administrative Agent for the account of any Issuing Bank any amount required to be paid by such Bank pursuant to the foregoing provisions of this Section 2.20(b) by the time specified in Section 2.20(b)(ii), such Issuing Bank shall be entitled to recover from such Bank (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to such Issuing Bank at a rate per annum equal to the Federal Funds Rate from time to time in effect.  A certificate of such Issuing Bank submitted to any Bank (through the Administrative Agent) with respect to any amounts owing under this Section 2.20(b)(vi) shall be conclusive absent manifest error.

 

(c)  Repayment of Participations.  (i)  At any time after an Issuing Bank has made a payment under any Letter of Credit and has received from any Bank such Bank’s L/C Advance in respect of such payment in accordance with Section 2.20(b), if the Administrative Agent receives for the account of such Issuing Bank any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Borrower or otherwise, including the proceeds of Cash Collateral, if any, applied thereto by the Administrative Agent), the Administrative Agent will distribute to such Bank its Pro Rata Share thereof (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Bank’s L/C Advance was outstanding) in the same funds as those received by the Administrative Agent.

 

(ii)  If any payment received by the Administrative Agent for the account of an Issuing Bank pursuant to Section 2.20(b)(i) is required to be returned under any circumstances (including pursuant to any settlement entered into by such Issuing Bank in its discretion), each Bank shall pay to the Administrative Agent for the account of such Issuing Bank its Pro Rata 

 

  

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Share thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Bank, at a rate per annum equal to the Federal Funds Rate from time to time in effect.

 

(d)  Role of Issuing Bank.  Each Bank and the Borrower agree that, in paying any drawing under a Letter of Credit, each Issuing Bank shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by any Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document.  None of the Issuing Bank, the Administrative Agent nor any of the respective correspondents, participants or assignees of such Issuing Bank, nor any of their respective officers, directors, agents, employees, attorneys and advisors, shall be liable to any Bank for (i) any action taken or omitted in connection herewith at the request or with the approval of the Banks or the Required Banks, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Letter of Credit Application.

 

(e)  Cash Collateral. (i) Upon the occurrence and during the continuance of any Event of Default, at the request of the Administrative Agent or the Required Banks, if, as of the Letter of Credit Expiration Date (or, if the expiry date of such Letter of Credit is after the Letter of Credit Expiration Date (as may be agreed by the Banks in accordance with Section 2.01(c)(i)), as of such later expiry date), any Letter of Credit for any reason remains outstanding and partially or wholly undrawn, the Borrower shall immediately Cash Collateralize the then Outstanding Amount of all L/C Obligations (in an amount equal to such Outstanding Amount determined as of the date of such Letter of Credit Expiration Date (or such later date as may be agreed by the Banks in accordance with Section 2.01(c)(i)), as the case may be).

 

(ii)  The Borrower, and to the extent provided by any Bank, such Bank hereby grants to the Administrative Agent, for the benefit of each Issuing Bank and the Banks, a security interest in all such cash, deposit accounts, securities accounts and all balances held in the Cash Collateral Account and all proceeds of the foregoing. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account.  Upon the drawing of any Letter of Credit for which funds are on deposit as Cash Collateral, such funds shall be applied, to the extent permitted under Applicable Law, to reimburse each Issuing Bank and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the L/C Obligations at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of Banks with L/C Obligations representing at least 51% of the total L/C Obligations), be applied to satisfy other obligations of the Borrower under this Agreement.

 

  

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(iii)  The Administrative Agent shall invest for the account of the Borrower the funds from time to time held by it in the Cash Collateral Account in such overnight U.S. treasury or similar short-term instruments as are selected by the Borrower and approved by the Administrative Agent, and shall maintain records adequate to determine the interest from time to time earned on such funds.  The Administrative Agent shall have no responsibility for any loss on any investments made by it with respect to the funds in such Cash Collateral Account.

 

(f)  Applicability of ISP.  Unless otherwise expressly agreed by an Issuing Bank and the Borrower upon issuing an L/C Credit Extension, the rules of the ISP shall apply to each Letter of Credit.

 

(g)  Conflict with Issuer Documents.  In the event of any conflict between the terms hereof and the terms of any Issuer Document, the terms hereof shall control.

 

(h)  Letters of Credit Issued for Consolidated Entities, Members, members of Consolidated Entities or Beneficiaries of Letter of Credit Issued by the Borrower.  Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of, a Consolidated Entity, Member or member of a Consolidated Entity, the Borrower shall be obligated to reimburse the Issuing Bank hereunder for any and all drawings under such Letter of Credit.  The Borrower hereby acknowledges that the L/C Credit Extensions for the account of Consolidated Entities, Members or members of the Consolidated Entities inure to the benefit of the Borrower, and that the Borrower’s business derives substantial benefits from the businesses of such Consolidated Entities, Members and members of such Consolidated Entities.

 

(i)  Letter of Credit Reports.  Each Issuing Bank shall furnish (A) to the Administrative Agent (with a copy to the Borrower) on the first Domestic Business Day of each month a written report summarizing issuance and expiration dates of L/C Credit Extensions issued during the preceding month and drawings during such month under each Letter of Credit and (B) to the Administrative Agent and each Bank  (with a copy to the Borrower) on the first Domestic Business Day of each calendar quarter a written report setting forth the average daily aggregate L/C Obligations during the preceding calendar quarter of all Letters of Credit.

 

(j)  Obligations Absolute.  The obligation of the Borrower to reimburse each Issuing Bank for each drawing under each Letter of Credit and to repay each L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:

 

(i)  any lack of validity or enforceability of such Letter of Credit, this Agreement, the Notes, the Issuer Documents or any other instrument in connection herewith;

 

  

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(ii)  the existence of any claim, counterclaim, setoff, defense or other right that the Borrower or any Subsidiary may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), such Issuing Bank or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;

 

(iii)  any draft, demand, certificate or other document presented under such 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; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;

 

(iv)  any payment by such Issuing Bank under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit (so long as such draft or certificate substantially complies with such terms); or any payment made by such Issuing Bank under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit; or

 

(v)  any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower.

 

The Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it pursuant to Section 2.20(a)(iv) and, in the event of any claim of noncompliance with the Borrower’s instructions or other irregularity, the Borrower will notify the Issuing Bank promptly upon becoming aware thereof.  The Borrower shall be conclusively deemed to have waived any such claim against the Issuing Bank and its correspondents unless such notice is given as aforesaid.

 

(k)  Liability.  The Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to such Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Borrower from pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement.  Neither any Issuing Bank, any of its affiliates, nor any of its respective officers, directors, agents, employees, attorneys and advisors shall be liable or responsible for: (i) the use that may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (ii) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such 

 

  

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documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (iii) payment by such Issuing Bank against presentation of documents that do not comply with the terms of any Letter of Credit (so long as such draft or certificate substantially complies with such terms); or (iv) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except that, anything in such clauses (i) through (iv) to the contrary notwithstanding, the Borrower shall have a claim against such Issuing Bank, and such Issuing Bank shall be liable to the Borrower, to the extent of any direct (but not special, indirect, consequential or punitive) damages suffered by the Borrower that the Borrower proves were caused by (A) such Issuing Bank’s willful misconduct or gross negligence as determined in a final, non-appealable judgment by a court of competent jurisdiction in determining whether documents presented under any Letter of Credit comply with the terms thereof or (B) such Issuing Bank’s willful failure to make lawful payment under any Letter of Credit after the presentation to it by the beneficiary of a draft and certificate(s) strictly complying with the terms and conditions of any Letter of Credit.  In furtherance and not in limitation of the foregoing, such Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary.

 

(l)  Replacement or Addition of Issuing Bank.  An Issuing Bank may be replaced or added at any time by written agreement among the Borrower, the Administrative Agent (unless, in the case of the replacement of an Issuing Bank, the successor Issuing Bank is a Bank and, if applicable, such agreement not to be unreasonably withheld, conditioned or delayed) and the successor or additional Issuing Bank, as applicable.  The Administrative Agent shall notify the Banks of any such replacement or addition, as applicable, of an Issuing Bank.  Where an Issuing Bank is replaced, at the time such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for account of the replaced Issuing Bank.  Furthermore, from and after the effective date of such replacement, the successor Issuing Bank, shall have all the rights and obligations of the replaced Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter.  References herein to the term “Issuing Bank” shall be deemed to refer to any successor or additional Issuing Bank, as applicable, or to any previous Issuing Bank, or to any successor or additional Issuing Banks, as applicable, and all previous Issuing Banks, as the context shall require.  After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit.

 

 

ARTICLE 3

Conditions

 

Section 3.01 .  Effectiveness.  This Agreement shall become effective on the date (the “Effective Date”) on which the Administrative Agent shall have 

 

  

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received the following documents or other items, each dated the Effective Date unless otherwise indicated:

 

(a)  receipt by the Administrative Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Administrative Agent in form satisfactory to it of telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party);

 

(b)  receipt by the Administrative Agent for the account of each Bank that has requested a Note of a duly executed Note dated on or before the Effective Date complying with the provisions of Section 2.05;

 

(c)  receipt by the Administrative Agent of an opinion of the General Counsel of the Borrower, substantially in the form of Exhibit F hereto, provided that an enforceability opinion under New York law, that is reasonably acceptable to the Administrative Agent, shall be furnished by the Borrower’s New York counsel, Dewey & LeBoeuf LLP, subject to customary assumptions, qualifications and limitations;

 

(d)  receipt by the Administrative Agent of a certificate signed by any one of the Chief Financial Officer, the Chief Executive Officer, the Treasurer, an Assistant Secretary-Treasurer, the Controller or the Vice President, Capital Markets Funding of the Borrower to the effect that the conditions set forth in clauses (c) through (g), inclusive, of Section 3.03 have been satisfied as of the Effective Date and, in the case of clauses (c), (e) and (g), setting forth in reasonable detail the calculations required to establish such compliance;

 

(e)  receipt by the Administrative Agent, with a copy for each Bank, of a certificate of an officer of the Borrower acceptable to the Administrative Agent stating that all consents, authorizations, notices and filings required or advisable in connection with this Agreement are in full force and effect, and the Administrative Agent shall have received evidence thereof reasonably satisfactory to it;

 

(f)  evidence satisfactory to the Administrative Agent that arrangements have been made for payment in full of all amounts owed under the Prior 5-Year Credit Agreement;

 

(g)  receipt by the Administrative Agent and the Syndication Agent (or their respective assigns) and by each Bank Party of all fees required to be paid in the respective amounts heretofore mutually agreed, and all expenses for which invoices have been presented, on or before the Effective Date; and

 

(h)  receipt by the Administrative Agent of all documents the Required Banks may reasonably request relating to the existence of the Borrower, the corporate authority for and the validity of this Agreement and the Notes, and any 

 

  

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other matters relevant hereto, all in form and substance reasonably satisfactory to the Administrative Agent.

 

The Administrative Agent shall promptly notify the Borrower and the  Bank Parties of the Effective Date, and such notice shall be conclusive and binding on all parties hereto.

 

Section 3.02 .  Prior Credit Agreement.  (a) On the Effective Date, the “Commitments” as defined in the Prior 5-Year Credit Agreement shall terminate, without further action by any party thereto, except that Sections 2.14, 7.05, 7.06, 8.03 and 9.03 of the Prior 5-Year Credit Agreement (and Section 2.13 and Article 9 of the Prior 5-Year Credit Agreement insofar as they relate to such foregoing Sections) shall survive such termination and any related payment of amounts owed under the Prior 5-Year Credit Agreement.

 

(a)  The Banks which are parties to the Prior 5-Year Credit Agreement, comprising the “Required Banks” as defined therein, hereby waive any requirement of notice of termination of the “Commitments” (as defined in the Prior 5-Year Credit Agreement) pursuant to Section 2.10 thereof and of prepayment of loans thereunder to the extent necessary to give effect to Section 3.01(f) and Section 3.02(a) hereof; provided that any such prepayment of Loans shall be subject to Section 2.14 of the Prior 5-Year Credit Agreement.

 

Section 3.03 .  Borrowings and L/C Credit Extensions.  The obligation of any Bank to make a Loan on the occasion of any Borrowing and the obligation of the Issuing Bank to issue, amend or increase the principal amount thereof or extend any Letter of Credit (other than an extension pursuant to an Automatic Extension Letter of Credit in accordance with the original terms thereof) is subject to the satisfaction of the following conditions, in each case at the time of such Borrowing or L/C Credit Extensions and immediately thereafter:

 

(a)  the fact that the Effective Date shall have occurred on or prior to October 31, 2011;

 

(b)  receipt by the Administrative Agent of a Notice of Borrowing as required by Section 2.02 or 2.03, as the case may be;

 

(c)  the fact that the Borrower is in compliance with Section 7.11 of the 1994 Indenture, as such Indenture is in effect as of the date hereof;

 

(d)  the fact that the sum of (i) the aggregate outstanding principal amount of the Loans and (ii) the Outstanding Amount of L/C Obligations will not exceed the aggregate amount of the Commitments (as such Commitments may be increased pursuant to Section 2.17;

 

(e)  the fact that no Default shall have occurred and be continuing;

 

  

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(f)  the fact that the representations and warranties of the Borrower  (in the case of a Borrowing or L/C Credit Extension, other than the representations set forth in Section 4.02(c), Section 4.03 and Section 4.14) contained in this Agreement shall be true in all material respects (other than any such representations or warranties that, by their terms, refer to a specific date other than the date of Borrowing or L/C Credit Extension, in which case such representations and warranties shall be true in all material respects as of such specific date); provided that, in the case of the representation set forth in Section 4.06 being made after the Effective Date, such representation shall be true except to the extent not reasonably expected to have a material adverse effect on the business, financial position or results of operations of the Borrower; and

 

(g)  the fact that (i) there shall be no collateral securing Bonds issued pursuant to any Indenture of a type other than the types of collateral permitted to secure Bonds issued pursuant to such Indenture as of the date hereof, (ii) the allowable amount of eligible collateral then pledged under any Indenture shall not exceed 150% of the aggregate principal amount of Bonds then outstanding under such Indenture and (iii) no collateral shall secure Bonds other than (A) eligible collateral under such Indenture, the allowable amount of which is included within the computation under subsection (ii) above or (B) collateral previously so pledged which ceases to be such eligible collateral not as a result of any acts or omissions to act of the Borrower (other than the declaration of an “event of default” as defined in a mortgage which results in the exercise of any right or remedy described in such mortgage).

 

Each Borrowing or L/C Credit Extension hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing or L/C Credit Extension as to the facts specified in clauses (c), (d), (e), (f) and (g) of this Section 3.03.

 

 

ARTICLE 4

Representations and Warranties

 

The Borrower makes the following representations, warranties and agreements, which shall survive the execution and delivery of this Agreement and the Notes and the making of the Loans or L/C Credit Extensions:

 

Section 4.01 . Corporate Existence, Power and Authority.  The Borrower is a cooperative association duly incorporated, validly existing and in good standing under the laws of the District of Columbia and has the corporate power and authority and all material governmental licenses, authorizations, consents and approvals required to own its property and assets and to transact the business in which it is engaged.  The Borrower is duly qualified or licensed as a foreign corporation in good standing in every jurisdiction in which the nature of the business in which it is engaged makes such qualification or licensing necessary, except in those jurisdictions in which the failure to be so qualified or licensed 

 

  

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would not (after qualification, assuming that the Borrower could so qualify without the payment of any fee or penalty and retain the rights as they existed prior to such qualification all to an extent so that any fees or penalties required to be so paid or any rights not so retained would not, individually or in the aggregate, have a material adverse effect on the business or financial position of the Borrower), individually or in the aggregate, have a material adverse effect upon the business or financial position of the Borrower.  The Borrower has the corporate power and authority to execute, deliver and carry out the terms and provisions of this Agreement and the Notes.  This Agreement has been, and the Notes when executed and delivered will have been, duly and validly authorized, executed and delivered by the Borrower, and this Agreement constitutes a legal, valid and binding agreement of the Borrower, and the Notes, when executed and delivered by the Borrower in accordance with this Agreement, will constitute legal, valid and binding obligations of the Borrower, in each case enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or law).

 

Section 4.02 .  Financial Statements.  (a) The consolidated balance sheets of the Borrower and its Consolidated Entities as at May 31, 2011 and the related consolidated statements of operations, changes in equity and cash flows for the fiscal year ended May 31, 2011, including the related notes, accompanied by the opinion and report thereon of Deloitte & Touche LLP, independent public accountants, heretofore delivered to the Banks, present fairly in all material respects in accordance with generally accepted accounting principles (i) the consolidated financial position of the Borrower and its Consolidated Entities as at the date of said balance sheets and (ii) the consolidated results of the operations of the Borrower and its Consolidated Entities for said fiscal year.  The Borrower has no material liabilities (contingent or otherwise) of the type required to be disclosed in financial statements or footnotes which are not disclosed by or reserved against in the most recent audited financial statements or in the notes thereto other than (i) Indebtedness incurred and (ii) loan and guarantee commitments issued in each case by the Borrower in the ordinary course of business since the date of such financial statements.  All such financial statements have been prepared in accordance with generally accepted accounting principles applied on a basis consistent with prior periods, except as disclosed therein.  The same representations as are set forth in this Section 4.02 shall be deemed to have been made by the Borrower in respect of the most recent annual and quarterly financial statements of the Borrower and its Consolidated Entities (except that the annual opinion and report of Deloitte & Touche LLP may be replaced by an opinion and report of another nationally recognized firm of independent public accountants) furnished or required to be furnished to the Banks prior to or at the time of the making of each Loan hereunder, at the time the same are furnished or required to be furnished.

 

  

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(b)  The unaudited consolidated balance sheets of the Borrower and its Consolidated Entities as of August 31, 2011 and the related unaudited consolidated statements of operations, changes in equity and cash flows for the three months then ended, heretofore delivered to the Banks, present fairly in conformity with generally accepted accounting principles applied on a basis consistent with the financial statements referred to in subsection (a) of this Section 4.02, the consolidated financial position of the Borrower and its Consolidated Entities as of such date and their consolidated results of operations and changes in financial position for such three-month period (subject to normal year-end adjustments).  The Borrower and its Consolidated Entities have no material liabilities (contingent or otherwise) of the type required to be disclosed in financial statements or footnotes which are not disclosed by or reserved against in such financial statements for such three-month period other than (i) Indebtedness incurred and (ii) loan and guarantee commitments issued in each case by the Borrower or its Consolidated Entities in the ordinary course of business since the date of such financial statements.

 

(c)  Since August 31, 2011 and except as disclosed in the Borrower’s public filings two Domestic Business Days prior to the date hereof, there has been no material adverse change in the business, financial position or results of operations of the Borrower and its Consolidated Entities, considered as a whole.

 

Section 4.03 .  Litigation.  There are no actions, suits, proceedings or investigations pending or, to the Borrower’s knowledge, threatened by or before any court or any Governmental Authority, body or agency or any arbitration board which are reasonably likely to materially adversely affect the business, financial position or results of operations of the Borrower or the authority or ability of the Borrower to perform its obligations under this Agreement or the Notes.

 

Section 4.04 .  Governmental Authorizations.  No material authorization, consent, approval or license of, or declaration, filing or registration with or exemption by, any Governmental Authority, body or agency is required in connection with the execution, delivery or performance by the Borrower of this Agreement or the Notes.  The Banks acknowledge that the Borrower may file this Agreement with the Securities and Exchange Commission after the Effective Date.

 

Section 4.05 .  Members’ Subordinated Certificates.  The holders of the Borrower’s Members’ Subordinated Certificates are not and will not be entitled to receive any payments with respect to the principal thereof or interest thereon solely because of withdrawing or being expelled from membership in the Borrower.

 

Section 4.06 .  No Violation of Agreements.  Neither the Borrower nor any Subsidiary is in default in any material respect under any material agreement or other material instrument to which it is a party or by which it is bound or its property or assets may be affected.  No event or condition exists which

 

 

  

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 constitutes, or with the giving of notice or lapse of time or both would constitute, such a default under any such material agreement or other instrument.  Neither the execution and delivery of this Agreement or the Notes, nor the consummation of any of the transactions herein or therein contemplated, nor compliance with the terms and provisions hereof or thereof, will contravene any material provision of law, statute, rule or regulation to which the Borrower is subject or any material judgment, decree, award, franchise, order or permit applicable to the Borrower, or will conflict or be inconsistent with, or will result in any breach of, any of the material terms, covenants, conditions or provisions of, or constitute (or with the giving of notice or lapse of time, or both, would constitute) a material default under (or condition or event entitling any Person to require, whether by purchase, redemption, acceleration or otherwise, the Borrower to perform any obligations prior to the scheduled maturity thereof), or result in the creation or imposition of any Lien upon any of the property or assets of the Borrower pursuant to the terms of, any material indenture, mortgage, deed of trust, agreement or other instrument to which it may be subject, or violate any provision of the certificate of incorporation or by-laws of the Borrower.  Without limiting the generality of the foregoing, the Borrower is not a party to, or otherwise subject to any provision contained in, any instrument evidencing Indebtedness of the Borrower, any agreement or indenture relating thereto or any other material contract or agreement (including its certificate of incorporation and by-laws), which would be violated by the incurring of the Indebtedness to be evidenced by the Notes.

 

Section 4.07 .  No Event of Default under the Indentures.  The Borrower has complied fully with all of the material provisions of each Indenture.  No Event of Default (within the meaning of such term as defined in each Indenture) and no event, act or condition (except for possible non-compliance by the Borrower with any immaterial provision of such Indenture which in itself is not such an Event of Default under such Indenture) which with notice or lapse of time, or both, would constitute such an Event of Default has occurred and is continuing under such Indenture.  The Borrowings by the Borrower contemplated by this Agreement will not cause such an Event of Default under, or the violation of any covenant contained in, any Indenture.

 

Section 4.08 .  Compliance with ERISA.  The Plans (other than Plans consisting of multiemployer plans (as defined in Section 4001 of ERISA)) are in substantial compliance with ERISA other than any failure to comply that is not reasonably likely to have a material adverse effect on the business, results of operations or financial position of the Borrower, no such Plan is insolvent or in reorganization other than an insolvency or reorganization that is not reasonably likely to have a material adverse effect on the business, results of operations or financial position of the Borrower, and no such Plan has an accumulated or waived funding deficiency within the meaning of Section 412 of the Internal Revenue Code other than any accumulated or waived funding deficiency that is not reasonably likely to have a material adverse effect on the business, results of operations or financial position of the Borrower.  No Plan consisting of a multiemployer plan (as defined in Section 4001 of ERISA) is in reorganization.  

 

  

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Neither the Borrower nor a Subsidiary of the Borrower nor any member of the ERISA Group has incurred any material liability (including any material contingent liability) to or on account of a Plan pursuant to Section 4062, 4063, 4064, 4201 or 4204 of ERISA, no proceedings have been instituted to terminate any Plan, and no condition exists which presents a material risk to the Borrower of incurring a material liability to or on account of a Plan pursuant to any of the foregoing Sections of ERISA.

 

Section 4.09 .  Compliance with Other Laws.  The Borrower and each Subsidiary is in compliance with all applicable requirements of law and all applicable rules and regulations of each Federal, State, municipal or other governmental department, agency or authority, domestic or foreign, except to the extent that the failure to comply would not reasonably be expected to have a material adverse effect on the business, financial position or results of operations of the Borrower.

 

Section 4.10 .  Tax Status.  The Borrower is exempt from payment of Federal income tax under Section 501(c)(4) of the Internal Revenue Code.

 

Section 4.11 .  Investment Company Act.  The Borrower is not an “investment company” or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended.

 

Section 4.12 .  Disclosure.  Neither this Agreement nor any document, certificate or financial statement furnished to any Bank by or on behalf of the Borrower in connection herewith (all such documents, certificates and financial statements, taken as a whole) contains, as of the date of delivery thereof and taken as a whole, any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements contained herein and therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.

 

Section 4.13 .  Subsidiaries.  Each of the Borrower’s corporate Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted.

 

Section 4.14 .  Environmental Matters.  In the ordinary course of its business, the Borrower conducts reviews, to the extent appropriate given the nature of its business operations, of the effect of Environmental Laws on the business, operations and properties of the Borrower and its Subsidiaries, in the course of which it identifies and evaluates associated liabilities and costs (including, without limitation, any capital or operating expenditures required for clean-up or closure of properties presently or previously owned, any capital or operating expenditures required to achieve or maintain compliance with 

 

  

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environmental protection standards imposed by law or as a condition of any license, permit or contract, any related constraints on operating activities, including any periodic or permanent shutdown of any facility or reduction in the level of or change in the nature of operations conducted thereat, any costs or liabilities in connection with off-site disposal of wastes or Hazardous Substances, and any actual or potential liabilities to third parties, including employees, and any related costs and expenses).  On the basis of this review, the Borrower has reasonably concluded that such associated liabilities and costs, including the cost of compliance with Environmental Laws, are unlikely to have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Entities, considered as a whole.

 

 

ARTICLE 5

Covenants

 

The Borrower agrees that, so long as any Bank Party has any Commitment hereunder or any amount payable under any Note or any fee payable pursuant to Section 2.09 or any other amount then due and payable hereunder remains unpaid or any Letter of Credit remains outstanding:

 

Section 5.01 .  Corporate Existence.  Except as otherwise permitted by Section 5.02 hereof, the Borrower, at its own cost and expense, will, and will cause each Subsidiary to, do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, material rights and franchises; provided, however, that neither the Borrower nor any Subsidiary shall be required to preserve any right or franchise or, in the case of a Subsidiary, its corporate existence, if its Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Borrower or such Subsidiary (provided that the termination of the corporate existence of a Subsidiary shall be permitted if the Board of Directors of the Borrower shall determine that its existence is not desirable in the conduct of the business of the Borrower) and that the loss thereof is not disadvantageous in any material respect to the Banks.

 

Section 5.02 .  Disposition of Assets, Merger, Character of Business, etc.  The Borrower will not wind up or liquidate its business or sell, lease, transfer or otherwise dispose of all or substantially all of its assets as an entirety or in a series of related transactions and will not consolidate with or merge with or into any other Person other than a merger with a Subsidiary in which the Borrower is the surviving Person.  The Borrower will not engage in any business other than the business contemplated by its certificate of incorporation and by-laws, each as in effect on the Effective Date.

 

Section 5.03 .  Financial Information.  (a) The Borrower will, and will cause each Subsidiary other than the Subsidiaries listed on Schedule 5.03(a) to,

 

  

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 keep its books of account in accordance with generally accepted accounting principles.

 

(b)  The Borrower will (subject to the last paragraph of this Section 5.03) furnish to the Administrative Agent for distribution to the Banks:

 

(i)  as soon as available and in any event within 60 days after the close of each of the first three quarters of each fiscal year of the Borrower, as at the end of, and for the period commencing at the end of the previous fiscal year and ending with, such quarter, unaudited consolidated balance sheets of the Borrower and its Consolidated Entities and the related unaudited consolidated statements of operations, changes in equity and cash flow of the Borrower and its Consolidated Entities for such quarter and for the portion of the Borrower’s fiscal year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of the Borrower’s previous fiscal year, all in reasonable detail and certified (subject to normal year-end adjustments) as to fairness of presentation in accordance with generally accepted accounting principles in all material respects and consistency (except for changes concurred in by the Borrower’s independent public accountants) by the Chief Executive Officer, the Chief Financial Officer, the Treasurer, an Assistant Secretary-Treasurer or the Controller of the Borrower;

 

(ii)  as soon as practicable and in any event within the earlier of (i) two Domestic Business Days after filing with the Securities and Exchange Commission and (ii) 120 days after the close of each fiscal year of the Borrower, as at the end of and for the fiscal year just closed, consolidated balance sheets of the Borrower and its Consolidated Entities and the related consolidated statements of operations, changes in equity and cash flow for such fiscal year for the Borrower and its Consolidated Entities, all in reasonable detail and certified (without any qualification as to the scope of the audit) by Deloitte & Touche LLP or other independent public accountants of nationally recognized standing selected by the Borrower, who shall have audited the books and accounts of the Borrower for such fiscal year;

 

(iii)  with reasonable promptness, copies of all regular and periodical reports (including Current Reports on Form 8-K) filed with, or furnished to, the Securities and Exchange Commission;

 

(iv)  promptly after the public announcement of, or promptly after receiving a written notice of, a change (whether an increase or decrease) in any rating issued by either S&P or Moody’s, solely to the extent that the Borrower is then under an existing contract with such agency for the provision of ratings information pertaining to any securities of, or guaranteed by, the Borrower or any of its Subsidiaries or affiliates, a notice setting forth such change; and

 

  

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(v)  with reasonable promptness, such other information respecting the business, operations and financial condition of the Borrower or any of its Subsidiaries or any Joint Venture as any Bank may, from time to time, reasonably request, including, without limitation, with respect to the performance and observance by the Borrower of the covenants and conditions contained in this Agreement.

 

Reports or financial information required to be delivered pursuant to clauses (b)(i), (b)(ii) and (b)(iii) of this Section 5.03 shall be deemed to have been delivered on the date on which the Borrower posts such reports or financial information on the Borrower’s website (www.nrucfc.org) or at such other website as may be notified to the Administrative Agent and the Banks or when such reports or financial information are posted on the SEC’s website at www.sec.gov; provided, that the Borrower shall notify the Administrative Agent of any such posting; and provided further that the Borrower shall deliver paper copies of the reports or financial information required to be delivered pursuant to clauses (b)(i), (b)(ii) and (b)(iii) of this Section 5.03 to the Administrative Agent, if so requested by any Bank to the Administrative Agent, until written notice to cease delivering such paper copies is given by such Bank to the Administrative Agent.

 

Section 5.04 .  Default Certificates.  Concurrently with each financial statement delivered to the Administrative Agent pursuant to clauses (i) and (ii) of Section 5.03(b), the Borrower will furnish to the Administrative Agent a certificate signed by the Chief Executive Officer, the Chief Financial Officer, the Treasurer, an Assistant Secretary-Treasurer or the Controller of the Borrower to the effect that the review of the activities of the Borrower during such year or the portion thereof covered by such financial statement and of the performance of the Borrower under this Agreement has been made under his supervision and that to the best of his knowledge, based on such review, there exists no event which constitutes a Default or an Event of Default under this Agreement or, if any such event exists, specifying the nature thereof, the period of its existence and what action the Borrower has taken and proposes to take with respect thereto, which certificate shall set forth the calculations or other data required to establish compliance with the provisions of Section 5.09 and Sections 5.12 through 5.14, inclusive, at the end of such fiscal quarter or fiscal year, as the case may be.  The Borrower further covenants that upon any such officer of the Borrower obtaining knowledge of any Default or Event of Default under this Agreement, it will forthwith, and in no event later than the close of business on the fourth (4th) Domestic Business Day immediately after the day such knowledge is obtained, deliver to the Administrative Agent a statement of any officer referred to above specifying the nature and the period of existence thereof and what action the Borrower has taken and proposes to take with respect thereto.

 

Section 5.05 .  Notice of Litigation and Defaults.  The Borrower will promptly give written notice to the Administrative Agent of (i) any action, proceeding or claim of which the Borrower may have notice, which may be commenced against the Borrower or any Subsidiary in which the amount involved

 

  

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 is $50,000,000 or more and is not covered in full by insurance or as to which any insurer has disclaimed liability; and (ii) any default by the Borrower or any Subsidiary or event or condition known to the Borrower which with the giving of notice or lapse of time, or both, would constitute a default, with respect to any payment or payments in respect of Indebtedness of the Borrower or such Subsidiary aggregating in excess of $50,000,000 (whether in payment of principal thereof or interest thereon or with respect to any material covenant or agreement contained in any instrument, mortgage, deed of trust or agreement evidencing or relating to such Indebtedness or otherwise), provided that if any matter described in clauses (i) or (ii) of this Section has previously been disclosed by the Borrower in its regular or periodical reports filed with, or furnished to, the Securities and Exchange Commission, then no additional written notice shall be required under this Section.

 

Section 5.06 .  ERISA.  As soon as possible and, in any event, within 10 days after the Borrower or a Subsidiary of the Borrower knows or has reason to know that a Reportable Event has occurred, that an accumulated funding deficiency has been incurred or an application may be or has been made to the Secretary of the Treasury for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code with respect to a Plan, that a Plan has been or may be terminated, that proceedings may be or have been instituted to terminate a Plan, or that the Borrower, a Subsidiary of the Borrower or any member of the ERISA Group will or may incur any liability in excess of $5,000,000 to or on account of a Plan under Section 4062, 4063, 4064, 4201 or 4204 of ERISA, the Borrower will deliver to the Administrative Agent a certificate of the Chief Financial Officer of the Borrower setting forth details as to such occurrence and action, if any, which the Borrower or such Subsidiary is required or proposes to take, together with any notices required to be filed by the Borrower, such Subsidiary, such member of the ERISA Group or the plan administrator with the PBGC with respect thereto.

 

Section 5.07 .  Payment of Charges.  The Borrower will, and will cause each Subsidiary to, duly pay and discharge (i) all taxes, assessments and governmental charges or levies imposed upon or against it or its property or assets, prior to the date on which material penalties attach thereto, unless and to the extent only that such taxes, assessments and governmental charges or levies are being contested in good faith by appropriate proceedings or unless the failure to do so will not have a material adverse effect on the business, financial position or results of operations of the Borrower; and (ii) all lawful claims, including, without limitation, claims for labor, materials, supplies or services, which might or could, if unpaid, become a Lien upon such property or assets, unless and to the extent only that the validity or the amount thereof is being contested in good faith by appropriate proceedings or unless the failure to do so will not have a material adverse effect on the business, financial position or results of operations of the Borrower.

 

  

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Section 5.08 .  Inspection of Books and Assets.  The Borrower will, and will cause each Subsidiary to, permit any representative of any Bank Party (or any agent or nominee of such Bank) to visit and inspect any of the property of the Borrower or such Subsidiary, to examine the books of record and account of the Borrower or such Subsidiary and to discuss the affairs, finances and accounts of the Borrower or such Subsidiary with the officers and independent public accountants of the Borrower or such Subsidiary, all at such reasonable times and as often as such Bank may reasonably request.

 

Section 5.09 .  Indebtedness.  (a) The Borrower will not, and will not permit any of its Consolidated Entities (other than Rural Telephone Finance Cooperative and National Cooperative Services Corporation) to, incur, assume or Guarantee any Superior Indebtedness, or make any optional prepayment on any Members’ Subordinated Certificate; provided that (i) subject to the provisions of Section 5.12, any such Subsidiary may incur Superior Indebtedness owing to the Borrower or assume or Guarantee Indebtedness of any Person (other than the Borrower or any of its Subsidiaries) owing to the Borrower and (ii) the Borrower may incur, assume or Guarantee Superior Indebtedness or make optional prepayments on Members’ Subordinated Certificates if, after giving effect to any such action specified above in this clause (ii), on the date of such incurrence, assumption or Guarantee or making of such optional prepayment (the “Determination Date”) the aggregate principal amount of Superior Indebtedness then outstanding would not exceed ten times the sum of (a) the aggregate principal amount of Members’ Subordinated Certificates outstanding on the Determination Date, (b) the aggregate amount of the line item “total equity” shown on the consolidated balance sheet of the Borrower and its Consolidated Entities on the Determination Date, and (c) the aggregate principal amount of Qualified Subordinated Indebtedness outstanding on the Determination Date; provided that the non-cash adjustments (whether positive or negative) required to be made pursuant to ASC 815 and ASC 830 shall be excluded from calculations under clause (ii) above to the extent otherwise included therein.  The respective principal amounts of Superior Indebtedness, Members’ Subordinated Certificates and Qualified Subordinated Indebtedness to be outstanding on such given future date shall be determined after giving effect to mandatory sinking fund payments, other mandatory prepayments and serial and other maturity payments required to be made on or prior to said given future date by the terms of such Superior Indebtedness, Members’ Subordinated Certificates, Qualified Subordinated Indebtedness or any indenture or other instrument pursuant to which they are respectively issued.

 

(b)  If any Loan or L/C Obligation is outstanding hereunder, the Borrower will not take any action which would prevent it from then complying, or fail to take any action which would enable it then to comply, with the provisions of Section 3.03(g), assuming for this purpose only that the Borrower then intended to borrow from one or more of the Bank Parties hereunder.

 

  

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Section 5.10 .  Liens.  The Borrower will not create or permit to exist any Lien on or with respect to any Indebtedness of any Member which is an asset of the Borrower, now existing or hereafter created, or on any notes, mortgages or other documents or instruments evidencing any such Indebtedness, and the Borrower will not permit any Consolidated Entity to create or permit to exist any Lien on or with respect to any of such Subsidiary’s assets, except Liens (i) granted by the Borrower to the trustee pursuant to any Indenture, (ii) on any such Indebtedness granted by the Borrower or its Consolidated Entity to secure any borrowing for the purpose of making loans to Member power supply systems or loans to Members for bulk power supply projects or loans to Members for the purpose of providing financing to telephone and related systems eligible to borrow from the RUS or loans to borrowers borrowing from National Cooperative Services Corporation or Rural Telephone Finance Cooperative, which borrowing or borrowings are on terms (except as to terms of interest, premium, if any, and amortization) not materially more disadvantageous to the Borrower’s unsecured creditors than the borrowings under any Indenture (it being understood that the Borrower can not pledge such assets to an extent greater than 150% of the aggregate principal amount of such Indebtedness), (iii) of current taxes not delinquent or a security for taxes being contested in good faith, (iv) other than in favor of the PBGC, created by or resulting from any legal proceedings (including legal proceedings instituted by the Borrower or any Subsidiary) which are being contested in good faith by appropriate proceedings, including appeals of judgments as to which a stay of execution shall have been issued, and adequate reserves shall have been established, (v) created by the Borrower to secure Guarantees by the Borrower of Indebtedness, the interest on which is excludable from the gross income of the recipient thereof for Federal income tax purposes as provided in Section 103(a) of the Internal Revenue Code or Section 103(a) of the Internal Revenue Code of 1954, as amended, (x) of a Member which is a state or political subdivision thereof or (y) of a state or political subdivision thereof incurred to benefit a Member for one of the purposes provided in Section 142(a)(2), (4), (5), (6), (8), (9), (10) or (12) of the Internal Revenue Code or Section 103(b)(4)(D), (E), (F), (G), (H) or (J) of the Internal Revenue Code of 1954, as amended, (vi) granted by any Subsidiary to the Borrower, (vii) REDLG Program Liens securing REDLG Obligations with respect to government Guarantees of Indebtedness of the Borrower and (viii) on any such Indebtedness granted by the Borrower to secure any borrowings, which borrowings are on terms (except as to terms of interest, premium, if any, and amortization) not materially more disadvantageous to the Borrower’s unsecured creditors than the borrowings under any Indenture (it being understood that the Borrower can not pledge such assets to an extent greater than 150% of the aggregate principal amount of such Indebtedness); provided that Liens incurred in reliance on clauses (ii), (vii) and (viii) of this Section 5.10 shall not secure amounts exceeding $7,500,000,000 in the aggregate at any one time outstanding.

 

Section 5.11 .  Maintenance of Insurance.  The Borrower will maintain, and will cause each Subsidiary to maintain, insurance in such amounts, on such forms and with such companies as is necessary or appropriate for its business.

 

  

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Section 5.12 .  Subsidiaries and Joint Ventures.  The Borrower will not permit (a) the sum of (i) the amount of Indebtedness owing to the Borrower by all of its Subsidiaries and Joint Ventures plus (ii) the amount paid by the Borrower in respect of the stock, obligations or securities of or any other interest in such Subsidiaries and Joint Ventures plus (iii) any capital contributions by the Borrower to such Subsidiaries and Joint Ventures (the amounts referred to in paragraphs (i) through (iii), the “Investments”) plus (iv) the amount of assets (excluding Foreclosed Assets) otherwise sold or transferred by the Borrower to such Subsidiaries and Joint Ventures (other than sales at fair market value) minus (v) any Start-up Investments minus (vi) any Investment made in cash by the Borrower in any Special Purpose Subsidiary (up to a maximum amount not to exceed the lesser of (x) the amount necessary to provide such Special Purpose Subsidiary with sufficient working capital to conduct its business as contemplated hereby and (y) $150,000,000) to exceed at any time (b) 10% of the sum of (i) all accounts which, in accordance with generally accepted accounting principles, constitute equity in the Borrower and its Consolidated Entities at such time plus (ii) all Indebtedness of the Borrower shown on its balance sheet dated as of May 31, 2011 as Members’ Subordinated Certificates as such Indebtedness shall be reduced from time to time and any other Indebtedness of the Borrower incurred after May 31, 2011 having substantially similar provisions as to subordination as those contained in said outstanding certificates as such other Indebtedness shall be reduced from time to time, in each case at such time plus (iii) all Qualified Subordinated Indebtedness outstanding at such time; provided that non-cash adjustments (whether positive or negative) required to be made pursuant to ASC 815 and ASC 830 shall be excluded from the calculation of the amounts specified in clauses (b)(i), (b)(ii), and (b)(iii) of this Section 5.12 to the extent otherwise included therein; provided, further, that, in addition to the foregoing, the Borrower may transfer assets with an aggregate fair market value of not more than $150,000,000 to a bankruptcy remote trust required to be established to support REDLG Obligations of the Borrower, and any such transfer shall be excluded from any calculation under clauses (a) and (b) above to the extent otherwise included therein.  For the purpose of this Section 5.12, “Foreclosed Asset” means (x) any property distributed to the Borrower with the authority of any Bankruptcy Court in connection with the bankruptcy of any of the Borrower’s debtors and (y) property received by the Borrower upon enforcement by the Borrower of its security interest (if any) in such property or in settlement of delinquent accounts or other overdue amounts owed to it by any of the Borrower’s debtors; “Special Purpose Subsidiary” means any domestic Subsidiary (which shall include any Subsidiary organized under the laws of the United States Virgin Islands) and any Subsidiary organized under the laws of the Netherlands Antilles or the British Virgin Islands all of the shares of capital stock or other ownership interest of which are directly or indirectly owned by the Borrower, which Subsidiary is established for the sole purpose of, and whose sole business shall at all times be, holding Foreclosed Assets; and “Start-up Investments” means Investments made in a Special Purpose Subsidiary solely to finance such Special Purpose Subsidiary’s initial acquisition of Foreclosed Assets.

 

  

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Section 5.13 .  Minimum TIER.  The Borrower shall not permit, as of the last day of each fiscal quarter, the average of the TIERs for the six (6) immediately preceding fiscal quarters (including the fiscal quarter ending on such date) of the Borrower to be less than 1.025:1.00.

 

Section 5.14 .  Retirement of Patronage Capital.  The Borrower shall not make, or permit any Subsidiaries of the Borrower to make, any payments to Members in respect of Patronage Capital Certificates unless (i) the TIER for the immediately preceding fiscal year for which financial statements have been delivered to the Administrative Agent pursuant to Section 5.03(b) equals or exceeds 1.05:1.00 and (ii) there exists (and would exist after giving effect to any such payment) no Default or Event of Default under this Agreement.

 

Section 5.15 .  Use of Proceeds.  The proceeds of the Loans or L/C Credit Extensions made hereunder may be used by the Borrower for general corporate purposes.  None of such proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying any “margin stock”, within the meaning of Regulation U.  Neither the Borrower nor any of its Subsidiaries has taken or will take any action which might cause this Agreement or the Notes to violate Regulation U or Regulation X.

 

 

ARTICLE 6

Defaults

 

Section 6.01 .  Events of Default.  If one or more of the following events (“Events of Default”) shall have occurred and be continuing:

 

(a)  Principal and Interest.  The Borrower shall (i) fail to pay when due (whether upon stated maturity, by acceleration or otherwise) any principal of any Loan or any L/C Obligation or (ii) fail, and such failure shall continue uncured for five or more Domestic Business Days, to pay when due (whether upon stated maturity, by acceleration or otherwise) any interest on any Loan or any L/C Obligation;

 

(b)  Other Amounts.  The  Borrower shall fail to pay when due any fee or other amount payable under this Agreement (including pursuant to Section 2.09(b)) and such failure remains uncured for ten (10) or more Domestic Business Days after the due date thereof;

 

(c)  Covenants Without Notice.  The Borrower shall fail to observe or perform any covenant or agreement on its part to be observed or performed which is set forth in Section 5.01 (only with respect to the Borrower’s corporate existence), 5.02, 5.09, 5.10, 5.12, 5.13, 5.14 or 5.15;

 

(d)  Covenants With 10 Days Grace.  The Borrower shall fail to observe or perform any covenant or agreement on its part to be observed or performed, which is set forth in the last sentence of Section 5.04, or in Section 5.05(ii) and

 

  

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 such non-observance or non-performance shall continue unremedied for a period of more than 10 days;

 

(e)  Other Covenants.  The Borrower shall fail to observe or perform any covenant, condition or agreement on its part to be observed or performed, other than as referred to in subsections (a), (b), (c), and (d) above, for a period of 30 days after written notice specifying such failure and requesting that it be remedied is given by any Bank Party to the Borrower and the other Bank Parties; provided that, if the failure be such that it cannot be corrected within the applicable period, but can be corrected within a reasonable period of time thereafter, it shall not constitute a Default if corrective action is instituted by the Borrower within the applicable period and diligently pursued until the failure is corrected, but any such failure that is not so corrected within 60 days after such applicable period shall constitute a Default;

 

(f)  Representations.  Any representation, warranty, certification or statement made or deemed to be made by the Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made or deemed to be made;

 

(g)  Non-Payments of Indebtedness and/or Derivatives Obligations.  The Borrower or any Subsidiary of the Borrower shall fail to make any payment or payments aggregating for the Borrower and its Subsidiaries in excess of $50,000,000 in respect of Indebtedness and/or Derivatives Obligations of the Borrower or any Subsidiary (other than the Loans or any Indebtedness under this Agreement) when due (whether upon stated maturity, by acceleration or otherwise) or within any applicable grace period;

 

(h)  Defaults Under Other Agreements.  The Borrower or any Subsidiary shall fail to observe or perform within any applicable grace period any covenant or agreement contained in any agreement or instrument relating to any Indebtedness of the Borrower or any Subsidiary, aggregating for the Borrower and its Subsidiaries in excess of $50,000,000 if the effect of such failure is to accelerate, or to permit the holder of such Indebtedness or any other Person to accelerate, the maturity of such Indebtedness;

 

(i)  Bankruptcy.  Any proceeding shall be instituted by or against the Borrower or any Subsidiary seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, conservation or proceeding in the nature thereof, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief or protection of debtors, or seeking the entry of an order for relief or the appointment of a receiver (including state regulatory authorities acting in a similar capacity), trustee, custodian or other similar official for it or for any substantial part of its property, and, in the case of any such proceeding instituted against it (but not instituted by it) shall remain undismissed or unstayed

 

  

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 for a period of 60 days; or the Borrower or any Subsidiary shall take any action to authorize any of the actions set forth above in this subsection (i);

 

(j)  ERISA.  A Plan shall fail to maintain the minimum funding standard required by Section 412 of the Internal Revenue Code for any plan year or a waiver of such standard is sought or granted under Section 412(d), or a Plan is, shall have been or is likely to be terminated or the subject of termination proceedings under Section 4042 of ERISA, or the Borrower or a Subsidiary of the Borrower or any member of the ERISA Group has incurred or is likely to incur a liability to or on account of a Plan under Section 4062, 4063, 4064, 4201 or 4204 of ERISA, and there shall result from any such event or events either a liability or a material risk of incurring a liability to the PBGC or a Plan, which in the opinion of the Required Banks, will have a material adverse effect upon the business, results of operations or financial position of the Borrower; or

 

(k)  Money Judgment.  A final judgment or order for the payment of money in excess of $50,000,000 shall be rendered against the Borrower or any Subsidiary and such judgment or order shall continue unsatisfied and in effect for a period of 45 days during which execution shall not be effectively stayed or deferred (whether by action of a court, by agreement or otherwise); provided, however, that any such judgment or order shall not give rise to an Event of Default under this paragraph (k) if and for so long as (i) the amount of such judgment or order is covered by a valid and binding policy of insurance and (ii) within 90 days of the rendering of such judgment or order the insurer thereunder has affirmed liability;

 

(l)  Insolvency.  The Borrower or any Subsidiary shall generally not pay its debts as they become due, or shall admit in writing its inability to pay its debts generally or shall make a general assignment for the benefit of creditors;

 

then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, the Administrative Agent, upon the request of the Required Banks, shall by notice to the Borrower, take any or all of the following actions, without prejudice to the rights of the Administrative Agent, any Bank or the holder of any Note to enforce its claims against the Borrower:  (a) declare the Commitments terminated, whereupon the Commitment of each Bank shall forthwith terminate immediately and any fee payable pursuant to Section 2.09 shall forthwith become due and payable without any other notice of any kind; and/or (b) declare the principal of and accrued interest on the Loans, and all other obligations owing hereunder, to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided that, if an Event of Default specified in subsection (i) shall occur, the result which would occur upon the giving of written notice by the Administrative Agent to the Borrower, as specified in clauses (a) and (b) above, shall occur automatically without the giving of any such notice.

 

  

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Section 6.02 .  Actions In Respect Of Letters Of Credit Upon Default.  If any Event of Default shall have occurred and be continuing, the Administrative Agent may, or shall at the request of the Required Banks, irrespective of whether it is taking any of the actions described in Section 6.01 or otherwise, subject to Section 2.20(e) and after giving effect to Section 2.19(a)(iv) and any Cash Collateral provided by the Defaulting Bank, make demand upon the Borrower to, and forthwith upon demand the Borrower will, Cash Collateralize, for deposit in the Cash Collateral Account, an amount equal to the Outstanding Amount of all L/C Obligations.  Subject to Section 2.19(a)(iv) and 2.20(e), if at any time the Administrative Agent determines that any Cash Collateral is subject to any right or claim of any Person other than the Administrative Agent and the Bank Parties or that the Cash Collateral is less than the Outstanding Amount of all L/C Obligations, the Borrower, and to the extent provided by any Bank, such Bank will, forthwith upon demand by the Administrative Agent, pay to the Administrative Agent additional Cash Collateral to be deposited and held in the Cash Collateral Account, in an amount equal to the excess of (a) such aggregate Outstanding Amount of all L/C Obligations over (b) the total amount of Cash Collateral that the Administrative Agent determines to be free and clear of any such right and claim.

 

Section 6.03 .  Notice of Default.  The Administrative Agent shall give notice to the Borrower under Section 6.01(e) promptly upon being requested to do so by any Bank Party and shall thereupon notify all the Bank Parties thereof.

 

 

ARTICLE 7

The Administrative Agent

 

Section 7.01 .  Appointment and Authorization.  Each Bank Party irrevocably appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the Notes as are delegated to the Administrative Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto.

 

Section 7.02 .  Administrative Agent and Affiliates.  The Royal Bank of Scotland plc shall have the same rights and powers under this Agreement as any other Bank Party and may exercise or refrain from exercising the same as though it were not the Administrative Agent, and the terms “Banks,” “holders of Notes” and like terms shall include The Royal Bank of Scotland plc in its individual capacity as such. The Royal Bank of Scotland plc and its affiliates may, without liability to account, make loans to, accept deposits from, acquire debt or equity interests in, act as trustee under indentures of, and engage in any other business with, any Borrower and any stockholder, subsidiary or affiliate of any Borrower, as though the Royal Bank of Scotland plc were not the Administrative Agent hereunder.

  

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Section 7.03 .  General Nature of the Administrative Agent’s Duties.  Notwithstanding anything to the contrary elsewhere in this Agreement or in any other Credit Documentation:

 

(a)  The Administrative Agent shall not have any duties or responsibilities except those expressly set forth in this Agreement and the other Credit Documentation, and no implied duties or responsibilities on the part of the Administrative Agent shall be read into this Agreement or any Credit Documentation or shall otherwise exist.  Without limiting the generality of the foregoing, the Administrative Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article 6.

 

(b)  The duties and responsibilities of the Administrative Agent under this Agreement and the other Credit Documentation shall be mechanical and administrative in nature, and the Administrative Agent shall not have a fiduciary relationship in respect of any Lender or Issuing Bank.

 

(c)  The Administrative Agent is and shall be solely the agent of the Banks and the Issuing Banks. The Administrative Agent does not assume, and shall not at any time be deemed to have, any relationship of agency or trust with or for, or any other duty or responsibility to, any Borrower or any other Person (except only for its relationship as agent for, and its express duties and responsibilities to, the Banks and Issuing Banks as provided in this Agreement and the other Credit Documentation).

 

(d)  The Administrative Agent shall not be under any obligation to take any action hereunder or under any other Credit Documentation if the Administrative Agent believes in good faith that taking such action may conflict with any law or any provision of this Agreement or any other Credit Documentation, or may require the Administrative Agent to qualify to do business in any jurisdiction where it is not then so qualified.

 

Section 7.04 .  Consultation with Experts.  The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts.

 

Section 7.05 .  Liability of Administrative Agent.  Neither the Administrative Agent nor any of its affiliates nor any of their respective directors, officers, agents, or employees shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct.  Neither the Administrative Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or 

 

  

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agreements of the Borrower; (iii) the satisfaction of any condition specified in Article 3, except receipt of items required to be delivered to the Administrative Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith.  The Administrative Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex or similar writing) reasonably believed by it to be genuine or to be signed by the proper party or parties.

 

Section 7.06 .  Indemnification.  Each Bank shall, ratably in accordance with the sum of (i) its unused Commitment, (ii) its Pro Rata Share of all L/C Obligations outstanding and (iii) any Loans outstanding of such Bank, indemnify the Administrative Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, loss, damages or liability (except such as result from such indemnitee’s gross negligence or willful misconduct as determined by a final, non-appealable judgment of a court of competent jurisdiction) that such indemnitees may suffer or incur in connection with this Agreement or any action taken or omitted by such indemnitees hereunder.  Each Bank severally agrees to indemnify each Issuing Bank (to the extent not promptly reimbursed by the Borrower and without limiting its obligation to do so in accordance with this Agreement) from and against such Bank’s Pro Rata Share of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against such Issuing Bank in its capacity as such in any way relating to or arising out of this Agreement, the Notes or the Issuer Documents, or any action taken or omitted by such Issuing Bank under this Agreement, the Notes or the Issuer Documents (including the issuance or transfer of, or payment or failure to pay under, any Letter of Credit); provided that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting directly and primarily from such Issuing Bank’s gross negligence or willful misconduct as found in a final, non-appealable judgment by a court of competent jurisdiction. Without limitation of the foregoing, each Bank agrees to reimburse such Issuing Bank promptly upon demand for its Pro Rata Share of any costs and expenses (including, without limitation, reasonable fees and expenses of counsel) payable by the Borrower under Section 9.03, to the extent that such Issuing Bank is not promptly reimbursed for such costs and expenses by the Borrower in accordance with this Agreement.

 

Section 7.07 .  Credit Decision.  Each Bank Party acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Bank Party, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement.  Each Bank Party also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Bank Party, and 

 

  

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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 any action under this Agreement.

 

Section 7.08 .  Successor Administrative Agent.  The Administrative Agent may, upon giving 5 Domestic Business Days prior written notice to the Borrower, and for so long as long as no Event of Default has occurred and is continuing, at the request of the Borrower, shall, resign at any time by giving written notice thereof to the Banks and the Borrower.  Upon any such resignation, the Borrower shall have the right, with the consent of the Required Banks, such consent not to be unreasonably withheld, conditioned or delayed, to appoint a successor Administrative Agent.  If no successor Administrative Agent shall have been so appointed by the Borrower, and shall have accepted such appointment, within 15 days after the retiring Administrative Agent gives notice of resignation, then the retiring Administrative Agent may, on behalf of the Bank Parties, appoint a successor Administrative Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $1,000,000,000.  Upon the acceptance of its appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder.  After any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent.

 

Section 7.09 .  Co-Documentation Agents, Syndication Agent and Co-Lead Arrangers Not Liable.  Nothing in this Agreement shall impose upon the Co-Documentation Agents, the Syndication Agent or the Co-Lead Arrangers, each in such capacity, any duties or responsibilities whatsoever.

 

Section 7.10 .  Calculations.  The Administrative Agent shall not be liable for any calculation, apportionment or distribution of payments made by it in good faith. If such calculation, apportionment or distribution is subsequently determined to have been made in error, the sole recourse of any Lender to whom payment was due but not made shall be to recover from the other Banks any payment in excess of the amount to which they are determined to be entitled or, if the amount due was not paid by the Borrower, to recover such amount from the Borrower.

 

 

ARTICLE 8

Change in Circumstances

 

Section 8.01 .  Basis for Determining Interest Rate Inadequate or Unfair.  If on or prior to the first day of any Interest Period for any Fixed Rate Borrowing:

 

  

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(a)  the Administrative Agent is advised by the Euro-Dollar Reference Banks that the London Interbank Offered Rate is not available in the manner set forth in the definition of London Interbank Offered Rate for such Interest Period, or

 

(b)  in the case of a Committed Borrowing, Banks having 50% or more of the aggregate amount of the Commitments advise the Administrative Agent that the Adjusted London Interbank Offered Rate, as determined by the Administrative Agent, will not adequately and fairly reflect the cost to such Banks of funding their Euro-Dollar Loans for such Interest Period,

 

the Administrative Agent shall forthwith give notice thereof to the Borrower and the Banks, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make Euro-Dollar Loans or to continue or convert outstanding Loans as or into Euro-Dollar Loans shall be suspended and (ii) each outstanding Euro-Dollar Loan shall be converted into a Base Rate Loan on the last day of the then current Interest Period applicable thereto.  Unless the Borrower notifies the Administrative Agent at least two Domestic Business Days before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a Euro-Dollar Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day.

 

Section 8.02 .  Illegality.  If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Bank shall so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Administrative Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans or to convert outstanding Loans into Euro-Dollar Loans or continue outstanding Loans as Euro-Dollar Loans, shall be suspended.  Before giving any notice to the Administrative Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. The Borrower hereby agrees to pay the reasonable costs and expenses 

 

  

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incurred by such Bank in connection with any such designation. If such Bank shall determine that it may not lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans to maturity and shall so specify in such notice, the Borrower shall immediately prepay in full the then-outstanding principal amount of each such Euro-Dollar Loan, together with accrued interest thereon.  Concurrently with prepaying each such Euro-Dollar Loan, the Borrower shall borrow a Base Rate Loan in an equal principal amount from such Bank (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base Rate Loan.

 

Section 8.03 .  Increased Cost and Reduced Return.  (a) If on or after (x) the date hereof, in the case of any Committed Loan or L/C Credit Extension or any obligation to make or participate in Committed Loans or L/C Credit Extensions or (y) the date of the related Money Market Quote, in the case of any Money Market Loan, any Change in Law shall:

 

(i)  impose on any Bank Party or the London interbank market any other condition, cost or expense affecting this Agreement or Fixed Rate Loans made by such Bank Party or participation therein; or

 

(ii)  subject any Recipient to any Taxes (other than (A) Indemnified Taxes and (B) Other Connection Taxes on gross or net income, profits or revenue (including value-added or similar Taxes)) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto;

 

(iii)  impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage), special deposit, insurance assessment or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank Party (or its Applicable Lending Office) or shall impose on any Bank Party (or its Applicable Lending Office) or the London interbank market any other condition affecting its Fixed Rate Loans, its Notes or its obligation to make Fixed Rate Loans or make or participate in L/C Credit Extensions; and the result of any of the foregoing is to increase the cost to such Bank Party (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan or any L/C Credit Extension (or participation therein), or to reduce the amount of any sum received or receivable by such Bank Party (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank Party to be material,

 

then, within 15 days after demand by such Bank Party or such other Recipient (with a copy to the Administrative Agent), (i) the Borrower shall pay to such Bank 

 

  

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Party such additional amount or amounts as will compensate such Bank Party or such other Recipient for such increased cost or reduction suffered (including any amount or amounts equal to any taxes on the overall net income of such Bank Party or such other Recipient payable by such Bank Party or such other Recipient with respect to the amount of payments required to be made pursuant to this Section 8.03(a)) as reasonably determined by such Bank Party (which determination shall be made in good faith (and not on an arbitrary or capricious basis) and only if such additional amount or amounts are passed on in a similar manner by such Bank Party to similarly situated borrowers (which are parties to credit or loan documentation containing a provision similar to this Section 8.03(a), as determined by such Bank Party in its reasonable discretion, or (ii) convert such Bank Party's Loans so affected by such Change in Law to Base Rate Loans and pay any related breakage costs pursuant to Section 2.14 and any accrued increased costs pursuant to this Section 8.03.)

 

(b)  If a Bank Party, other than a Defaulting Bank, determines that any Change in Law, will have the effect of increasing the amount of capital required or expected to be maintained by such Bank Party based on the existence of such Bank Party’s Commitment hereunder or its obligations hereunder, it will notify the Borrower.  This determination will be made on a Bank Party-by-Bank Party basis.  The Borrower shall (i) pay to each Bank Party on demand such additional amounts as are necessary to compensate for the increased cost to such Bank Party as a result of any Change in Law or (ii) convert such Bank Party's Loans so affected by such Change in Law to a Base Rate Loan and pay any related breakage costs pursuant to Section 2.14 and any accrued increased costs pursuant to this Section 8.03.  In determining such amount, such Bank Party will act reasonably and in good faith (and not on an arbitrary or capricious basis)  and will use averaging and attribution methods which are reasonable, and such Bank Party will pass such costs on to the Borrower only if such costs are passed on in a similar manner by such Bank Party to similarly situated borrowers (which are parties to credit or loan documentation containing a provision similar to this Section 8.03(b)), as determined by such Bank Party in its reasonable discretion.  Each Bank Party’s determination of compensation shall be conclusive if made in accordance with this provision.  Each Bank Party, upon determining that any increased costs will be payable pursuant to this Section 8.03(b), will give prompt written notice thereof to the Borrower, which notice shall show the basis for calculation of such increased costs, although the failure to give any such notice shall not release or diminish any of the Borrower’s obligations to pay increased costs pursuant to this Section 8.03(b).

 

(c)  Each Bank Party will promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank Party to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank Party, be otherwise disadvantageous to such Bank Party.  The Borrower hereby agrees to pay the reasonable costs and expenses incurred by such Bank Party in connection with any such designation. A

 

  

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 Bank Party claiming compensation under this Section shall furnish a certificate to the Borrower setting forth the additional amount or amounts to be paid to it hereunder, which shall be conclusive in the absence of manifest error.  In determining such amount, such Bank Party may use any reasonable averaging and attribution methods.

 

(d)  Failure or delay on the part of any Bank Party to demand compensation pursuant to this Section 8.03 shall not constitute a waiver of such Bank Party’s right to demand such compensation; provided that the Borrower shall not be required to compensate any Bank Party pursuant to this Section 8.03 for any increased costs or reductions incurred more than six months prior to the date that such Bank Party notifies the Borrower and the Administrative Agent of the Change in Law giving rise to such increased costs or reductions and of such Bank Party’s intention to claim compensation therefor; provided, further, that, if the Change in Law giving rise to such increased costs or reductions are retroactive, then the six-month period referred to above shall be extended to include the period of retroactive effect thereof.

 

Section 8.04 .  Base Rate Loans Substituted for Affected Euro-Dollar Loans.  If (i) the obligation of any Bank to make, or to continue or convert outstanding Loans as or to, Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03(a) with respect to its Fixed Rate Loans or its obligation to make Fixed Rate Loans, and the Borrower shall, by at least five Euro-Dollar Business Days’ prior notice to such Bank through the Administrative Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply:

 

(a)  all Loans which would otherwise be made by such Bank as Euro-Dollar Loans shall be made instead as Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and

 

(b)  after each of its Euro-Dollar Loans has been repaid, all payments of principal which would otherwise be applied to repay such Euro-Dollar Loans shall be applied to repay its Base Rate Loans instead.

 

 

ARTICLE 9

Miscellaneous

 

Section 9.01 .  Notices.  (a) All notices, requests, directions, consents, approvals and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party (subject to subparagraph (b) below):  (w) in the case of the Borrower:

 

  

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National Rural Utilities Cooperative Finance Corporation

20701 Cooperative Way

Dulles, Virginia 20166

Attn: Capital Markets Relations

Phone: (703) 467-7402

Fax: (703) 467-5178

Email: BankingRelations@nrucfc.coop

 

with a copy to:

 

National Rural Utilities Cooperative Finance Corporation

20701 Cooperative Way

Dulles, Virginia  20166

Attn: General Counsel

Phone: (703) 467-7404

Fax: (703) 467-5651

 

(x) in the case of the Administrative Agent:

 

The Royal Bank of Scotland plc

600 Washington Boulevard

Stamford, Connecticut 06901

Attn: Charles Ray

Phone: (203) 897-3559

Fax: (203) 873-3569

Email: agencyops@rbs.com

 

with a copy to:

 

The Royal Bank of Scotland plc

600 Washington Boulevard

Stamford, Connecticut 06901

Attn: Emily Freedman

Fax: (203) 873-3543

Email: Emily.freedman@rbs.com

 

(y) in the case of any Bank, at its address or telex or telecopier number set forth in its Administrative Questionnaire or (z) in the case of any other party, such other address or telex or telecopier number as such party may hereafter specify for the purpose by notice to the Administrative Agent and the Borrower.  Each such notice, request, direction, consent, approval or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answerback is received, (ii) if given by facsimile, when such facsimile is transmitted to the facsimile number specified in this Section and receipt is confirmed or (iii) if given by any other means, when delivered or received at the address specified in this Section; provided that (A) notices to the Administrative Agent under Article 2 or Article 8 shall also be

 

  

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 confirmed by telephone call and shall not be effective until received and (B) any communications deemed received hereunder must have been received during the recipient’s normal business hours; provided, however, that any communication that is not received during the recipient’s normal business hours on a particular Business Day, shall be deemed to be received on the immediately following Business Day.

 

(b)  Notices and other communications to the Bank Parties hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Article 2 or Article 8 unless otherwise agreed by the Administrative Agent and the applicable Bank Party.  The Administrative Agent or the 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.

 

  (c)           The address, telephone number or facsimile number for any party hereto may be changed at any time and from time to time upon written notice given by such changing party to each other party hereto.

 

Section 9.02 .  No Waivers.  No failure or delay by the Administrative Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

 

Section 9.03 .  Expenses; Documentary Taxes; Indemnification.  (a) The Borrower shall pay (i) all documented reasonable out-of-pocket expenses of the Administrative Agent, including reasonable fees and disbursements of special counsel for the Administrative Agent, in connection with the preparation of this Agreement, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all documented reasonable out-of-pocket expenses incurred by the Administrative Agent or any Bank, including reasonable fees and disbursements incurred by counsel or in-house counsel, in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom.  The Borrower shall indemnify each Bank Party against any transfer taxes, documentary taxes, assessments or charges made by any Governmental Authority by reason of the execution and delivery of this Agreement or the Notes and any and all liabilities with respect to or resulting from any delay or omission (unless solely attributable to such Bank) to pay such taxes. This Section 9.03(a) shall not apply with respect to Taxes other than any Taxes that represent losses or damages arising from any non-Tax claim.

 

(b)  The Borrower agrees to indemnify each Bank Party, their respective affiliates and the respective directors, officers and employees of the foregoing

 

  

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 (each an “Indemnitee”) and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs, claims, demands and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by any Indemnitee (or by the Administrative Agent in connection with its actions as Agent hereunder) in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; provided that no Indemnitee shall have the right to be indemnified hereunder for its own gross negligence, willful misconduct or unlawful conduct as determined by a final, non-appealable judgment of a court of competent jurisdiction.

 

Section 9.04 .  Sharing of Set-offs.  Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest then due with respect to any Loans made by it which is greater than the proportion received by any other Bank in respect of the aggregate amount of principal and interest due with respect to any Loans made by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Loans held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Loans held by the Banks shall be shared by the Banks pro rata; provided that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under the Loans.  The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Loan, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Borrower in the amount of such participation.

 

Section 9.05 .  Amendments and Waivers.  Except as provided by Section 2.17 or Section 2.19(a)(iii), any provision of this Agreement or the Notes may be amended or waived if  such amendment or waiver is in writing and is signed by the Borrower and either (a) the Required Banks (and, if the rights or duties of the Administrative Agent are affected thereby, by the Administrative Agent) or (b) the Administrative Agent if, but only if, the Administrative Agent has received the prior written consent of the Required Banks; provided that, no such amendment or waiver shall (i) increase the Commitment of any Bank or subject any Bank to any additional obligation without the written consent of such Bank, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder without the written consent of each Bank directly affected thereby, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or any fees hereunder without the written consent of each Bank directly affected thereby, (iv) change the aggregate unpaid principal amount of the Notes without the written consent of each Bank directly affected thereby, (v) change any provision which

 

  

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 requires the pro rata sharing of payments among the Banks hereunder without the written consent of each Bank directly affected thereby, (vi) change clauses (i) through (vi) of this proviso to this Section 9.05 or the definition of “Required Banks” (other than the percentage indicated therein, which, for the avoidance of doubt, is subject to clause (vii) below) without the written consent of each Bank (including, notwithstanding Section 2.19(a)(iii), any Defaulting Bank) or (vii) modify or change (x) the percentage indicated in the definition of “Required Banks” or (y) subject to clause (vi) above, any other provision hereof specifying the number or percentage of Banks required to waive, amend or modify any rights hereunder, make any determination or grant any consent hereunder or take any other action under any provision of this Agreement, without the written consent of each Bank (excluding, for the avoidance of doubt, any Defaulting Bank to the extent of its unfunded Commitment). For the avoidance of doubt, no consent or any other action will be required of any Bank (other than the Defaulting Bank and the Administrative Agent to the extent required by Section 2.18) for any assignment of any Loans or termination of any Commitments pursuant to Section 2.18.

 

Whenever a waiver, amendment or modification requires the consent of a Bank “affected” or “directly affected” thereby, such waiver, amendment or modification shall, upon consent of such Bank, become effective as to such Bank whether or not it becomes effective as to any other Bank, so long as the Required Banks consent to such waiver, amendment or modification as provided above.

 

If the Required Banks shall have approved any amendment which requires the consent of all of the Banks, the Borrower shall be permitted to replace any non-consenting Bank with a replacement institution; provided that (i) the replacement institution shall purchase at par all Loans and other amounts owing to such replaced Bank on or prior to the date of replacement, (ii) the Borrower shall be liable to such replaced Bank under Section 2.13 if any Euro-Dollar Loan owing to such replaced Bank shall be purchased other than on the last day of the Interest Period relating thereto (as if such purchase constituted a prepayment of such Loans), (iii) such replacement institution, if not already a Bank, shall be reasonably satisfactory to the Administrative Agent, (iv) the replaced Bank shall be obligated to make such replacement in accordance with the provisions of Section 9.06(c) and (v) any such replacement shall not be deemed to be a waiver of any rights the Borrower, Administrative Agent or any Bank shall have against the replaced Bank.

 

Section 9.06 .  Successors and Assigns.  (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks.

 

(b)  Any Bank may at any time grant to one or more affiliates of such Bank, banks or other institutions (each a “Participant”) participating interests in 

 

  

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its Commitment or any or all of its Loans or L/C Obligations.  In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Borrower and the Administrative Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Bank in connection with such Bank’s rights and obligations under this Agreement.  Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clauses (i), (ii) or (iii) of Section 9.05 without the consent of the Participant.  Subject to the provisions of subsection (e), the Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits, and be bound by the obligations, of Article 8 and Section 2.16 (subject to the requirements and limitations therein, including the requirements under Section 2.16(f) (it being understood that the documentation required under Section 2.16(f) shall be delivered to the participating Bank)) with respect to its participating interest; provided that such Participant (A) agrees to be subject to the provisions of Sections 2.18, 2.19 and 9.04 as if it were an assignee under paragraph (b) of this Section; and (B) shall not be entitled to receive any greater payment under Sections 2.15 or 2.17, with respect to any participation, than its participating Bank would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation.  An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). Each Bank that sells a participation shall, acting solely for this purpose as an agent of the Borrower, maintain a register  on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under this Agreement (the “Participant Register”); provided that no Bank shall have any obligation to disclose all or any portion of the Participant Register to any Person (including the identity of any Participant or any information relating to a Participant’s interest in any Commitments, Loans, Letters of Credit or its other obligations under any this Agreement or the Notes) except to the extent that such disclosure is necessary to establish that such Commitment, Loan, Letter of Credit or other  obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations.  The entries in the Participant Register shall be conclusive absent manifest error, and such Bank shall treat each person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.

 

  

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(c)  Any Bank may at any time assign to one or more banks or other institutions (each an “Assignee”) all, or a proportionate part (but not in any case in an amount less than $5,000,000, unless (x) such Assignee is another Bank or an affiliate of such transferor Bank or (y) such assignment is for all of such transferor Bank’s rights and obligations under this Agreement and the Notes) of all of its rights and obligations under this Agreement and the Notes, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit G hereto executed by such Assignee and such transferor Bank, with (and subject to) the subscribed consent of (1) the Borrower and the Administrative Agent, such consents not to be unreasonably withheld and (2) each Issuing Bank in its sole discretion; provided that (i) if an Assignee is another Bank or an affiliate of such transferor Bank, or (ii) in the case of an assignment by any Bank to one or more Assignees after the occurrence and during the continuance of an Event of Default, no such consent of the Borrower shall be required; and provided further that such assignment may, but need not, include the rights of the transferor Bank in respect of outstanding Money Market Loans.  Upon execution and delivery of such an instrument and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required.  Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Administrative Agent and the Borrower shall make appropriate arrangements so that, if required, a new Note is issued to the Assignee.  In connection with any such assignment, the transferor Bank shall pay to the Administrative Agent an administrative fee for processing such assignment in the amount of $3,500.  If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall, prior to the first date on which interest or fees are payable hereunder for its account, deliver to the Borrower and the Administrative Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 2.16.

 

(d)  Any Bank Party may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement and its Note to a Federal Reserve Bank or any other Central Banking Authority to secure the obligations of such Bank thereto.  No such pledge or assignment shall release the transferor Bank from its obligations hereunder or substitute any such pledge or assignee for such Bank as a party hereto or thereto.

 

(e)  No Assignee, Participant or other transferee of any Bank’s rights shall be entitled to receive any greater payment under Section 8.03 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrower’s prior written consent.

 

  

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(f)  Any Issuing Bank may assign all of its rights and obligations under the undrawn portion of its commitment hereunder to issue Letters of Credit at any time; provided, however, that (i) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and record, an Assignment and Assumption Agreement, together with a processing and recordation fee of $3,500 and (ii) so long as no Event of Default has occurred and is continuing, the Borrower has consented to the assignment (such consent not to be unreasonably withheld).

 

Section 9.07 .  Collateral.  Each of the Banks represents to the Administrative Agent and each of the other Banks that it in good faith is not relying upon any “margin stock” (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement.

 

Section 9.08 .  Governing Law.  (a) This Agreement and each Note shall be governed by and construed in accordance with the laws of the State of New York.

 

(b)  The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County, Borough of Manhattan, and of the United States District Court for the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court.  Each of the parties hereto agrees, to the fullest extent permitted by law, that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  Nothing in this Agreement shall affect any right that the Administrative Agent or any Bank may otherwise have to bring any action or proceeding relating to this Agreement against the Borrower or its properties in the courts of any jurisdiction.

 

(c)  The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section.  Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

(d)  Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01.  Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

 

  

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Section 9.09 .  Counterparts; Integration.  This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof.

 

Section 9.10 .  Several Obligations.  The obligations of the Bank Parties hereunder are several.  Neither the failure of any Bank Party to carry out its obligations hereunder nor of this Agreement to be duly authorized, executed and delivery by any Bank Party shall relieve any other Bank Party of its obligations hereunder (or affect the rights hereunder of such other Bank).  No Bank Party shall be responsible for the obligations of, or any action taken or omitted by, any other Bank Party hereunder.

 

Section 9.11 .  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 9.12 .  Confidentiality.  The Administrative Agent and each Bank Party represent that they will maintain the confidentiality of any written or oral information provided by or on behalf of the Borrower (hereinafter collectively called “Confidential Information”), subject to the Administrative Agent’s and each Bank’s (a) obligation to disclose any such Confidential Information pursuant to a request or order under applicable laws or regulations or from a regulatory authority or pursuant to a subpoena or other legal process, (b) right to disclose any such Confidential Information to its bank examiners, auditors, counsel and other professional advisors, and its employees, officers and directors, and to other Bank Parties (it being understood that such Persons shall be informed of the confidential nature of such information and instructed to keep it confidential), (c) right to disclose any such Confidential Information in connection with any litigation or dispute involving the Bank Parties and the Borrower or any of its Subsidiaries and affiliates, (d) right to provide such information to Participants, prospective Participants to which sales of participating interests are permitted pursuant to Section 9.06(b) and prospective Assignees to which assignments of interests are permitted pursuant to Section 9.06(c) if such Participant, prospective Participant or prospective Assignee agrees in writing to maintain the confidentiality of such information on terms substantially similar to those of this Section as if it were a “Bank” party hereto, and (e) right to disclose Confidential Information to its affiliates if such affiliate agrees in writing to maintain the confidentiality of such information on terms substantially similar to those of this Section.  Notwithstanding the foregoing, any such information supplied to a Bank Party, Participant, prospective Participant or prospective Assignee under this Agreement shall cease to be Confidential Information if it is or becomes known to 

 

  

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such Person by other than unauthorized disclosure, or if it becomes a matter of public knowledge other than as a result of a breach of this Section by such Person.

 

Section 9.13 .  WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

Section 9.14 . USA Patriot Act.  Each Bank hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Bank to identify the Borrower in accordance with the Act.    

 

Section 9.15 .  ICC Transactions.  Notwithstanding anything to the contrary set forth in this Agreement (without limiting the terms of the penultimate sentence of this Section 9.15) or in any of the Notes or other instruments or documents that have been or are in the future executed or delivered pursuant to, or that otherwise relate to, this Agreement or to any Committed Borrowings or Loans hereunder (all of the foregoing, collectively with this Agreement, the “Credit Documentation”), (a) to the extent necessary under the Credit Documentation, the Banks hereby consent to, and waive any Default, Event of Default or other breach, violation, default or noncompliance with the provisions of the Credit Documentation that might otherwise be caused by or be attributable to, the “ICC Transactions” as such term is defined in Schedule 9.15 hereto, and (b) the ICC Transactions, the “ICC Assets,” the “ICC Related Companies” (as such terms are respectively defined in Schedule 9.15 hereto), and the assets, liabilities and operations of the ICC Related Companies (including without limitation any circumstances, events, occurrences, actions or omissions relating to, of or by any of the ICC Related Companies), are hereby excluded from, and shall not be taken into account in applying, interpreting or determining compliance with, the provisions of the Credit Documentation (including without limitation, the definitions, representations, warranties, covenants, agreements, conditions and events of default set forth in the Credit Documentation) and may be excluded from any certifications, notices, reports or statements delivered or to be delivered pursuant to the Credit Documentation.  Without limiting the generality of the foregoing, the defined terms “ERISA Group,” “Joint Venture,” “Member” and “Subsidiary,” among others, as used in the Credit Documentation shall not include the ICC Related Companies.  Notwithstanding the preceding provisions of this Section 9.15, any new investments in the ICC Related Companies by purchase of equity and/or debt securities, funding (through capital contributions and/or newly originated loans) of working capital or capital expenditure needs of the ICC Related Companies, payment by RTFC (as such term is defined in Schedule 9.15 hereto) or the Borrower of claims of other creditors of the ICC Related Companies, and/or provision of any new guarantees, 

 

  

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letters of credit and/or other new credit support or credit enhancement of the debt or other obligations of the ICC Related Companies, in the case of each of the foregoing, made or provided by the Borrower and/or RTFC at any time from December 9, 2008 shall not exceed in the aggregate (but without double-counting any such new investments) $275,000,000 without the consent of the Required Banks.  To the extent that the Credit Documentation provides that any of the ICC Transactions may be implemented if certain advance notice thereof is given, all such conditions or requirements of advance notice shall be deemed to have been complied with and all such notices shall be deemed to have been duly and timely given in accordance with the terms of the Credit Documentation.

 

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

 

	
NATIONAL RURAL UTILITIES

COOPERATIVE FINANCE

CORPORATION

	
By:

	
/s/ J. ANDREW DON

	
Name: J. Andrew Don

	
Title:SVP and Treasurer

(NY) 27011/233/CA/RBS.CA.doc

  

  

  

  

	
THE ROYAL BANK OF SCOTLAND PLC, as 

Administrative Agent, as Initial Issuing Bank and as 

a Bank

	
By:

	
/s/ EMILY FREEDMAN 

	
Name: Emily Freedman

	
Title: Vice President

	  

(NY) 27011/233/CA/RBS.CA.doc

  

  

  

  

	
JPMORGAN CHASE BANK, N.A., as Syndication 

Agent and as a Bank

	
By:

	
/s/ JUAN JAVELLANA

	
Name: Juan Javellana

	
Title: Executive Director

(NY) 27011/233/CA/RBS.CA.doc

  

  

  

  

	
THE BANK OF TOKYO-MITSUBISHI 

UFJ, LTD., as a Co-Documentation 

Agent and as a Bank

	
By:

	
/s/ MARY COSEO

	
Name: Mary Coseo

	
Title: Vice President

 

(NY) 27011/233/CA/RBS.CA.doc

  

  

  

  

	
ROYAL BANK OF CANADA, as a Co-

  Documentation Agent and as a Bank

	
By:

	/s/ THOMAS CASEY
	
Name: Thomas Casey

	
Title: Authorized Signatory

(NY) 27011/233/CA/RBS.CA.doc

  

  

  

  

 

	
KEYBANK NATIONAL 

ASSOCIATION, as a Co-

Documentation Agent and as a Bank

	
By:

	
/s/  SHERRIE I. MANSON

	
Name: Sherrie I. Manson

	
Title: Senior Vice President 

 

(NY) 27011/233/CA/RBS.CA.doc

  

  

  

  

	
Mizuho Corporate Bank, Ltd., and as a Bank

	
By:

	
/s/  LEON MO

	
Name: Leon Mo

	
Title:  Authorized Signatory

 

 

 

(NY) 27011/233/CA/RBS.CA.doc

  

  

  

  

 

 

 

	
US BANK NATIONAL 

ASSOCIATION, as a Bank

	
By:

	
/s/MICHAEL SAGGES

	
Name: Michael Sagges

	
Title:  Vice President

 

 

 

(NY) 27011/233/CA/RBS.CA.doc

  

  

  

  

 

 

 

 

	
PNC BANK, N.A., as a Bank

	
By:

	
/s/  D. JERMAINE JOHNSON

	
Name: D. Jermaine Johnson

	
Title:  Senior Vice President

 

 

 

(NY) 27011/233/CA/RBS.CA.doc

  

  

  

  

 

 

 

	
THE BANK OF NOVA SCOTIA, as an Issuing Bank 

and as a Bank

	
By:

	
/s/  THANE RATTEW

	
Name: Thane Rattew

	
Title:  Managing Director

 

 

(NY) 27011/233/CA/RBS.CA.doc

  

  

  

  

 

 

 

AGENT SCHEDULE

	
Institution

	
Title

	
The Royal Bank of Scotland plc

	
Administrative Agent

	
JPMorgan Chase Bank, N.A.

	
Syndication Agent

	
The Bank of Tokyo-Mitsubishi UFJ, Ltd.

	
Co-Documentation Agent

	
KeyBank National Association

	
Co-Documentation Agent

	
Royal Bank of Canada

	
Co-Documentation Agent

 

Agent Schedule

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COMMITMENT SCHEDULE

 

	
Institution

	
Commitment

	
The Royal Bank of Scotland plc

	
$120,000,000.00

	
JPMorgan Chase Bank, N.A.

	
$120,000,000.00

	
The Bank of Tokyo-Mitsubishi UFJ, Ltd.

	
$120,000,000.00

	
KeyBank National Association

	
$120,000,000.00

	
Royal Bank of Canada

	
$120,000,000.00

	
Mizuho Corporate Bank, Ltd.

	
$100,000,000.00

	
U.S. Bank, National Association

	
$85,000,000.00

	
The Bank of Nova Scotia

	
$50,000,000

	
PNC Bank, N.A.

	
$49,875,000

	
Total

	
$884,875,000

Commitment Schedule

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PRICING SCHEDULE

 

The “Euro-Dollar Margin”, “Base Rate Margin” and the “Facility Fee Rate” for the Borrower at any date are the respective percentages set forth below in the applicable row and column based upon the Status of the Borrower that exists on such date.

 

	
Status

	
Level I

	
Level II

	
Level III

	
Level IV

	
Level V

	
Euro-Dollar Margin:

	
0.8150%

	
.9250%

	
1.0250%

	
1.1250%

	
1.2250%

	
Base Rate Margin

	
0%

	
0%

	
0.0250%

	
0.1250%

	
0.2250%

	
Facility Fee Rate:

	
0.0600%

	
0.0750%

	
0.1000%

	
0.1250%

	
0.1500%

For purposes of this Pricing Schedule, the following terms have the following meanings, subject to the concluding paragraph of this Pricing Schedule:

 

“Level I Status” exists at any date if, at such date, the Borrower’s senior unsecured long-term debt is rated AA- or higher by S&P or Aa3 or higher by Moody’s.

 

“Level II Status” exists at any date if, at such date, (i) the Borrower’s senior unsecured long-term debt is rated A+ or higher by S&P or A1 or higher by Moody’s, and (ii) Level I Status does not exist.

 

“Level III Status” exists at any date if, at such date, (i) the Borrower’s senior unsecured long-term debt is rated A or higher by S&P or A2 or higher by Moody’s, and (ii) Level II Status does not exist.

 

“Level IV Status” exists at any date if, at such date, (i) the Borrower’s senior unsecured long-term debt is rated A- or higher by S&P or A3 or higher by Moody’s, and (ii) Level III does not exist.

 

“Level V Status” exists at any date if, at such date, no other Status applies.

 

“Moody’s” means Moody’s Investors Services, Inc.

 

“Rating Agencies” means each of S&P and Moody’s.

 

“S&P” means Standard & Poor’s Rating Services.

 

“Status” refers to the determination of which of Level I Status, Level II Status, Level III Status, Level IV Status or Level V Status exists at any date.

 

The credit ratings to be utilized for purposes of this Pricing Schedule are those assigned to the senior unsecured long-term debt securities of the Borrower 

 

Pricing Schedule

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without third-party credit enhancement (the “Borrower’s Unsecured Long-Term Debt”), and any ratings assigned to any other debt security of the Borrower shall be disregarded; provided that if at any date there is no such rating assigned by a particular Rating Agency, such Rating Agency’s rating of the Borrower’s Unsecured Long-Term Debt shall be deemed to be one notch below such Rating Agency’s rating of the senior secured debt of the Borrower at such date.  In the event that the two assigned ratings differ, then the higher rating assigned to the Borrower’s Unsecured Long-Term Debt (after giving effect to the proviso in the first sentence of this paragraph) shall be used if the ratings assigned differ by only one rating (e.g., A+/A2 results in Level II Status).  In the event the two assigned ratings differ by more than one rating, the rating below the highest shall be used (e.g., A+/A3 results in Level III Status).

 

 

Pricing Schedule

(NY) 27011/233/CA/RBS.CA.doc

  

  

  

  

SCHEDULE 2.01

 

	
L/C Number

	
Member

	
Amount

	
Effective

Date

	
Expiration

Date

	
Beneficiary

	
93046/80085

	
C&T Enterprises

(Wellsboro)

	
 $591,000.00

	
4/27/2010

	
4/27/2012

	
PJM

Interconnection

	
93047/80085

	
C&T Enterprises

(Citizens)

	
 $600,000.00

	
4/27/2010

	
4/27/2012

	
PJM

Interconnection

	
93093/80085

	
LCEC Generation

LLC

	
 $6,445,000.00

	
10/15/2010

	
6/1/2012

	
Wartsila North

America, Inc.

	
93103/80085

	
Vitelcomm Cellular,

Inc.

	
 $1,000,000.00

	
11/23/2010

	
11/23/2011

	
Research in

Motion

Corporation

	
Total

	  	
 $8,636,000.00

	  	  	  

 

Schedule 2.01

(NY) 27011/233/CA/RBS.CA.doc

  

  

  

  

SCHEDULE 5.03(a)

 

NON-GAAP SUBSIDIARIES

 

	
a.  

	
Denton Realty Holdings, LLC, organized in the State of Delaware. Borrower owns 100% of the membership interests.

	
b.  

	
Denton Realty Investors, LLC, organized in the State of Delaware. Borrower owns 100% of the membership interests.

	
c.  

	
Denton Realty Partners, LP, organized in the State of Delaware. Denton Realty Holdings, LLC is the general partner and owns 0.5% of the partnership interests, and Denton Realty Investors, LLC is the limited partner and owns 99.5% of the partnership interests.

	
d.  

	
CFC Advantage, LLC, organized in the State of Delaware. Borrower owns 100% of the membership interests.

	
e.  

	
DRP County Lakes, LLC, organized in the State of Texas.  Borrower owns 100% of the membership interests.

Schedule 5.03(a)

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SCHEDULE 9.15

 

ICC TRANSACTIONS

 

Background

 

As described in the Borrower’s filings with the U.S. Securities and Exchange Commission, Rural Telephone Finance Cooperative (“RTFC”), a Consolidated Entity of the Borrower, made secured loans to Innovative Communication Corporation (“ICC”), a diversified telecommunications company organized under the laws of the United States Virgin Islands (“USVI”) and headquartered in St. Croix, USVI. Through operating divisions and subsidiaries, ICC provided cellular, wireline local and long-distance telephone, cable television, Internet access and other telecommunications services in the eastern and southern Caribbean.  ICC and its subsidiaries are hereby defined as the “ICC Companies.”  As of March 1, 2011, RTFC had no loans outstanding to ICC.

ICC and certain of its affiliates were the subject of pending bankruptcy proceedings and a Bankruptcy Trustee has been appointed to manage the operations of the ICC bankruptcy estate (the “Trustee”).  The Trustee separated the bankruptcy estate into three asset groups and sold two of those groups with the proceeds from the sale being applied to pay a portion of RTFC debt and other creditors’ claims and to pay administrative expenses of the estate. The assets of the estate which have been sold to direct and indirect subsidiaries of the Borrower are described as “Group 1” assets and include the following:

“Group 1”:

	
·  

	
Wireline telephone operations in the USVI,

	
·  

	
Wireless telephone operations in the USVI and St. Maarten/St. Martin, and

	
·  

	
Cable television service operations in the USVI, the British Virgin Islands and St. Maarten.

ICC Transactions

 

RTFC and the Trustee entered into a Purchase Agreement as part of a $250 million credit bid made by RTFC for certain ICC assets and stock in ICC Companies in Group 1 (collectively, “ICC Assets”).   The ICC Assets were sold to RTFC, with RTFC reserving the right to assign its rights under the Purchase Agreement to CFC or one or more designees controlled by the Borrower and wholly owned directly or indirectly by the Borrower (collectively as the “ICC Related Companies”). In such cases, among other things, (i) the Borrower has provided equity and/or debt capitalization of, and ongoing funding for, the entities involved in the acquisition, ownership and operation of ICC Assets; (ii) the Borrower has provided working capital and capital expenditure financing to the

Schedule 9.15

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ICC Companies and for the ICC Assets, either directly or through such subsidiaries; (iii) the acquisition of ICC Assets involved settling claims of other creditors of the ICC Companies, which settlements may be financed by the Borrower directly or through ICC Related Companies; (iv) the Borrower has provided credit support and/or credit enhancement for obligations of ICC Related Companies, including without limitation in the form of guaranties and/or letters of credit; (v) the Borrower holds such ICC Assets (through one or more special purpose entities) and operates or provides for the operation of the ICC Companies for the purpose of preserving and rehabilitating such ICC Assets, preparing them for resale or other disposition and reselling or disposing of them in one or more transactions at a price or prices or for other consideration satisfactory to the Borrower; and (vi) the Borrower, through its subsidiaries, has engaged staff and/or outside consultants, agents, managers, management companies and other professional advisers to advise and assist with respect to, and/or to carry out, the foregoing.  All of the transactions, actions and other matters referred to above in this paragraph (together with such other related transactions and steps, occurring prior to or concurrently with or within a reasonable time after the transactions, actions and other matters referred to above and as may be reasonably necessary to carry out such transactions, actions and other matters) are hereby defined collectively as the “ICC Transactions.”

 

Nothing in this Schedule 9.15 or in Section 9.15 of the Credit Agreement shall constitute an obligation on the Borrower, RTFC or any other Person to enter into all or any of the transactions, or to take all or any of the actions, described in this Schedule 9.15.  Transactions and actions referred to in this Schedule 9.15 are not necessarily listed in the chronological order in which they may be entered into or taken.

 

Schedule 9.15

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                EXHIBIT A

 

FORM OF NOTE

 

New York, New York [DATE]

 

For value received, National Rural Utilities Cooperative Finance Corporation, a not-for-profit cooperative association incorporated under the laws of the District of Columbia (the “Borrower”), promises to pay to the order of [·] (the “Bank”), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan and L/C Borrowing made by the Bank to the Borrower pursuant to the Revolving Credit Agreement referred to below on the Maturity Date with respect to such Loan or L/C Borrowing.  The Borrower promises to pay interest on the unpaid principal amount of each such Loan and L/C Borrowing on the dates and at the rate or rates provided for in the Revolving Credit Agreement.  All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of The Royal Bank of Scotland plc, 600 Washington Boulevard, Stamford, Connecticut 06901, Attn: Charles Ray.

 

All Loans and L/C Borrowings made by the Bank, the respective types and maturities thereof and all repayments of the principal thereof shall be recorded by the Bank and, prior to any transfer hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding may be endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Revolving Credit Agreement.

 

This note is one of the Notes referred to in Revolving Credit Agreement, dated as of October 21, 2011, among the Borrower, the Banks listed on the signature pages thereof, The Royal Bank of Scotland plc, as Administrative Agent and Initial Issuing Bank, JPMorgan Chase Bank, N.A., as Syndication Agent, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., KeyBank National Association and Royal Bank of Canada as Co-Documentation Agents (as the same may be amended from time to time, the “Revolving Credit Agreement”).  Terms defined in the Revolving Credit Agreement are used herein with the same meanings.  Reference is made to the Revolving Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof.

 

	
NATIONAL RURAL UTILITIES 

  COOPERATIVE FINANCE 

  CORPORATION

	
By:

	  
	
Name:

	
Title:

A-1

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Note (cont’d)

LOANS AND PAYMENTS OF PRINCIPAL

	
Date

	
Amount of Loan

	
Type of Loan

	
Amount of Principal Repaid

	
Maturity Date

	
Notation Made By

	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  

A-2

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                      EXHIBIT B-1

 

FORM OF RUS GUARANTEE

The United States of America acting through the Administrator of the Rural Utilities Service (“RUS”) hereby unconditionally guarantees to [name of Payee] the making of [__%] of the payments of principal and interest when and as due on this Note of _________ (the “Cooperative”) in accordance with the terms hereof and of the Loan Agreement referred to in this Note, until such principal and interest shall be indefeasibly paid in full (which includes interest accruing on such principal between the date of default under this Note and the payment in full of this Guarantee), irrespective of receipt by RUS of any sums or property from its enforcement of its remedies for the Cooperative default.  This Guarantee shall be incontestable except for fraud or misrepresentation of which the holder had actual knowledge at the time it became a holder.  RUS hereby waives diligence, presentment, demand, protest and notice of any kind, as well as any requirement that [name of Payee] exhaust any right or take any action against the Cooperative.

 

This Guarantee is issued pursuant to Title III of the Rural Electrification Act of 1936, as amended (7 U.S.C. ‘‘ 901, et seq.), and the Loan Guarantee and Servicing Agreement among RUS, the Cooperative, Bank One, NA and National Rural Utilities Cooperative Finance Corporation dated ___________, ____.

 

	  	
UNITED STATES OF AMERICA

	
Date________________, ___

	
By:

	  
	  	
Name:

	  	
Title:Administrator of Rural

Electrification Administration

B-1-1

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                EXHIBIT B-2

 

FORM OF RUS GUARANTEE

The United States of America acting through the Administrator of the Rural Utilities Service (“RUS”) hereby unconditionally guarantees to the Payee the making of the payments of principal and Guaranteed Interest when and as due on the Note of _______________ (the “Cooperative”) dated _____ in the original principal amount of $ _____ (the “Note”), in accordance with the terms thereof and of the Loan Agreement and the Master Loan Guarantee and Servicing Agreement referred to in the Note, until such principal and Guaranteed Interest shall be indefeasibly paid in full (which includes interest accruing at the Guaranteed Interest Rate between the date of default under the Note and the payment in full of this Guarantee), irrespective of receipt by RUS of any sums or property from its enforcement of its remedies for the Cooperative’s default.  This Guarantee shall be incontestable except for fraud or misrepresentation of which the holder had actual knowledge at the time it became a holder.  RUS hereby waives diligence, presentment, demand, protest and notice of any kind (except the “Default Notice” required pursuant to Section 5.3(a) of the Master Loan Guarantee and Servicing Agreement), and acknowledges that the Payee does not have any right or obligation to exercise any right or take any action against the Cooperative.

 

This Guarantee is issued pursuant to the Rural Electrification Act of 1936, as amended (7 U.S.C. ‘‘ 901, et seq.) (the “Act”), and the Master Loan Guarantee and Servicing Agreement between RUS and National Rural Utilities Cooperative Finance Corporation dated as of February 16, 1999.

 

THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE UNITED STATES OF AMERICA, TO THE EXTENT APPLICABLE, AND OTHERWISE THE LAWS OF THE COMMONWEALTH OF VIRGINIA.

 

THE UNDERSIGNED, AS [ADMINISTRATOR] OF RUS, DOES HEREBY CERTIFY THAT I AM AUTHORIZED UNDER THE ACT AND 7 CFR PART 1700 TO DELIVER THIS GUARANTEE.

 

 

	  	
UNITED STATES OF AMERICA

	 	
By:

	  
	  	
Name:

	  	
Title:   [Administrator] of the Rural

    Utilities Service

	
Date________________, ___

	
RUS Loan No

B-2-1

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                  EXHIBIT C

 

FORM OF MONEY MARKET QUOTE REQUEST

[Date]

	
To:

	
The Royal Bank of Scotland plc (the “Administrative Agent”)

 

	
From:

	
National Rural Utilities Cooperative Finance Corporation (the ”Borrower”)

 

	
Re:

	
Revolving Credit Agreement, dated as of October 21, 2011, among the Borrower, the Banks listed on the signature pages thereof, The Royal Bank of Scotland plc, as Administrative Agent and Initial Issuing Bank, JPMorgan Chase Bank, N.A., as Syndication Agent, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., KeyBank National Association and Royal Bank of Canada, as Co-Documentation Agents (the “Revolving Credit Agreement”)

 

We hereby give notice pursuant to Section 2.03 of the Revolving Credit Agreement that we request Money Market Quotes for the following proposed Money Market Borrowing(s):

 

Date of Borrowing:  __________________

 

Principal Amount1                                                                Interest Period2

$

 

Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate].  [The applicable base rate is the London Interbank Offered Rate.]

 

Terms used herein have the meanings assigned to them in the Revolving Credit Agreement.

 

	
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

	
By:

	  
	
Name:

	
Title:

 

1   Amount must be $10,000,000 or a larger multiple of $1,000,000.

 

2   Any number of whole months (but not less than one month) (LIBOR Auction) or not less than 30 days (Absolute Rate Auction), subject to the provisions of the definition of Interest Period.

 

C-1

1

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                   EXHIBIT D

 

FORM OF INVITATION FOR MONEY MARKET QUOTES

[Date]

	
To:

	
[Name of Bank]

 

	
Re:

	
Invitation for Money Market Quotes to the National Rural Utilities Cooperative Finance Corporation (the “Borrower”)

 

Pursuant to Section 2.03 of the Revolving Credit Agreement, dated as of October 21, 2011, among the Borrower, the Banks listed on the signature pages thereof, The Royal Bank of Scotland plc, as Administrative Agent and Initial Issuing Bank, JPMorgan Chase Bank, N.A., as Syndication Agent, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., KeyBank National Association and Royal Bank of Canada, as Co-Documentation Agents (the “Revolving Credit Agreement”):

 

	
  

	
Date of Borrowing:  __________________

 

	
  

	
Principal Amount

	
Interest Period

$

Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.]

 

Please respond to this invitation by no later than 9:30 A.M. (New York City time) on [date].

 

	
THE ROYAL BANK OF SCOTLAND PLC

	
By:

	  
	
Name:

	
Title:Authorized Officer

D-1

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                      EXHIBIT E

 

FORM OF MONEY MARKET QUOTE

[Date]

	
  

	
The Royal Bank of Scotland plc,

	
  

	
  as Administrative Agent

c/o [·]

[·]

[·]

Attn: [·]

Attention:

	
Re:

	
Money Market Quote to National Rural Utilities Cooperative

 

	
  

	
Finance Corporation (the “Borrower”)

 

In response to your invitation on behalf of the Borrower dated _____________, 20__, we hereby make the following Money Market Quote on the following terms:

 

	
1.

	
Quoting Bank:  ________________________________

 

	
2.

	
Person to contact at Quoting Bank:  _____________________________

 

	
3.

	
Date of Borrowing: ____________________*

 

	
4.

	
We hereby offer to make Money Market Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates:

 

 

* As specified in the related Invitation.

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Principal Amount**

	
Interest Period***

	
Money Market [Margin****]

	
[Absolute Rate*****]

	
$

	  	  	  
	
$

	  	  	  
	  	  	  	  

[provided, that the aggregate principal amount of Money Market Loans for which the above offers may be accepted shall not exceed $____________.]**

 

We understand and agree that the offer[s] set forth above [is][are] subject to the satisfaction of the applicable conditions set forth in the Revolving Credit Agreement, dated as of October 21, 2011, among the Borrower, the Banks listed on the signature pages thereof, The Royal Bank of Scotland plc, as Administrative Agent and Initial Issuing Bank, JPMorgan Chase Bank, N.A., as Syndication Agent, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., KeyBank National Association and Royal Bank of Canada, as Co-Documentation Agents.

 

	
Very truly yours,

 

 

[NAME OF BANK]

 

 

	
By:

	  
	
Name:

	
Title:Authorized Officer

Dated: _______________

 

** Principal amount bid for each Interest Period may not exceed principal amount requested. Specify aggregate limitation if the sum of the individual offers exceeds the amount the Bank is willing to lend.  Bids must be made for $1,000,000 or a larger multiple thereof.

 

*** Any number of whole months (but not less than one month) or not less than 30 days, as specified in the related Invitation.  No more than five bids are permitted for each Interest Period.

 

**** Margin over or under the London Interbank Offered Rate determined for the applicable Interest Period.  Specify percentage (rounded to the nearest 1/10,000 of 1%) and specify whether “PLUS” or “MINUS”.

 

***** Specify rate of interest per annum (rounded to the nearest 1/10,000th of 1%).

E-2

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                     EXHIBIT F

 

OPINION OF GENERAL COUNSEL OF THE BORROWER

October 21, 2011

To the Administrative Agent and each of the Banks party

 to the Revolving Credit Agreement referred to below

c/o The Royal Bank of Scotland plc

[·]

[·]

Ladies and Gentlemen:

I, John Jay List, General Counsel of the National Rural Utilities Cooperative Finance Corporation (the “Borrower”), am delivering this opinion pursuant to the Revolving Credit Agreement (the “Agreement”), dated as of October 21, 2011, among the Borrower, the Banks listed on the signature pages thereof, The Royal Bank of Scotland plc, as Administrative Agent and Initial Issuing Bank, JPMorgan Chase Bank, N.A., as Syndication Agent, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., KeyBank National Association and Royal Bank of Canada, as Co-Documentation Agents.  Terms defined in the Agreement are used herein as therein defined.  This opinion is being rendered to you at the request of the Borrower, pursuant to Section 3.01(c) of the Agreement.

 

I have examined originals or copies, certified or otherwise identified to my satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as I have deemed necessary or advisable for purposes of this opinion. This opinion is limited to the laws of the District of Columbia.

 

Upon the basis of the foregoing, I am of the opinion that:

 

1.                      The Borrower is a cooperative association duly incorporated, validly existing and in good standing under the laws of the District of Columbia and has the corporate power and authority and all material governmental licenses, authorizations, consents and approvals required to own its property and assets and to transact the business in which it is engaged.  The Borrower is duly qualified or licensed as a foreign corporation in good standing in every jurisdiction in which the nature of the business in which it is engaged makes such qualification or licensing necessary, except in those jurisdictions in which the failure to be so qualified or licensed would not (after qualification, assuming that the Borrower could so qualify without the payment of any fee or penalty and retain its rights as they existed prior to such qualification all to an extent so that 

F-1

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any fees or penalties required to be so paid or any rights not so retained would not, individually or in the aggregate, have a material adverse effect on the business or financial position of the Borrower), individually or in the aggregate, have a material adverse effect upon the business or financial position of the Borrower.

 

2.           The Borrower has the corporate power and authority to execute, deliver and carry out the terms and provisions of the Agreement and the Notes.  The Agreement and the Notes have been duly and validly authorized, executed and delivered by the Borrower.4

 

3.           There are no actions, suits, proceedings or investigations pending or, to my knowledge, threatened against or affecting the Borrower by or before any court or any Governmental Authority, body or agency or any arbitration board which are reasonably likely to materially adversely affect the business, financial position or results of operations of the Borrower or the authority or ability of the Borrower to perform its obligations under the Agreement or the Notes.  Without limiting the foregoing opinion, I would like to draw your attention to the legal actions described on Annex A.

 

4.           No authorization, consent, approval or license of, or declaration, filing or registration with or exemption by, any Governmental Authority, body or agency is required in connection with the execution, delivery or performance by the Borrower of the Agreement or the Notes.

 

5.           The holders of the Borrower’s Members’ Subordinated Certificates are not and will not be entitled to receive any payments with respect to the principal thereof or interest thereon solely because of withdrawing or being expelled from membership in the Borrower.

 

6.           Neither the Borrower nor any Consolidated Entity is in default in any material respect under any material agreement or other instrument to which it is a party or by which it or its property or assets is bound. No event or condition exists which constitutes, or with the giving of notice or lapse of time or both would constitute, such a default under any such agreement or other instrument.  Neither the execution and delivery of the Agreement or the Notes, nor the consummation of any of the transactions therein contemplated, nor compliance with the terms and provisions thereof, will contravene any provision of law, statute, rule or regulation to which the Borrower is subject or any judgment, 

 

4 The opinion with respect to the enforceability of the Revolving Credit Agreement under New York law shall be provided by Borrower's New York counsel, Dewey & LeBoeuf LLP, subject to customary assumptions, qualifications and limitations.

 

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decree, award, franchise, order or permit applicable to the Borrower, or will conflict or be inconsistent with, or will result in any material breach of, any of the material terms, covenants, conditions or provisions of, or constitute (or with the giving of notice or lapse of time, or both, would constitute) a default under (or condition or event entitling any Person to require, whether by purchase, redemption, acceleration or otherwise, the Borrower to perform any obligations prior to the scheduled maturity thereof), or result in the creation or imposition of any Lien upon any of the property or assets of the Borrower pursuant to the terms of, any indenture, mortgage, deed of trust, agreement or other instrument to which it may be subject, or violate any provision of the certificate of incorporation or by-laws of the Borrower.  Without limiting the generality of the foregoing, the Borrower is not a party to, or otherwise subject to any provision contained in, any instrument evidencing Indebtedness of the Borrower, any agreement or indenture relating thereto or any other contract or agreement (including its certificate of incorporation and by-laws), which would be violated by the incurring of the Indebtedness to be evidenced by the Notes.

 

7.           The Borrower has complied fully with all of the material provisions of each Indenture.  No Event of Default (within the meaning of such term as defined in any Indenture) and no event, act or condition (except for possible non-compliance by the Borrower with any immaterial provisions of such Indenture which in itself is not such an Event of Default under such Indenture) which with notice or lapse of time, or both, would constitute such an Event of Default has occurred and is continuing under such Indenture.  The borrowings by the Borrower contemplated by the Agreement will not cause such an Event of Default under, or the violation of any covenant contained in, any Indenture.

 

8.           Set forth on Annex B attached hereto is a true, correct and complete list of all of the Borrower’s Subsidiaries and Joint Ventures, the jurisdiction of incorporation or organization of each such Subsidiary and Joint Venture and the nature and percentage of the Borrower’s ownership of each such Subsidiary and Joint Venture.

 

9.           The Borrower has received a ruling from the Internal Revenue Service to the effect that it is exempt from payment of Federal income tax under Section 501(c)(4) of the Internal Revenue Code of 1986, and nothing has come to our attention that leads us to believe that the Borrower is not so exempt.

 

Sincerely,

John Jay List

General Counsel

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Annex A

 

Innovative Communication Corporation (“ICC”) is a diversified telecommunications company and Rural Telephone Finance Cooperative (“RTFC”) borrower headquartered in St. Croix, United States Virgin Islands (“USVI”).  In the USVI, through its subsidiary Virgin Islands Telephone Corporation d/b/a Innovative Telephone (“Vitelco”) and other operating subsidiaries and divisions, ICC provided cellular, wireline local and long-distance telephone, cable television, and Internet access services.  Through other subsidiaries, ICC provided telecommunications, cable television, and Internet access services in the eastern and southern Caribbean.

 

As of March 1, 2011, RTFC had no loans outstanding to ICC.  RTFC was the primary secured lender to ICC.  ICC was placed into Chapter 11 bankruptcy proceedings on September 21, 2007.  ICC’s indirect majority shareholder and chairman, Jeffrey Prosser (“Prosser”) filed a voluntary bankruptcy petition for reorganization that was converted to a Chapter 7 liquidation in October 2007.

 

On October 6, 2010, CFC, through a subsidiary, closed on the purchase of the operating companies, located in the United States Virgin Islands formerly owned by ICC.  On March 1, 2011 CFC, through a subsidiary, closed on the purchase of the cable television providers in the British Virgin Islands (“BVI”) and St. Maarten. CFC, through its subsidiaries and contractors, now owns and operates the former ICC companies that provide telecommunications services to the USVI, BVI and St. Maarten.  This ownership will continue while the assets are being rehabilitated for sale to a permanent owner.

On or about December 7, 2008, Jeffrey Prosser, Dawn Prosser, Adrian Prosser and John Raynor filed a lawsuit in the United States District for the United States Virgin Islands against CFC, RTFC, Sheldon C. Petersen, John Jay List, Steven L. Lilly (each an officer of CFC), Wayne Stratton (a director of CFC) et. al. alleging violations of the Racketeer Influenced and Corrupt Organizations Act and the Virgin Islands Criminally Influenced and Corrupt  Organizations Act, torts actionable under Virgin Islands law, and common law civil conspiracy.  CFC and RTFC believe that the suit is completely without merit and are vigorously pursuing a dismissal of the case and injunctive relief.  CFC and RTFC believe that the allegations raised in this complaint, like similar allegations brought previously and either released or dismissed, are completely baseless, and part of a pattern of abusive litigation in this matter.

 

Prosser and related parties continue to assert claims in proceedings against CFC and certain of its officers and directors and other parties.  CFC anticipates that it will continue to be engaged in defense of those assertions as well as pursuing claims of its own.

 

 

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Nothing herein constitutes an admission that the foregoing are reasonably likely to materially adversely affect the business, financial position or results of CFC or the authority or ability of CFC to perform its obligations under the Agreement or the Notes.

 

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Annex B

 

 

Subsidiaries, Special Purpose Subsidiaries and Joint Ventures:

 

	
  

	
a.

	
CFC Advantage, LLC, organized in the State of Delaware. Borrower owns 100% of the membership interests.

 

	
  

	
b.

	
Denton Realty Holdings, LLC, organized in the State of Delaware. Borrower owns 100% of the membership interests.

 

	
  

	
c.

	
Denton Realty Investors, LLC, organized in the State of Delaware. Borrower owns 100% of the membership interests.

 

	
  

	
d.

	
DRP County Lakes, LLC, organized in the State of Texas.  Borrower owns 100% of the membership interests.

 

	
  

	
d.

	
Denton Realty Partners, LP, organized in the State of Delaware. Denton Realty Holdings, LLC is the general partner and owns 0.5% of the partnership interests, and Denton Realty Investors, LLC is the limited partner and owns 99.5% of the partnership interests.

 

Denton Realty Partners, LP ownership interest:

 

	
Rayzor Ranch, L.P.

	  	
25%

	
Laurel Development II, L.P.

	  	
10%

	
W/J Lakes Development LP

	  	
50%

	
W/J Lakes LP

	  	
50%

 

	
  

	
e.

	
Caribbean Asset Holdings, LLC, organized in the State of Delaware.  Borrower owns 100% of the membership interests.

	
  

	
Caribbean Asset Holdings, LLC ownership interest:

1.  DTR Holdings, LLC                                                           100%

 

	
DTR Holdings, LLC ownership interest:

	  	
 

	
VI PowerNet, LLC

	  	
100%

	

Innovative Long Distance, Inc.

	  	
100%

	
Virgin Islands Telephone Corporation

	  	
100%

       

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Vitelcom Cellular, Inc.

	  	
100%

	
Caribbean Communications Corp.

	  	
100%

	
St. Croix Cable T.V., Inc.

	  	
100%

	
iCC TV, Inc.

	  	
100%

	Group B-200, Inc.	 	 

       

2.  BVI Asset Holdings, LLC                                                                100%

BVI Asset Holdings, LLC ownership interest:

B.V.I. Cable T.V., Ltd.                                                      100%

3.  STM Asset Holdings, LLC                                                      100%

STM Asset Holdings LLC ownership interest:

Caribbean Teleview Services N.V.                                                                100%

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                   EXHIBIT G

 

ASSIGNMENT AND ASSUMPTION AGREEMENT

 

AGREEMENT dated as of ___________, 20__ among [ASSIGNOR] (the “Assignor”), [ASSIGNEE] (the “Assignee”), NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION (the “Borrower”) and the ROYAL BANK OF SCOTLAND PLC, as Administrative Agent (the “Agent”).

 

W I T N E S S E T H

 

WHEREAS, this Assignment and Assumption Agreement (the “Agreement”) relates to the Revolving Credit Agreement, dated as of October 21, 2011 (the “Credit Agreement”), among the Borrower, the Banks listed on the signature pages thereof, The Royal Bank of Scotland plc, as Administrative Agent and Initial Issuing Bank (the “Agent”), and JPMorgan Chase Bank, N.A., as Syndication Agent, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., KeyBank National Association and Royal Bank of Canada, as Co-Documentation Agents.

 

WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans and/or make or participate in L/C Obligations to the Borrower in an aggregate principal amount at any time outstanding not to exceed $__________;

 

WHEREAS, Committed Loans and L/C Obligations made to the Borrower by the Assignor under the Credit Agreement in the aggregate principal amount of $__________ are outstanding at the date hereof; and

 

WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $__________ (the “Assigned Amount”), together with a corresponding portion of its outstanding Committed Loans and/or L/C Obligations, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms;

 

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows:

            

SECTION 1.  Definitions.  All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement.

 

SECTION 2.  Assignment.  The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment

 

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 from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Committed Loans and/or L/C Obligations made by the Assignor outstanding at the date hereof.  Upon the execution and delivery hereof by the Assignor, the Assignee, the Borrower and the Administrative Agent and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee.  The assignment provided for herein shall be without recourse to the Assignor.

 

SECTION 3.  Payments.  As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds the amount heretofore agreed between them. It is understood that commitment and/or facility fees accrued to the date hereof are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee.  Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party’s interest therein and shall promptly pay the same to such other party.

 

SECTION 4.  Consent of the Borrower and the Administrative Agent.  This Agreement is conditioned upon the consent of [the Borrower,] the Administrative Agent and the Issuing Bank pursuant to Section 9.06(c) of the Credit Agreement.  The execution of this Agreement [by the Borrower,]  the Administrative Agent and the Issuing Bank is evidence of this consent.  Pursuant to Section 9.06(c) of the Credit Agreement, if requested by the Assignee, the Borrower agrees to execute and deliver a Note payable to the order of the Assignee to evidence the assignment and assumption provided for herein.

 

SECTION 5.  Non-Reliance on Assignor.  The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial position, or statements of the Borrower, or the validity and enforceability of the obligations of the Borrower in respect of the Credit Agreement or any Note.  The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be 

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responsible for making its own independent appraisal of the business, affairs and financial position of the Borrower.

 

SECTION 6.  Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

 

SECTION 7.  Counterparts.  This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written.

 

 

	
[ASSIGNOR]

	
By:

	  
	
Name:

	
Title:

	
[ASSIGNEE]

	
By:

	  
	
Name:

	
Title:

	
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

	
By:

	  
	
Name:

	
Title:

	
THE ROYAL BANK OF SCOTLAND PLC, as Administrative Agent

	
By:

	  
	
Name:

	
Title:

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EXHIBIT H-1

 

[FORM OF]

 

U.S. TAX CERTIFICATE

 

(For Non-U.S. Bank Parties That Are Not Partnerships For U.S. Federal Income Tax Purposes)

 

Reference is hereby made to the Revolving Credit Agreement dated as of October 21, 2011 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the Banks listed on the signature pages thereof, The Royal Bank of Scotland plc., as Administrative Agent and Initial Issuing Bank, JPMorgan Chase Bank, N.A., as Syndication Agent, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., KeyBank National Association and Royal Bank of Canada, as Co-Documentation Agents.

 

Pursuant to the provisions of Section 2.16 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, (iv) it is not a controlled  foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code and (v) the interest payments in question are not effectively connected with the undersigned’s conduct of a U.S. trade or business.

 

The undersigned has furnished the Administrative Agent and the Borrower with a certificate of its non-U.S. person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made  to the undersigned, or in either of the two calendar years preceding such payments.

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Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

 

	
[NAME OF BANK PARTY]

	
By:

	  
	
Name:

	
Title:

 

Date:                      , 20[  ]

 

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EXHIBIT H-2

 

[FORM OF]

 

U.S. TAX CERTIFICATE

 

(For Non-U.S. Bank Parties That Are Partnerships For U.S. Federal Income Tax Purposes)

 

Reference is hereby made to the Revolving Credit Agreement dated as of October 21, 2011 (as amended,  supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the Banks listed on the signature pages thereof, The Royal Bank of Scotland plc, as Administrative Agent and Initial Issuing Bank, JPMorgan Chase Bank, N.A., as Syndication Agent, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., KeyBank National Association and Royal Bank of Canada, as Co-Documentation Agents.

 

Pursuant to the provisions of Section 2.16 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its partners/members are the sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such Loan(s)), (iii) with respect to the extension of credit pursuant to this Credit Agreement, neither the undersigned nor  any of its partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its partners/members is a ten percent shareholder of the Borrower within the  meaning of Section 871(h)(3)(B) of the Code, (v) none of its partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code, and (vi) the interest payments in question are not effectively connected with the undersigned’s or its  partners/members’ conduct of a U.S. trade or business.

 

The undersigned has furnished the Administrative Agent and the Borrower with  IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of its partners/members claiming the portfolio interest exemption.  By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent and (2) the undersigned shall have at all times  furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the  undersigned, or in either of the two calendar years preceding such payments.

 

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

 

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[NAME OF BANK PARTY]

	
By:

	  
	
Name:

	
Title:

 

Date:                      , 20[  ]

 

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EXHIBIT H-3

 

[FORM OF]

 

U.S. TAX CERTIFICATE

 

(For Non-U.S. Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)

 

Reference is hereby made to the Revolving Credit Agreement dated as of October 21, 2011 (as amended,  supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the Banks listed on the signature pages thereof, The Royal Bank of Scotland plc, as Administrative Agent and Initial Issuing Bank, JPMorgan Chase Bank, N.A., as Syndication Agent, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., KeyBank National Association and Royal Bank of Canada, as Co-Documentation Agents.

 

Pursuant to the provisions of Section 2.17 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section  871(h)(3)(B) of the Code, (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code, and (v) the interest payments in question are not effectively connected with the undersigned’s conduct of a U.S. trade or business.

 

The undersigned has furnished its participating Bank with a certificate of its non-U.S. person status on IRS Form W-8BEN.  By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Bank in writing and (2) the undersigned shall have at all times furnished such Bank with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such  payments.

 

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Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

 

	
[NAME OF PARTICIPANT]

	
By:

	  
	
Name:

	
Title:

 

Date:                      , 20[  ]

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EXHIBIT H-4

 

[FORM OF]

 

U.S. TAX CERTIFICATE

 

(For Non-U.S. Participants That Are Partnerships For U.S. Federal Income Tax Purposes)

 

Reference is hereby made to the Revolving Credit Agreement dated as of October 21, 2011 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the Banks listed on the signature pages thereof, The Royal Bank of Scotland plc., as Administrative Agent and Initial Issuing Bank, JPMorgan Chase Bank, N.A., as Syndication Agent, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., KeyBank National Association and Royal Bank of Canada, as Co-Documentation Agents.

 

Pursuant to the provisions of Section 2.17 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its partners/members are the sole beneficial owners of such participation, (iii) with respect such participation, neither the undersigned nor any of its partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its partners/members is a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, (v) none of its partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code, and (vi) the interest payments in question are not effectively connected with the undersigned’s or its partners/members’ conduct of a U.S. trade or business.

 

The undersigned has furnished its participating Bank with IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of its partners/members claiming the portfolio interest exemption.  By executing this certificate, the undersigned agrees that (1) if the information  provided on this certificate changes, the undersigned shall promptly so inform such Bank and (2) the undersigned shall have at all times furnished such Bank with a properly completed and  currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

 

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Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

 

	
[NAME OF PARTICIPANT]

	
By:

	  
	
Name:

	
Title:

 

Date:                      , 20[  ]

 

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