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<PAGE>
EXHIBIT 10.7
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
BY AND AMONG
FLOWSERVE B.V.,
AS APPLICANT
FLOWSERVE CORPORATION
AND
THE MATERIAL SUBSIDIARIES LISTED ON SCHEDULE 1 HERETO,
AS GUARANTORS
CALYON NEW YORK BRANCH,
AS ADMINISTRATIVE AGENT AND ISSUING LENDER
AND
THE LENDERS NAMED HEREIN,
LENDERS
* * *
$89,250,000
* * *
JULY 28, 2004
<PAGE>
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
<S> <C> <C> <C>
SECTION 1
DEFINITIONS.....................................................................................1
1.1 Defined
Terms...................................................................................1
1.2 Number and Gender of Words; Other
References...................................................17
1.3 Accounting
Terms...............................................................................17
SECTION 2 LETTER OF CREDIT
FACILITY......................................................................18
2.1 Letter of Credit
Commitment....................................................................18
2.2 Request for Issuance of Letter of
Credit.......................................................20
2.3 Amendment
Procedures...........................................................................20
2.4 Extension of Credit Expiration
Date............................................................20
2.5 Mandatory Letter of Credit Commitment
Reduction................................................21
SECTION 3 REIMBURSEMENT AND PAYMENT
OBLIGATIONS..........................................................21
3.1 Reimbursement of Drawings Under a Letter of
Credit.............................................21
3.2 Fees and
Commissions...........................................................................21
3.3 Computation of Rates and
Fees..................................................................22
3.4 Additional
Costs...............................................................................22
3.5 Expenses;
Indemnification......................................................................23
3.6
Taxes..........................................................................................24
3.7 Form and Currency of
Payments..................................................................26
3.8 Acceleration of Undrawn
Amounts................................................................27
3.9 Maximum
Rate...................................................................................28
SECTION 4
GUARANTY.......................................................................................28
4.1 Guaranty of
Payment............................................................................28
4.2 Obligations
Unconditional......................................................................29
4.3
Modifications..................................................................................29
4.4 Waiver of
Rights...............................................................................30
4.5
Reinstatement..................................................................................30
4.6
Remedies.......................................................................................30
4.7
Subrogation....................................................................................30
SECTION 5 CONDITIONS PRECEDENT TO ISSUANCE OF THE LETTER OF
CREDIT.......................................30
5.1
Agreement......................................................................................31
5.2 Officer's
Certificate..........................................................................31
5.3 Evidence of
Authority..........................................................................31
5.4 Organizational
Documents.......................................................................31
5.5 Opinion of
Counsel.............................................................................31
5.6 Financial
Information..........................................................................31
5.7
Litigation.....................................................................................31
5.8 Compliance with Financial
Obligations..........................................................32
5.9 Intercompany
Indebtedness......................................................................32
5.10 EIB
Loan.......................................................................................32
5.11 Parent Credit
Agreement........................................................................32
5.12 Additional
Information.........................................................................32
SECTION 6 REPRESENTATIONS AND
WARRANTIES.................................................................32
6.1 Organization,
Powers...........................................................................32
</Table>
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
i
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<Table>
<S> <C> <C> <C>
6.2
Authorization..................................................................................32
6.3
Enforceability.................................................................................32
6.4 Governmental
Approvals.........................................................................33
6.5 Financial
Statements...........................................................................33
6.6 No Material Adverse
Change.....................................................................33
6.7 Title to Properties; Possession Under
Leases...................................................33
6.8
Subsidiaries...................................................................................33
6.9 Litigation; Compliance with
Laws...............................................................33
6.10
Agreements.....................................................................................34
6.11 Federal Reserve
Regulations....................................................................34
6.12 Investment Company Act; Public Utility Holding Company
Act.....................................34
6.13 Tax
Returns....................................................................................34
6.14 No Material
Misstatements......................................................................34
6.15 Employee Benefit
Plans.........................................................................35
6.16 Environmental
Matters..........................................................................35
6.17 Labor
Matters..................................................................................35
6.18
Solvency.......................................................................................35
6.19
Projections....................................................................................35
6.20 Senior
Indebtedness............................................................................36
6.21 Consolidated Coverage
Ratio....................................................................36
6.22 EIB
Loan.......................................................................................36
SECTION 7 AFFIRMATIVE COVENANTS OF THE CREDIT
PARTIES....................................................36
7.1 Existence; Businesses and
Properties...........................................................36
7.2
Insurance......................................................................................36
7.3 Obligations and
Taxes..........................................................................36
7.4 Financial Statements, Reports,
etc.............................................................37
7.5 Litigation and Other
Notices...................................................................39
7.6 Maintaining Records; Access to Properties and
Inspections......................................39
7.7 Use of
Proceeds................................................................................40
7.8 Further
Assurances.............................................................................40
7.9 Interest Rate
Protection.......................................................................40
7.10 EIB
Loan.......................................................................................40
SECTION 8 NEGATIVE COVENANTS OF THE CREDIT
PARTIES.......................................................40
8.1
Indebtedness...................................................................................40
8.2
Liens..........................................................................................42
8.3 Sale and Lease-Back
Transactions...............................................................43
8.4 Investments, Loans and
Advances................................................................43
8.5 Mergers, Consolidations, Sales of Assets and
Acquisitions......................................45
8.6 Dividends and Distributions; Restrictive
Agreements............................................46
8.7 Transactions with
Affiliates...................................................................47
8.8 Business of the Credit
Parties.................................................................48
8.9 Other Indebtedness and
Agreements..............................................................48
8.10 Capital
Expenditures...........................................................................48
8.11 Interest Coverage
Ratio........................................................................48
8.12 Fixed Charge Coverage
Ratio....................................................................49
8.13 Maximum Leverage
Ratio.........................................................................49
8.14 Designated Senior
Indebtedness.................................................................49
8.15 Fiscal
Year....................................................................................49
</Table>
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
ii
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<Table>
<S> <C> <C> <C>
SECTION 9 EVENTS OF
DEFAULT..............................................................................49
9.1 Events of
Default..............................................................................50
9.2 Remedies Upon Event of
Default.................................................................51
SECTION 10 AGREEMENT AMONG
LENDERS.......................................................................52
10.1 Administrative
Agent...........................................................................52
10.2
Expenses.......................................................................................53
10.3 Proportionate Absorption of
Losses.............................................................53
10.4 Delegation of Duties;
Reliance.................................................................53
10.5 Limitation of
Liability........................................................................54
10.6 Default;
Collateral............................................................................55
10.7 Limitation of
Liability........................................................................55
10.8 Relationship of
Lenders........................................................................55
10.9 Benefits of
Agreement..........................................................................55
10.10 Obligation
Several.............................................................................55
SECTION 11
MISCELLANEOUS.................................................................................55
11.1
Headings.......................................................................................55
11.2 Nonbusiness
Days...............................................................................55
11.3
Communications.................................................................................56
11.4 Form and Number of
Documents...................................................................56
11.5
Survival.......................................................................................56
11.6 Governing
Law..................................................................................56
11.7 Invalid
Provisions.............................................................................56
11.8
Entirety.......................................................................................56
11.9 Jurisdiction; Venue; Service of Process; Jury
Trial............................................57
11.10 Amendments, Consents, Conflicts, and
Waivers...................................................57
11.11 Multiple
Counterparts..........................................................................58
11.12 Successors and Assigns; Assignments and
Participations.........................................58
11.13 Discharge Only Upon Payment in Full; Reinstatement in
Certain Circumstances....................60
11.14 Judgment
Currency..............................................................................61
11.15
Setoff.........................................................................................61
11.16
Confidentiality................................................................................61
11.17 USA PATRIOT Act
Notice.........................................................................62
</Table>
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
iii
<PAGE>
SCHEDULES AND EXHIBITS
Schedule 1 Material Subsidiaries
Schedule 1.1(a) Fifth Third Letters of Credit
Schedule 2.1 Lenders and Commitments
Schedule 6.8 Subsidiaries
Schedule 6.9 Litigation
Schedule 6.16 Environmental Matters
Schedule 8.1(a) Existing Indebtedness
Schedule 8.1(d) Existing Purchase Money Indebtedness
Schedule 8.1(e) Existing Capital Lease Obligations
Schedule 8.1(f) Outstanding Industrial Revenue Bonds
Schedule 8.1(g) Existing Indebtedness of Foreign
Subsidiaries
Schedule 8.2 Existing Liens
Schedule 8.4 Existing Intercompany Loans
Exhibit A Assignment of Cash Collateral Account
Exhibit B Form of Assignment and Acceptance
Exhibit C Form of Letter of Credit
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
iv
<PAGE>
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
THIS LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT is made and
entered
into as of this 28th day of July, 2004, by and between FLOWSERVE
B.V., a company
organized under the laws of the Netherlands (the "COMPANY" or
"FBV"), FLOWSERVE
CORPORATION, a New York corporation, and the Material
Subsidiaries (hereinafter
defined) listed on SCHEDULE 1 hereto (each a "GUARANTOR" and
collectively, the
"GUARANTORS"), the LENDERS (hereinafter defined), and CALYON NEW
YORK BRANCH, a
duly licensed branch under the New York Banking Law of a foreign
banking
corporation organized under the laws of the Republic of France,
as
Administrative Agent (hereinafter defined) for itself and the
other Lenders.
WITNESSETH:
WHEREAS, the Company has requested that (a) the Issuing Lender
issue
for the Company's account, a letter of credit in the amount of
$89,250,000 in
order to support that certain credit arrangement between the
Company and the
EIB, and (ii) the Lenders purchase participations in such letter
of credit from
Issuing Lender; and
WHEREAS, the Issuing Lender is willing to issue the requested
letter of
credit for the account of the Company and the Lenders are
willing to purchase
participations therein under the terms and conditions
hereinafter set forth,
including, without limitation, the guarantee of the
reimbursement obligations of
the Company by the Guarantors;
NOW, THEREFORE, for and in consideration of the terms,
agreements and
covenants set forth herein, the parties hereto do hereby agree
as follows:
SECTION 1 DEFINITIONS
1.1 DEFINED TERMS. For the purposes of this Agreement, unless
the
context otherwise requires, the following terms shall have the
respective
meanings assigned to them in this SECTION 1 or in the Section or
recital
referred to:
"ABN" means ABN Amro Bank N.V. and any successor thereto.
"ABN STANDBY CREDIT" means bank guarantees, surety and
performance
bonds, letters of credit, and similar financial accommodations
issued by ABN or
any Affiliate thereof for the account of the Parent or any of
its Subsidiaries
solely to support contractual obligations of the Parent and its
Subsidiaries
incurred in the ordinary course of business of the Parent and
its Subsidiaries.
"ACQUISITION" means the Parent's acquisition of (i) 100% of the
share
capital of Invensys plc, and (ii) certain assets of certain
subsidiaries of
Invensys plc.
"ADMINISTRATIVE AGENT" means Calyon New York Branch, and its
permitted
successor or successors as administrative agent for the Lenders
under this
Agreement.
"AFFILIATE" of any Person means any other individual or entity
who
directly or indirectly controls, or is controlled by, or is
under common control
with, such Person, and, for purposes of this definition only,
"control,"
"controlled by," and "under common control with" mean
possession, directly or
indirectly, of power to direct or cause the direction of
management or policies
(whether through ownership of voting securities, by contract, or
otherwise).
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
1
<PAGE>
"AGREEMENT" means this Letter of Credit and Reimbursement
Agreement, of
which this SECTION 1 forms a part, together with all amendments
and
modifications thereof and supplements and attachments
thereto.
"APPLICABLE LETTER OF CREDIT FEE" means, for any day, with
respect to
the Letter of Credit, the applicable fee set forth below based
upon the Leverage
Ratio as of the relevant date of determination:
<Table>
<Caption>
APPLICABLE LETTER OF CREDIT FEE
PRICING LEVEL LEVERAGE RATIO LETTER OF CREDIT FEE
------------- -------------------------------
--------------------
<S> <C> <C>
1 > or equal to 4.00 to 1.0 2.50%
2 > or equal to 3.50 to 1.0 < 4.00 to 1.0 2.25%
3 > or equal to 3.00 to 1.0 < 3.50 to 1.0 2.00%
4 > or equal to 2.50 to 1.0 < 3.00 to 1.0 1.75%
5 < 2.50 to 1.0 1.50%
</Table>
Each change in the Applicable Letter of Credit Fee resulting
from a
change in the Leverage Ratio shall be effective on and after the
date of
delivery to the Administrative Agent of the financial statements
and
certificates required by SECTION 7.4(a)(i) or 7.4(a)(ii) and
SECTION
7.4(a)(iii), respectively, indicating such change until the date
immediately
preceding the next date of delivery of such financial statements
and
certificates indicating another such change. Notwithstanding the
foregoing, (a)
at any time during which the Parent has failed to deliver the
financial
statements and certificates required by SECTION 7.4(a)(i) or
7.4(A)(ii) and
SECTION 7.4(a)(iii), respectively, or (b) at any time after the
occurrence and
during the continuance of an Event of Default, the Leverage
Ratio shall be
deemed to be in Level 1 for purposes of determining the
Applicable Letter of
Credit Fee.
"ASSET SALE" means the sale, transfer, or other disposition (by
way of
merger, casualty, condemnation, or otherwise), other than an
Asset Swap, by the
Parent or any of its Subsidiaries (other than the Company or the
Material
Subsidiaries) to any Person other than the Parent or any other
Credit Party of:
(a) any capital stock or other equity interests of any of the
Parent's
Subsidiaries (other than directors' qualifying shares) or (b)
any other assets
of the Parent or any of its Subsidiaries (other than (i)
inventory, damaged,
obsolete or worn out assets, scrap and Permitted Investments, in
each case
disposed of in the ordinary course of business, (ii) the sale of
Program
Receivables pursuant to the Receivables Program, (iii)
dispositions between or
among Subsidiaries of the Parent that are not Credit Parties,
(iv) dispositions
from Credit Parties to Subsidiaries of the Parent that are not
Credit Parties of
assets having an aggregate value not in excess of the Dollar
Equivalent amount
of $25,000,000 (from and after August 8, 2000) and (v) sales,
transfers, or
other dispositions (in addition to those described in CLAUSES
(i) through (IV)
above) in any fiscal year of the Parent of assets having an
aggregate value not
in excess of $5,000,000).
"ASSET SWAP" means any transfer of assets of the Parent or any
of its
Subsidiaries (other than the Company or the Material
Subsidiaries) to any Person
other than the Parent or any Affiliate of the Parent in exchange
for assets of
such Person if such exchange would qualify, whether in part or
in full, as a
like-kind exchange pursuant to Section 1031 of the Code. Nothing
in this
definition shall require the Parent or any of its Subsidiaries
to elect that
Section 1031 of the Code be applicable to any Asset Swap.
"ASSIGNMENT AND ACCEPTANCE AGREEMENT" means an Assignment
and
Acceptance Agreement substantially in the form of EXHIBIT B
attached hereto.
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
2
<PAGE>
"ASSIGNMENT OF CASH COLLATERAL ACCOUNT" means that certain
Assignment
of Cash Collateral Account substantially in the form of EXHIBIT
A attached
hereto and incorporated herein by reference, executed by the
Company for the
benefit of the Administrative Agent (for the benefit of the
Lenders) with
respect to the Cash Collateral Account.
"ATTRIBUTABLE OBLIGATION" of any Person means, with respect to
any Sale
and Lease-Back Transaction of such Person as of any particular
time, the present
value at such time discounted at the rate of interest implicit
in the terms of
the lease of the obligations of the lessee under such lease for
net rental
payments during the remaining term of the lease (including any
period for which
such lease has been extended or may, at the option of such
Person, be extended).
"AVAILABLE AMOUNT" means, for each day on which the Letter of
Credit
shall remain in effect, the aggregate maximum amount which is
available to be
drawn under the Letter of Credit.
"BENEFICIARY" means the EIB.
"BOARD" shall mean the Board of Governors of the Federal Reserve
System
of the United States of America.
"BUSINESS DAY" means any day other than a Saturday, Sunday, or
day on
which banks in New York City are authorized or required by Law
to close;
provided, however, that when used in connection with the LIBOR
Rate, the term
"Business Day" shall also exclude any day on which banks are not
open for
dealings in deposits in Dollars in the applicable interbank
market.
"CAPITAL EXPENDITURES" means, for any period, (a) the additions
to
property, plant, and equipment and other capital expenditures of
the Parent and
its consolidated Subsidiaries that are (or should be) set forth
in a
consolidated statement of cash flows of the Parent for such
period prepared in
accordance with GAAP, and (b) Capital Lease Obligations incurred
by the Parent
and its consolidated Subsidiaries during such period, but
excluding in each case
any such expenditure made to restore, replace, or rebuild
property to the
condition of such property immediately prior to any damage,
loss, destruction,
or condemnation of such property, to the extent such expenditure
is made with
insurance proceeds, condemnation awards, or damage recovery
proceeds relating to
any such damage, loss, destruction, or condemnation; provided,
however, that (i)
amounts reinvested as contemplated in the proviso to CLAUSE (a)
in the
definition of Net Cash Proceeds and (ii) the acquisition of
assets pursuant to
any Permitted Acquisition shall not be deemed Capital
Expenditures.
"CAPITAL LEASE OBLIGATIONS" of any Person shall mean the
obligations of
such Person to pay rent or other amounts under any lease of (or
other
arrangement conveying the right to use) real or personal
property, or a
combination thereof, which obligations are required to be
classified and
accounted for as capital leases on a balance sheet of such
Person under GAAP,
and the amount of such obligations shall be the capitalized
amount thereof
determined in accordance with GAAP.
"CAPTIVE INSURANCE COMPANY" shall have the meaning assigned to
it in
SECTION 8.8 hereof.
"CASH COLLATERAL" shall have the meaning assigned to it in
SECTION 3.8
hereof.
"CASH COLLATERAL ACCOUNT" means the segregated cash collateral
account
of the Company at the Administrative Agent, over which the
Administrative Agent
shall have sole dominion and control, established pursuant to
SECTION 3.8
hereof, styled Flowserve B.V. Cash Collateral Account, which
account is pledged
to the Administrative Agent (for the benefit of the Lenders)
pursuant to the
Assignment of Cash Collateral Account.
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
3
<PAGE>
"CASH COLLATERAL CALL EVENT" means the occurrence and
continuance of an
Event of Default.
"CASUALTY PROCEEDS" shall have the meaning assigned to such term
in the
"Mortgages" defined in and delivered pursuant to the Parent
Credit Agreement.
"CLOSING DATE" means the later of (a) the date of the Agreement,
or (b)
the date the Company has satisfied all of the conditions
precedent set forth in
SECTION 5 hereof.
"CODE" means the Internal Revenue Code of 1986, as amended, or
any
successor federal tax code, and any reference to any statutory
provision shall
be deemed to be a reference to any successor provision or
provisions.
"COMMITTED SUM" means, as the case may be, the amount stated
beside
each Lender's name on the most-recently amended SCHEDULE 2.1 to
this Agreement
(which amount is subject to increase, reduction, or cancellation
in accordance
with this Agreement).
"COMPANY" shall have the meaning assigned to it in the preamble
hereof.
"CONDEMNATION PROCEEDS" shall have the meaning assigned to such
term in
the "Mortgages" defined in and delivered pursuant to the Parent
Credit
Agreement.
"CONSOLIDATED EBITDA" means, for any period, Consolidated Net
Income
for such period, plus (a) without duplication and to the extent
deducted in
determining such Consolidated Net Income, the sum of (i)
Consolidated Interest
Expense for such period, (ii) consolidated income tax expense
for such period,
(iii) all amounts attributable to depreciation and amortization
for such period,
(iv) any extraordinary losses or extraordinary non-cash charges
for such period,
(v) the amount of premium payments made by Parent or its
Subsidiaries associated
with the repurchase or prepayment of the Subordinated Notes from
the proceeds of
the Fall 2001 Equity Issuance and the amount of such premium
payments associated
with any further repurchase or repayment of the Subordinated
Notes to the extent
such repurchase or prepayment is permitted hereunder, (vi)
integration and
restructuring charges in connection with the IDP Transactions
and taken with
respect to periods ended on or prior to December 31, 2001, (vii)
integration and
restructuring charges in connection with the Acquisition and
taken with respect
to periods ended on or prior to June 30, 2004, in an aggregate
amount not to
exceed $40,000,000, and (viii) restructuring and integration
charges taken with
respect to periods beginning on July 1, 2003 and ended on or
prior to December
31, 2004, in an aggregate amount not to exceed $15,000,000, and
minus (b)
without duplication and to the extent included in determining
such Consolidated
Net Income, any extraordinary gains for such period, all
determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED FIXED CHARGES" means, for any period, the sum of
(a)
Consolidated Interest Expense for such period, (b) the aggregate
amount of
scheduled principal payments (whether or not made) during such
period in respect
of long term Indebtedness of the Parent and its Subsidiaries
(other than
payments made by the Parent or any of its Subsidiaries to the
Parent or any
other Subsidiary of the Parent), (c) Capital Expenditures for
such period, (d)
the aggregate amount of Taxes paid in cash by the Parent and its
Subsidiaries
during such period, and (e) the aggregate amount of Restricted
Payments made in
cash by the Parent and its Subsidiaries during such period in
accordance with
SECTION 8.6 (other than SECTION 8.6(a)(II)).
"CONSOLIDATED INTEREST EXPENSE" means, for any period, for the
Parent
and its Subsidiaries on a consolidated basis, the sum, without
duplication, of:
(a) all interest, premium payments (other than premium payments
associated with
the repurchase or prepayment of the Subordinated Notes from
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
4
<PAGE>
proceeds of the Fall 2001 Equity Issuance), fees, charges, and
related expenses
payable by the Parent and its Subsidiaries in connection with
borrowed money
(including capitalized interest and interest paid on
intercompany loans) or in
connection with the deferred purchase price of assets, in each
case to the
extent treated as interest in accordance with GAAP and payable
in cash, (b) the
portion of rent payable by the Parent and its Subsidiaries with
respect to such
period under capital leases that is treated as interest in
accordance with GAAP
and payable in cash, and (c) all fees, discounts, premiums,
expenses, or similar
amounts incurred by the Parent or any of its Subsidiaries in
connection with the
Receivables Program for such period, including purchase
discounts (net of any
loss reserves), purchase premiums, operating expense fees,
structuring fees,
collection agent fees, unutilized purchase limit fees, and other
similar fees
and expenses.
"CONSOLIDATED NET INCOME" means, for any period, the net income
or loss
of the Parent and its Subsidiaries for such period determined on
a consolidated
basis in accordance with GAAP; provided that there shall be
excluded: (a) the
income of any Subsidiary of the Parent to the extent that the
declaration or
payment of dividends or similar distributions by such Subsidiary
of that income
is not at the time permitted by operation of the terms of its
charter or any
agreement, instrument, judgment, decree, statute, rule, or
regulation applicable
to such Subsidiary, and (b) the income or loss of any person
accrued prior to
the date it becomes a Subsidiary of the Parent or is merged into
or consolidated
with the Parent or any Subsidiary of the Parent or the date that
such Person's
assets are acquired by the Parent or any Subsidiary of the
Parent.
"CREDIT EXPIRATION DATE" means May 31, 2006, the expiry date of
the
Letter of Credit, or any subsequent expiry date of the Letter of
Credit if
extended pursuant to SECTION 2.4.
"CREDIT PARTIES" means the Company, the Parent and each
Material
Subsidiary; and "CREDIT PARTY" means any one of them.
"CURRENT ASSETS" means, at any time, the consolidated current
assets
(other than cash and Permitted Investments) of the Parent and
its Subsidiaries.
"CURRENT LIABILITIES" means, at any time, the consolidated
current
liabilities of the Parent and its Subsidiaries at such time, but
excluding,
without duplication, (a) the current portion of any long-term
Indebtedness and
(b) outstanding "Revolving Loans" and "Swingline Loans" under
and as defined in
the Parent Credit Agreement.
"DEBTOR RELIEF LAWS" means any applicable liquidation,
conservatorship,
bankruptcy, moratorium, rearrangement, insolvency, fraudulent
conveyance,
reorganization or similar laws affecting the rights, remedies or
recourse of
creditors generally, including without limitation the United
States Bankruptcy
Code and all amendments thereto, as are in effect from time to
time.
"DEFAULT" means any event or condition which upon notice, lapse
of time
or both would constitute an Event of Default.
"DEFAULT RATE" means a per annum rate of interest equal from day
to day
to the lesser of (a)(i) the LIBOR Rate, plus (ii) the Applicable
Letter of
Credit Fee, plus (iii) 2% or (b) the Maximum Rate.
"DEFEASED IRBS" means the industrial revenue bonds due January
15, 2015
and issued by the City of Albuquerque, New Mexico in the
aggregate principal
amount of $15,000,000.
"DETERMINING LENDERS" means for all purposes under the Loan
Papers, (i)
on any date of determination occurring prior to the date upon
which the Letter
of Credit Commitment has been
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
5
<PAGE>
terminated, those Lenders who collectively hold at least 51% of
the Letter of
Credit Commitment; and (ii) on any date of determination
occurring on or after
the date upon which the Letter of Credit Commitment has been
terminated, those
Lenders who collectively hold at least 51% of the LC
Exposure.
"DOLLAR EQUIVALENT AMOUNT" means: (a) with respect to any amount
of any
currency on any day, the equivalent amount in Dollars of such
amount of such
currency as determined by Administrative Agent using the
applicable Exchange
Rate on such day, and (b) with respect to any amount of Dollars,
such amount.
"DOLLAR SUBORDINATED NOTE INDENTURE" means the indenture dated
as of
August 8, 2000, between the Parent, the guarantors identified
therein, and The
Bank of New York, as trustee, as in effect on the date hereof
and as hereafter
amended from time to time in accordance with the requirements
thereof and of
this Agreement, pursuant to which the Dollar Subordinated Notes
are issued.
"DOLLAR SUBORDINATED NOTES" means the Parent's 12-1/4%
Senior
Subordinated Notes due 2010, in an initial aggregate principal
amount of
$290,000,000 and an aggregate outstanding principal amount as of
the date hereof
of $188,500,000, issued pursuant to the Dollar Subordinated Note
Indenture and
any notes issued by the Parent in exchange for the Dollar
Subordinated Notes, as
contemplated by the Dollar Subordinated Note Indenture, with
substantially
identical terms as the Dollar Subordinated Notes.
"DOLLARS" and the sign "$" mean the lawful currency of the
United
States of America.
"DOMESTIC SUBSIDIARIES" shall mean all Subsidiaries of the
Parent
incorporated or organized under the laws of the United States of
America, any
state thereof or the District of Columbia.
"DRAWING" means a demand for payment under the Letter of Credit
in
accordance with its terms.
"EIB" means the European Investment Bank, having its seat in
Luxembourg.
"EIB LOAN" means the loan from the EIB to the Company and the
Parent,
as evidenced by that certain Finance Contract dated as of April
14, 2004,
between the Company, the Parent, and the EIB, as amended by
letter agreement
dated June 30, 2004, and as it may otherwise be amended or
supplemented from
time to time.
"ELIGIBLE ASSIGNEE" means: (a) a Lender; (b) an Affiliate of a
Lender
with a senior issuer rating from Moody's and S&P equal to or
greater than the
rating of the assigning Lender; and (c) any other Person
approved by the
Administrative Agent and Issuing Lender and, unless an Event of
Default has
occurred and is continuing at the time any assignment is
effected in accordance
with SECTION 11.12(b), the Company (such approval not to be
unreasonably
withheld by the Administrative Agent, Issuing Lender and the
Company); provided,
however, that neither the Company nor any Affiliate of the
Company shall qualify
as an Eligible Assignee.
"EMU LEGISLATION" shall mean the legislative measures of the
European
Union for the introduction of, changeover to or operation of the
Euro in one or
more member states.
"ENVIRONMENTAL LAWS" means all applicable federal, state, local,
and
foreign laws (including common law), treaties, regulations,
rules, ordinances,
codes, decrees, judgments and orders (including consent orders),
in each case,
relating to protection of the environment, natural resources,
human health and
safety as related to Hazardous Materials or the presence,
Release of, or
exposure to, Hazardous Materials, or the generation,
manufacture, processing,
distribution, use, treatment, storage, transport, recycling, or
handling of, or
the arrangement for such activities with respect to, Hazardous
Materials.
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
6
<PAGE>
"ENVIRONMENTAL LIABILITY" means liabilities, obligations,
claims,
actions, suits, judgments, or orders under or relating to any
Environmental Law
for any damages, injunctive relief, losses, fines, penalties,
fees, expenses
(including fees and expenses of attorneys and consultants) or
costs, including
those arising from or relating to: (a) any action to address the
on- or off-site
presence, Release of, or exposure to, Hazardous Materials; (b)
permitting and
licensing, administrative oversight, insurance premiums, and
financial assurance
requirements; (c) any personal injury (including death),
property damage (real
or personal), or natural resource damage; and (d) the compliance
or
non-compliance with any Environmental Law.
"EQUITY ISSUANCE" means any issuance or sale by the Parent or
any of
its Subsidiaries of any capital stock or other equity interests
of the Parent or
any Subsidiary of the Parent, as applicable, or any obligations
convertible into
or exchangeable for, or giving any Person a right, option, or
warrant to acquire
such capital stock or equity interests or such convertible or
exchangeable
obligations, except in each case for (a) any issuance or sale to
the Parent or
any of its Subsidiaries, (b) any issuance of directors'
qualifying shares, and
(c) sales or issuances of common stock of the Parent to
management or employees
of the Parent or any of its Subsidiaries under any employee
stock option or
stock purchase plan or employee benefit plan in existence from
time to time.
"ERISA" means the Employee Retirement Income Security Act of
1974, as
amended from time to time, and the regulations promulgated and
rulings issued
thereunder from time to time.
"ERISA AFFILIATE" means any trade or business (whether or
not
incorporated) that, together with any Credit Party, is treated
as a single
employer under Section 414(b) or (c) of the Code, or solely for
purposes of
Section 302 of ERISA and Section 412 of the Code, is treated as
a single
employer under Section 414 of the Code.
"ERISA EVENT" means: (a) any "reportable event," as defined in
Section
4043 of ERISA or the regulations issued thereunder, with respect
to a Plan
(other than an event for which the 30-day notice period is
waived); (b) the
existence with respect to any Plan of an "accumulated funding
deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA),
whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or
Section 303(d)
of ERISA of an application for a waiver of the minimum funding
standard with
respect to any Plan; (d) the incurrence by any Credit Party or
any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect
to the
termination of, or withdrawal from, any Plan or the withdrawal
or partial
withdrawal of any Credit Party or any of its ERISA Affiliates
from any
Multiemployer Plan; (e) the receipt by any Credit Party or any
of its ERISA
Affiliates from the PBGC or a plan administrator of any notice
relating to the
intention to terminate any Plan or Plans or to appoint a trustee
to administer
any Plan; (f) the adoption of any amendment to a Plan that would
require the
provision of security pursuant to Section 401(a)(29) of the Code
or Section 307
of ERISA; (g) the receipt by any Credit Party or any of its
ERISA Affiliates of
any notice, or the receipt by any Multiemployer Plan from any
Credit Party or
any of its ERISA Affiliates of any notice, concerning the
imposition of
Withdrawal Liability or a determination that a Multiemployer
Plan is, or is
expected to be, insolvent or in reorganization, within the
meaning of Title IV
of ERISA; (h) the occurrence of a "prohibited transaction"
(within the meaning
of Section 4975 of the Code) with respect to which any Credit
Party incurs
liability; (i) any other event or condition with respect to a
Plan or
Multiemployer Plan that could reasonably be expected to result
in liability of
any Credit Party; or (j) any Foreign Benefit Event.
"EURO" and the sign "E" mean the single currency of the
European
Union as constituted by the Treaty on European Union and as
referred to in the
EMU Legislation.
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
7
<PAGE>
"EURO SUBORDINATED NOTE INDENTURE" means the indenture dated as
of
August 8, 2000, between FFBV, the Parent, the other guarantors
identified
therein, and The Bank of New York, as trustee, as in effect on
the date hereof
and as hereafter amended from time to time in accordance with
the requirements
thereof and of this Agreement, pursuant to which the Euro
Subordinated Notes are
issued.
"EURO SUBORDINATED NOTES" means FFBV's 12-1/4% Senior
Subordinated
Notes due 2010, in an initial aggregate principal amount of
E100,000,000 and an
aggregate outstanding principal amount as of the date hereof of
E65,000,000,
issued pursuant to the Euro Subordinated Note Indenture and any
notes issued by
FFBV in exchange for the Euro Subordinated Notes, as
contemplated by the Euro
Subordinated Note Indenture, with substantially identical terms
as the Euro
Subordinated Notes.
"EVENT OF DEFAULT" shall have the meaning assigned to it in
SECTION 9.1
hereof.
"EXCESS CASH FLOW" means, for any fiscal year of the Parent, (a)
the
sum, without duplication, of (i) Consolidated EBITDA for such
fiscal year and
(ii) reductions to noncash working capital of the Parent and it
Subsidiaries for
such fiscal year (i.e., the decrease, if any, in Current Assets
minus Current
Liabilities from the beginning to the end of such fiscal year),
other than any
such reduction attributable solely to the establishment during
such fiscal year
of the Receivables Program, less (b) the sum, without
duplication, of (i) the
amount of any Taxes payable in cash by the Parent and its
Subsidiaries with
respect to such fiscal year, (ii) Consolidated Interest Expense
for such fiscal
year, (iii) Capital Expenditures made in cash in accordance with
SECTION 8.10
during such fiscal year, except to the extent financed with the
proceeds of
Indebtedness, Equity Issuances, Casualty Proceeds, Condemnation
Proceeds, or
other proceeds that would not be included in Consolidated
EBITDA, (iv) permanent
repayments of Indebtedness (other than repurchases or
prepayments of the
Subordinated Notes out of proceeds of the Fall 2001 Equity
Issuance) made by the
Parent and its Subsidiaries during such fiscal year, but only to
the extent that
such prepayments by their terms cannot be reborrowed or redrawn
and do not occur
in connection with a refinancing of all or any portion of such
Indebtedness, (v)
for the fiscal years ending December 31, 2002, December 31,
2003, and December
31, 2004, cash restructuring expenses and cash integration
expenses, to the
extent added to Consolidated Net Income in determining
Consolidated EBITDA for
such year, (vi) for the fiscal year ending December 31, 2002,
capitalized cash
restructuring expenses and cash integration expenses in an
amount not to exceed
$10,000,000, (vii) the amount of extraordinary cash losses for
such period to
the extent added to Consolidated Net Income in determining
Consolidated EBITDA
for such year, and (viii) additions to noncash working capital
for such fiscal
year (i.e., the increase, if any, in Current Assets minus
Current Liabilities
from the beginning to the end of such fiscal year); provided
that to the extent
otherwise included therein, the gains and losses attributable to
Asset Sales
shall be excluded from the calculation of Excess Cash Flow.
"EXCHANGE RATE" means with respect to any currency on any date
of
determination, the spot rate at which such currency may be
exchanged into
Dollars on such date determined by reference to such publicly
available service
for displaying exchange rates for such date as may be agreed
upon from time to
time by the Administrative Agent and the Company or, in the
absence of such
agreement, the "EXCHANGE RATE" shall instead be the
Administrative Agent's spot
rate of exchange in the interbank market where its foreign
currency exchange
operations in respect of such currency are then being conducted,
at or about
10:00 a.m., local time, on such date for the purchase of Dollars
with such
currency, for delivery two (2) Business Days later; provided,
however, that if,
at the time of any such determination, no such spot rate can
reasonably be
quoted, the Administrative Agent may use any method (including
obtaining quotes
from two (2) or more market makers for such currency) as it
reasonably deems
applicable to determine such rate, and such determination shall
be conclusive
absent manifest error.
"FALL 2001 EQUITY ISSUANCE" means the public offering of the
Parent's
common stock made by the Parent on November 21, 2001 resulting
in gross cash
proceeds of $154,890,850.
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
8
<PAGE>
"FBV" shall have the meaning assigned to it in the preamble
hereof.
"FBV CAPITAL EXPENDITURES" means, for any period, (a) the
additions to
property, plant, and equipment and other capital expenditures of
the Company and
its consolidated Subsidiaries that are (or should be) set forth
in a
consolidated statement of cash flows of the Company for such
period prepared in
accordance with GAAP, and (b) Capital Lease Obligations incurred
by the Company
and its consolidated Subsidiaries during such period, but
excluding in each case
any such expenditure made to restore, replace, or rebuild
property to the
condition of such property immediately prior to any damage,
loss, destruction,
or condemnation of such property, to the extent such expenditure
is made with
insurance proceeds, condemnation awards, or damage recovery
proceeds relating to
any such damage, loss, destruction, or condemnation.
"FBV EBITDA" means, for any period, FBV Net Income for such
period,
plus (a) without duplication and to the extent deducted in
determining such FBV
Net Income, the sum of (i) FBV Interest Expense for such period;
(ii)
consolidated income tax expense for such period; (iii) all
amounts attributable
to depreciation and amortization for such period; (iv) any
extraordinary losses
for such period; (v) any expenses resulting from earn-out
payments, royalties,
management fees, redistributions paid to any of the Parent's
Subsidiaries that
are not consolidated with the Company's consolidated financial
statements, and
minus (b) without duplication and to the extent included in
determining such FBV
Net Income, any extraordinary gains for such period, all
determined on a
consolidated basis in accordance with GAAP.
"FBV FIXED CHARGE COVERAGE RATIO" means, for any period, the
ratio of
(a) FBV EBITDA minus FBV Capital Expenditures for such period to
(b) FBV Fixed
Charges for such period.
"FBV FIXED CHARGES" means, for any period, the sum of (a) FBV
Interest
Expense for such period, (b) the aggregate amount of scheduled
principal
payments (whether or not made) during such period in respect of
long term
Indebtedness of the Company and its Subsidiaries (other than
payments made by
the Company or any of its Subsidiaries to the Company or any
other Subsidiary of
the Company), (c) the aggregate amount of Taxes paid in cash by
the Company and
its Subsidiaries during such period, and (d) the aggregate
amount of
distributions paid in cash by the Company and its Subsidiaries
for the purposes
of dividends, earn-out payments, loans, royalties, management
fees,
redistributions, principal payments of intercompany loan
payables, and other
similar items (reasonably determined by the Administrative
Agent) paid by
Company to any Subsidiary of the Parent that is not consolidated
with the
Company.
"FBV INTEREST EXPENSE" means for any period, for the Company and
its
Subsidiaries on a consolidated basis, the sum, without
duplication, of: (a) all
interest, premium payments, fees, charges, and related expenses
payable by the
Company and its Subsidiaries in connection with borrowed money
(including
capitalized interest and interest paid on intercompany loans) or
in connection
with the deferred purchase price of assets, in each case to the
extent treated
as interest in accordance with GAAP and payable in cash, and (b)
the portion of
rent payable by the Company and its Subsidiaries with respect to
such period
under capital leases that is treated as interest in accordance
with GAAP and
payable in cash.
"FBV LEVERAGE RATIO" means, on any date, the ratio of the
total
consolidated Indebtedness of the Company and its Subsidiaries on
such date
(excluding Indebtedness under SECTION 8.1(c)) to FBV EBITDA for
the period of
four consecutive fiscal quarters most recently ended on or prior
to such date.
"FBV NET INCOME" means, for any period, the net income or loss
of the
Company and its Subsidiaries for such period determined on a
consolidated basis
in accordance with GAAP.
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
9
<PAGE>
"FFBV" means Flowserve Finance B.V., a Netherlands
corporation
(besloten vennootschap) and a wholly owned Subsidiary of the
Parent.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum
(rounded
upwards, if necessary, to the nearest 1/100 of 1%) determined
(which
determination shall be conclusive and binding, absent manifest
error) by the
Administrative Agent to be equal to the weighted average of the
rates on
overnight Federal funds transactions with member banks 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 Business Day next
succeeding such day;
provided that (a) if such day is not a Business Day, the Federal
Funds Rate for
such day shall be such rate on such transactions on the next
preceding Business
Day as so published on the next succeeding Business Day, and (b)
if no such rate
is so published on such next succeeding Business Day, the
Federal Funds Rate for
such day shall be the average rate charged to the Administrative
Agent (in its
individual capacity) on such day on such transactions as
determined by the
Administrative Agent (which determination shall be conclusive
and binding,
absent manifest error).
"FIFTH THIRD LETTER OF CREDIT" means each letter of credit
previously
issued for the account of the Parent or any of its Subsidiaries
that: (a) is
outstanding on the date hereof, and (b) is listed on SCHEDULE
1.1(a).
"FINANCIAL OFFICER" of any Person means the chief financial
officer,
principal accounting officer, treasurer, or controller of such
Person.
"FINSUB" means a bankruptcy-remote, wholly owned Subsidiary of
the
Parent, organized solely for the purpose of engaging in the
Receivables Program.
"FOREIGN BENEFIT EVENT" means, with respect to any Foreign
Pension
Plan, (a) the existence of unfunded liabilities in excess of the
amount
permitted under any applicable Law, or in excess of the amount
that would be
permitted absent a waiver from a Governmental Authority, (b) the
failure to make
the required contributions or payments, under any applicable
Law, on or before
the due date for such contributions or payments, (c) the receipt
of a notice by
a Governmental Authority relating to the intention to terminate
any such Foreign
Pension Plan or to appoint a trustee or similar official to
administer any such
Foreign Pension Plan, or alleging the insolvency of any such
Foreign Pension
Plan and (d) the incurrence of any liability in excess of the
Dollar Equivalent
Amount of $5,000,000 by any Credit Party under applicable Law on
account of the
complete or partial termination of such Foreign Pension Plan or
the complete or
partial withdrawal of any participating employer therein, or (e)
the occurrence
of any transaction that is prohibited under any applicable Law
that results in
the incurrence of any liability by any Credit Party, or the
imposition on any
Credit Party of any fine, excise tax, or penalty resulting from
any
noncompliance with any applicable Law, in each case in excess of
the Dollar
Equivalent Amount of $5,000,000.
"FOREIGN PENSION PLAN" shall mean any benefit plan which
under
applicable Law is required to be funded through a trust or other
funding vehicle
other than a trust or funding vehicle maintained exclusively by
a Governmental
Authority.
"FOREIGN SUBSIDIARY" means any Subsidiary of the Parent that is
not a
Domestic Subsidiary.
"GAAP" means generally accepted accounting principles of the
Accounting
Principles Board of the American Institute of Certified Public
Accountants and
the Financial Accounting Standards Board that are applicable
from time to time.
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
10
<PAGE>
"GOVERNMENTAL AUTHORITY" means any: (a) local, state, municipal,
or
federal judicial, executive, or legislative instrumentality; (b)
private
arbitration board or panel; or (c) central bank.
"GOVERNMENTAL REQUIREMENT" means all judgments, orders,
writs,
injunctions, decrees, awards, laws, ordinances, statutes,
regulations, rules,
franchises, permits, certificates, licenses, authorization and
the like and any
other requirements of any government or any commission, board,
court, agency,
instrumentally or political subdivision thereof.
"GUARANTORS" means the Parent and each Material Subsidiary,
and
"GUARANTOR" means any one of them.
"GUARANTY" means the Guaranty of each Guarantor made under
SECTION 4
hereof.
"HAZARDOUS MATERIALS" means: (a) any petroleum products or
byproducts
and all other hydrocarbons, coal ash, radon gas, asbestos, urea
formaldehyde
foam insulation, polychlorinated biphenyls, chlorofluorocarbons,
and all other
ozone-depleting substances, in each case regulated by any
Environmental Law, and
(b) any chemical, material, substance, or waste that is
prohibited, limited, or
regulated by or pursuant to any Environmental Law.
"HEDGING AGREEMENT" means any interest rate protection
agreement,
foreign currency exchange agreement, commodity price protection
agreement, or
other interest or currency exchange rate or commodity price
hedging arrangement.
"IDP" means Ingersoll-Dresser Pump Company, a Delaware
general
partnership.
"IDP PURCHASE AGREEMENT" means the Purchase Agreement dated as
of
February 9, 2000, as amended by Amendment No. 1 dated as of July
14, 2000 among
the Parent, Flowserve RED Corporation, IDP Acquisition, LLC, and
Ingersoll Rand
Company.
"IDP TRANSACTIONS" means the acquisition of the partnership
interests
in IDP pursuant to the IDP Purchase Agreement on or about August
8, 2000.
"INDEBTEDNESS" of any Person means, without duplication: (a)
all
obligations of such Person for borrowed money, (b) all
obligations of such
Person evidenced by bonds, debentures, notes, or similar
instruments, (c) all
obligations of such Person upon which interest charges are
customarily paid, (d)
all obligations of such Person under conditional sale or other
title retention
agreements relating to property or assets purchased by such
person, (e) all
obligations of such Person issued or assumed as the deferred
purchase price of
property or services (excluding trade accounts payable and
accrued obligations
incurred in the ordinary course of business), (f) all
Indebtedness of others
secured by (or for which the holder of such Indebtedness has an
existing right,
contingent or otherwise, to be secured by) any Lien on property
owned or
acquired by such Person, whether or not the obligations secured
thereby have
been assumed, (g) all guarantees by such person of Indebtedness
of third
parties, (h) all Capital Lease Obligations of such Person, (i)
all obligations
of such person as an account party in respect of letters of
credit, and (j) all
obligations of such Person in respect of bankers' acceptances.
The Indebtedness
of any Person shall include the Indebtedness of any partnership
in which such
Person is a general partner. In addition, for purposes of this
Agreement, the
Indebtedness of Finsub shall also include all consideration
provided to Finsub
by the purchaser of Program Receivables less any amounts
collected with respect
to such Program Receivables. Notwithstanding the foregoing, so
long as the
Defeased IRBs are owned by the Parent or a wholly owned
subsidiary, neither the
Defeased IRBs nor any guarantee thereof shall constitute
Indebtedness hereunder.
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
11
<PAGE>
"INVESTMENT GRADE RATINGS" means that the credit rating of the
Parent's
senior unsecured, non-credit-enhanced long-term debt is (a) BBB-
or higher, as
determined by S&P, and (b) Baa3 or higher, as determined by
Moody's.
"ISSUANCE FEE" shall have the meaning assigned to it in SECTION
3.2(b)
hereof.
"ISSUING LENDER" means Calyon New York Branch or such other
Lender, if
any, that becomes the issuer of the Letter of Credit under this
Agreement.
"LAWS" means all applicable statutes, laws, treaties,
ordinances,
tariff requirements, rules, regulations, orders, writs,
injunctions, decrees,
judgments, opinions, or interpretations of any Governmental
Authority.
"LC EXPOSURE" means, at any time and without duplication, under
this
Agreement the sum of (a) the aggregate undrawn portion of the
Available Amount
plus (b) the aggregate unpaid reimbursement obligations of the
Company in
respect of Drawings.
"LENDERS" means, on any date of determination, the financial
institutions named on SCHEDULE 2.1 (as the same may be amended
from time to time
by the Administrative Agent to reflect the assignments made in
accordance with
SECTION 11.12(c) of this Agreement), and subject to the terms
and conditions of
this Agreement, their respective successors and assigns, but not
any Participant
who is not otherwise a party to this Agreement.
"LETTER OF CREDIT" means the irrevocable standby letter of
credit
issued by the Issuing Lender (a) in an amount of up to
$89,250,000, (b)
supporting the EIB Loan, and (c) in the form of EXHIBIT C
attached hereto.
"LETTER OF CREDIT COMMITMENT" shall have the meaning assigned to
it in
SECTION 2.1 hereof.
"LETTER OF CREDIT FEE" shall have the meaning assigned to it in
SECTION
3.2(c) hereof.
"LEVERAGE RATIO" means, on any date for the Parent, the ratio of
Total
Debt on such date to Consolidated EBITDA for the period of four
consecutive
fiscal quarters most recently ended on or prior to such date;
provided, however,
if at any time the Leverage Ratio is being determined, the
Parent or any of its
Subsidiaries shall have completed a Permitted Acquisition or an
Asset Sale since
the beginning of the relevant four fiscal quarter period, the
Leverage Ratio
shall be computed on a pro forma basis (in accordance with the
last sentence of
SECTION 8.4(g)) as if such Permitted Acquisition or Asset Sale
and any related
incurrence of Indebtedness, had occurred at the beginning of
such period.
"LIBOR RATE" means, for any day, a fluctuating rate of interest
equal
to (a) the offered quotation which appears on the page of the
Telerate Screen
which displays an average rate of the British Bankers'
Association for the
Dollar for a three-month period at or about 10:00 A.M. (London
time) on such
date, or (b) if such page or such service shall cease to be
available, such
other page or such other service for the purpose of displaying
an average rate
of the British Bankers' Association as the Administrative Agent,
after
consultation with the Company, shall reasonably select; provided
that, to the
extent that an interest rate is not ascertainable pursuant to
the foregoing
provisions of this definition, the "LIBOR Rate," for any day,
shall be a
fluctuating rate of interest determined by the Administrative
Agent to be the
rate at which deposits in Dollars are offered for a three-month
period to major
banks in the European interbank market by the Administrative
Agent at
approximately 11:00 a.m. (London time) on such date.
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
12
<PAGE>
"LIEN" means a mortgage, pledge, lien, security interest or
other
charge or encumbrance, or any other type of preferential
arrangement to secure
or provide for the payment of any obligation of any Person,
whether arising by
contract, operation of law or otherwise (including, without
limitation, the
interest of a vendor or lessor under any conditional sale
agreement, capital
lease or other title retention agreement).
"LOAN PAPERS" means: (a) this Agreement, certificates
delivered
pursuant to this Agreement, and Exhibits and Schedules hereto;
(b) all
agreements, documents, or instruments in favor of the
Administrative Agent,
Issuing Lender, or Lenders (or the Administrative Agent on
behalf of Lenders)
delivered pursuant to this Agreement or otherwise delivered in
connection with
all or any part of the Obligation; (c) the Letter of Credit; and
(d) all
renewals, extensions, or restatements of, or amendments or
supplements to, any
of the foregoing.
"MARGIN STOCK" shall have the meaning assigned to such term
in
Regulation U.
"MATERIAL ADVERSE CHANGE" means a material adverse change in, or
a
material adverse effect upon, the financial condition of the
Parent and its
Subsidiaries, taken as a whole.
"MATERIAL INDEBTEDNESS" means Indebtedness (other than
Indebtedness
under this Agreement), or obligations in respect of one or more
Hedging
Agreements, of any Credit Party in an aggregate principal amount
exceeding the
Dollar Equivalent Amount of $10,000,000. For purposes of
determining Material
Indebtedness, the "principal amount" of the obligations of any
Credit Party in
respect of any Hedging Agreement at any time shall be the
maximum aggregate
amount (giving effect to any netting agreements) that such
Credit Party would be
required to pay if such Hedging Agreement were terminated at
such time.
"MATERIAL SUBSIDIARY" means each of the Persons listed on
SCHEDULE 1
hereto.
"MAXIMUM AMOUNT and MAXIMUM RATE" respectively mean, for each
Lender,
the maximum non-usurious amount and the maximum non-usurious
rate of interest
which, under applicable Law, such Lender is permitted to
contract for, charge,
take, reserve, or receive on the Obligation.
"MOODY'S" means Moody's Investors Service, Inc., or any
successor
thereto.
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan as defined
in
Section 4001(a)(3) of ERISA.
"NET CASH PROCEEDS" means: (a) with respect to any Asset Sale,
the cash
proceeds (including cash proceeds subsequently received (as and
when received)
in respect of noncash consideration initially received), net of
(i) selling
expenses (including broker's fees or commissions, legal fees,
transfer and
similar taxes, and the Parent's good faith estimate of income
taxes paid or
payable in connection with such sale), (ii) amounts provided as
a reserve, in
accordance with GAAP, against any liabilities under any
indemnification
obligations or purchase price adjustment associated with such
Asset Sale
(provided that, to the extent and at the time any such amounts
are released from
such reserve, such amounts shall constitute Net Cash Proceeds),
and (iii) the
principal amount, premium or penalty, if any, interest and other
amounts on any
Indebtedness for borrowed money which is secured by the asset
sold in such Asset
Sale and which is required to be repaid with such proceeds
(other than any such
Indebtedness assumed by the purchaser of such asset); provided,
however, that if
(x) the Parent shall deliver a certificate of a Financial
Officer to the
Administrative Agent at or prior to the time of receipt thereof
setting forth
the Parent's intent to reinvest such proceeds in productive
assets of a kind
then used or usable in the business of the Parent and its
Subsidiaries within
270 days of receipt of such proceeds and (y) no Default or Event
of Default
shall have occurred and shall be continuing at the time of such
certificate or
at the proposed
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
13
<PAGE>
time of the application of such proceeds, such proceeds shall
not constitute Net
Cash Proceeds except to the extent not so used or contractually
committed to be
used at the end of such 270-day period, at which time such
proceeds shall be
deemed to be Net Cash Proceeds; and (b) with respect to any
issuance or
disposition of Indebtedness or any Equity Issuance or the
initial sale of
Program Receivables pursuant to the Receivables Program (or any
subsequent
increase thereto permitted hereunder), the cash proceeds
thereof, net of all
taxes and fees, commissions, costs and other expenses incurred
in connection
therewith. Any "boot" or other non-like-kind assets received in
connection with
an Asset Swap shall, to the extent received in cash or at the
time converted
into cash, be considered cash proceeds from the sale of an
asset.
"NEW SUBORDINATED DEBT" means Indebtedness having the
following
characteristics: (i) the obligor shall be the Parent, (ii) such
Indebtedness
shall be unsecured, (iii) such Indebtedness shall be
subordinated in right of
payment to the Obligations in a manner reasonably acceptable to
the
Administrative Agent, (iv) such Indebtedness shall not have any
scheduled
payment of principal, scheduled prepayment, scheduled mandatory
redemption, or
sinking fund payment prior to December 31, 2009, (v) such
Indebtedness shall not
contain any provision prohibiting the creation or assumption of
any Lien on any
of the properties or assets of the Parent or its Subsidiaries,
whether then
owned or thereafter acquired, to secure payment of the
Obligations or any
agreement renewing, refinancing, or extending the Obligations or
this Agreement,
(vi) the Parent shall be in compliance with SECTIONS 8.11, 8.12,
and 8.13(a) on
a pro forma basis after giving effect to the incurrence of such
Indebtedness,
and (vii) other terms and conditions shall be no less favorable
to the Parent or
its Subsidiaries or the Lenders in any material respect than the
terms and
conditions applicable to the Subordinated Notes.
"OBLIGATION" means all present and future indebtedness,
fees,
commissions, obligations, and liabilities of any Credit Party,
and all renewals
and extensions thereof, or any part thereof, now or hereafter
owed to the
Administrative Agent, Issuing Lender, or any Lender, arising
pursuant to this
Agreement, the Letter of Credit or the Assignment of Cash
Collateral Account,
and including, without limitation, any and all interest accruing
thereon, and
attorneys' fees incurred in the enforcement or collection
thereof.
"ORIGINAL CREDIT AGREEMENT" means that certain Credit Agreement
dated
as of August 8, 2000, among the Parent, Bank of America, N.A.,
as administrative
agent and collateral agent, and certain other agents and lenders
party thereto,
as amended, restated, modified, or supplemented from time to
time.
"ORIGINAL CURRENCY" shall have the meaning assigned to it in
SECTION
11.14(a) hereof.
"OTHER CURRENCY" shall have the meaning assigned to it in
SECTION
11.14(a) hereof.
"OTHER TAXES" shall have the meaning assigned to it in SECTION
3.6(c)
hereof.
"PARENT" means Flowserve Corporation, a New York
corporation.
"PARENT CREDIT AGREEMENT" means that certain First Amended and
Restated
Credit Agreement dated as of May 2, 2002, by and among the
Parent, Bank of
America, N.A., as administrative agent, and the other lenders
and agents party
thereto, as amended, restated, modified, or supplemented from
time to time.
"PARTICIPANT" shall have the meaning assigned to it in SECTION
11.12(e)
hereof.
"PBGC" means the Pension Benefit Guaranty Corporation referred
to and
defined in ERISA.
"PERMITTED ACQUISITION" shall have the meaning assigned to it
in
SECTION 8.4(g) hereof.
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
14
<PAGE>
"PERMITTED INVESTMENTs" means:
(a) direct obligations of, or obligations the principal of and
interest
on which are unconditionally guaranteed by, the United States of
America (or by
any agency thereof to the extent such obligations are backed by
the full faith
and credit of the United States of America), in each case
maturing within one
year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days
from the
date of acquisition thereof and having, at such date of
acquisition, one of the
three highest credit ratings obtainable from S&P or from
Moody's;
(c) investments in certificates of deposit, banker's
acceptances, and
time deposits maturing within one year from the date of
acquisition thereof
issued or guaranteed by or placed with, and money market deposit
accounts issued
or offered by, the Administrative Agent or any domestic office
of any commercial
bank organized under the laws of the United States of America or
any state
thereof that has a combined capital and surplus and undivided
profits of not
less than $500,000,000;
(d) fully collateralized repurchase agreements with a term of
not more
than 30 days for securities described in CLAUSE (a) above and
entered into with
a financial institution satisfying the criteria of CLAUSE (c)
above;
(e) investments in "money market funds" within the meaning of
Rule 2a-7
of the Investment Company Act of 1940, as amended, substantially
all of whose
assets are invested in investments of the type described in
CLAUSES (a) through
(d) above; and
(f) other short-term investments utilized by Foreign
Subsidiaries in
accordance with normal investment practices for cash management
in investments
of a type analogous to the foregoing.
"PERSON" means an individual, sole proprietorship, partnership,
joint
venture, association, trust, estate, business trust,
corporation, not-for-profit
corporation, sovereign government or agency, instrumentality, or
political
subdivision thereof, or any similar entity or organization.
"PLAN" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of
ERISA or Section
412 of the Code or Section 307 of ERISA, and in respect of which
any Credit
Party or any ERISA Affiliate is (or, if such plan were
terminated, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined
in Section 3(5)
of ERISA.
"PRESCRIBED FORMS" means such duly executed form(s) or
statement(s),
and in such number of copies, which may, from time to time, be
prescribed by Law
and which, pursuant to applicable provisions of: (a) an income
tax treaty
between the United States and the country of residence of the
Administrative
Agent or a Lender providing the form(s) or statement(s); (b) the
Code; or (c)
any applicable rule or regulation under the Code, permit the
Company to make
payments hereunder for the account of the Administrative Agent
or such Lender
free of deduction or withholding of income or similar taxes.
"PROGRAM RECEIVABLES" means all trade receivables and related
contract
rights originated and owned by the Parent or any of its
Subsidiaries and sold
pursuant to the Receivables Program.
"PROJECTIONS" shall have the meaning assigned thereto in
SECTION
5.6(a)(i) hereof.
"PRO RATA or PRO RATA PART" means on any date of determination
for any
Lender: (a) at any time prior to the termination of the Letter
of Credit
Commitment, the proportion that such Lender's Committed
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
15
<PAGE>
Sum bears to the Letter of Credit Commitment, or (b) at any time
on or after the
termination of the Letter of Credit Commitment, such Lender's
proportionate part
(whether held directly or through a participation therein and
determined after
giving effect to any participations) of the LC Exposure.
"RECEIVABLES PROGRAM" means, collectively, (a) the sale of, or
transfer
of interests in, Program Receivables to Finsub in a "true sale"
transaction, and
(b) the sale of, or transfer of interests in, such Program
Receivables by Finsub
to persons that are not Affiliates of the Parent; provided that
all governing
terms and conditions (including any terms or conditions
providing for recourse
to the Parent or any of its Subsidiaries (other than Finsub)) of
the Receivables
Program shall be subject to the prior written approval of the
Administrative
Agent, which approval shall not be unreasonably withheld.
"RECEIVABLES PROGRAM DOCUMENTATION" means all written agreements
that
may from time to time be entered into by the Parent and/or any
of its
Subsidiaries in connection with the Receivables Program, as such
agreements may
be amended, supplemented, or otherwise modified from time to
time in accordance
with the provisions thereof and hereof.
"REGULATION T" means Regulation T of the Board as from time to
time in
effect and all official rulings and interpretations thereunder
or thereof.
"REGULATION U" means Regulation U of the Board as from time to
time in
effect and all official rulings and interpretations thereunder
or thereof.
"REGULATION X" means Regulation X of the Board as from time to
time in
effect and all official rulings and interpretations thereunder
or thereof.
"RELEASE" means any release, spill, emission, leaking,
dumping,
injection, pouring, deposit, disposal, discharge, dispersal,
leaching, or
migration into or through the environment or within or upon any
building,
structure, facility, or fixture.
"REPRESENTATIVES" means representatives, officers,
directors,
employees, attorneys, and agents.
"RESPONSIBLE OFFICER" means: (a)(i) in the case of a corporation
or
trust where such Person has appointed officers, its president or
any vice
president, and, in any case where two Responsible Officers are
acting on behalf
of such Person, the second such Responsible Officer may be a
secretary or
assistant secretary, or (ii) in the case of a corporation or
trust where such
Person has not appointed officers, a director or managing
director; (b) in the
case of a limited partnership, the Responsible Officer of the
general partner,
acting on behalf of such general partner in its capacity as
general partner; and
(c) in the case of a limited liability company, the Responsible
Officer of the
managing member, acting on behalf of such managing member in its
capacity as
managing member.
"RESTRICTED PAYMENT" shall have the meaning assigned to such
term in
Section 8.6(a).
"RIGHTS" means rights, remedies, powers, privileges, and
benefits.
"S&P" means Standard & Poor's Ratings Group, a division
of McGraw Hill,
Inc., a New York corporation, or any successor thereto.
"SALE AND LEASE-BACK TRANSACTION" of any Person means any
arrangement
entered into by such Person or any Subsidiary of such Person,
directly or
indirectly, whereby such Person or any Subsidiary of such Person
shall sell or
transfer any property, whether now owned or hereafter acquired,
and whereby such
Person or any Subsidiary of such Person shall then or thereafter
rent or lease
as lessee such property
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
16
<PAGE>
or any part thereof or other property which such Person or any
Subsidiary of
such Person intends to use for substantially the same purpose or
purposes as the
property sold or transferred.
"SEC" means the Securities and Exchange Commission or any
successor
thereto.
"SUBSIDIARY" of any Person means any corporation, partnership,
joint
venture, or other entity of which more than 50% of the
outstanding capital stock
or other equity interests having ordinary voting power
(irrespective of whether
or not at the time capital stock or other equity interest of any
other class or
classes of such corporation, partnership, joint venture or other
entity shall or
might have voting power upon the occurrence of any contingency)
is at the time
directly or indirectly owned by such Person.
"SUBORDINATED NOTES" means the Dollar Subordinated Notes and the
Euro
Subordinated Notes.
"TAXES" shall have the meaning assigned thereto in SECTION
3.6(a)
hereof.
"TOTAL DEBT" means, at any time, the total consolidated
Indebtedness of
the Parent and its Subsidiaries at such time (excluding (a)
Indebtedness under
SECTION 8.1(k); (b) Indebtedness under SECTION 8.1(o); and (c)
Indebtedness of
the type described in CLAUSE (i) of the definition of such term
and under
SECTION 8.1(l), except in each case to the extent of any
unreimbursed drawings
or payments thereunder.
"U.C.P." means the Uniform Customs and Practice for Documentary
Credits
(1993 Revision), International Chamber of Commerce Publication
No. 500.
"WITHDRAWAL LIABILITY" means liability to a Multiemployer Plan
as a
result of a complete or partial withdrawal from such
Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of
ERISA.
1.2 NUMBER AND GENDER OF WORDS; OTHER REFERENCES. Unless
otherwise
specified, in the Loan Papers: (a) where appropriate, the
singular includes the
plural and vice versa, and words of any gender include each
other gender, (b)
heading and caption references may not be construed in
interpreting provisions,
(c) monetary references are to currency of the United States of
America, (d)
section, paragraph, annex, schedule, exhibit, and similar
references are to the
particular Loan Paper in which they are used, (e) references to
"telecopy,"
"facsimile," "fax," or similar terms are to facsimile or
telecopy transmissions,
(f) references to "including" mean including without limiting
the generality of
any description preceding that word, (g) the rule of
construction that
references to general items that follow references to specific
items are limited
to the same type or character of those specific items is not
applicable in the
Loan Papers, (h) references to any Person include that Person's
heirs, personal
representatives, successors, trustees, receivers, and permitted
assigns, (i)
references to any Law include every amendment or supplement to
it, rule and
regulation adopted under it, and successor or replacement for
it, and (j)
references to any Loan Paper or other document include every
renewal and
extension of it, amendment and supplement to it, and replacement
or substitution
for it.
1.3 ACCOUNTING TERMS. All accounting terms not specifically
defined
herein shall be construed in accordance with GAAP and policies
consistent with
those applied in the preparation of the consolidated financial
statements
referred to herein.
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
17
<PAGE>
SECTION 2 LETTER OF CREDIT FACILITY
2.1 LETTER OF CREDIT COMMITMENT.
(a) The Issuing Lender irrevocably agrees, subject to and in
accordance with the terms and conditions contained in this
Agreement,
to issue the Letter of Credit in an aggregate amount not to
exceed at
any time outstanding $89,250,000 (the "LETTER OF CREDIT
COMMITMENT").
The rules of the U.C.P. shall apply to the Letter of Credit.
(b) Immediately upon the issuance by Issuing Lender of the
Letter of Credit, Issuing Lender shall be deemed to have sold
and
transferred to each other Lender, and each other such Lender
shall be
deemed irrevocably and unconditionally to have purchased and
received
from Issuing Lender, without recourse or warranty, an
undivided
interest and participation, to the extent of such Lender's Pro
Rata
Part in the Letter of Credit and all Rights of Issuing Lender
in
respect thereof (other than Rights to receive certain fees
provided for
in SECTION 3.2(c)). Upon issuance, renewal, amendments or
extension of
the Letter of Credit, Issuing Lender shall provide copies
thereof to
the Administrative Agent and each other Lender.
(c) In order to induce Issuing Lender to issue and maintain
the Letter of Credit and Lenders to participate therein, the
Company
agrees to pay or reimburse the Administrative Agent for the
benefit of
the Issuing Lender and the other Lenders (i) on the date on
which any
draft is paid, the amount of any draft paid by Issuing Lender
and (ii)
no later than three (3) days after demand therefor, the amount
of any
fees (in addition to the fees described in SECTION 3) Issuing
Lender
customarily charges to a Person similarly situated in the
ordinary
course of its business for amending letters of credit, for
honoring
drafts, and taking similar action in connection with letters of
credit.
The Company's obligations under this SECTION 2.1(c) shall be
absolute
and unconditional under any and all circumstances and shall be
made in
accordance with the terms and conditions of this Agreement,
including,
without limitation, any of the following circumstances: (A)
the
existence of any claim, setoff, defense, or other Right which
the
Company may have at any time against the beneficiary named in
the
Letter of Credit, any transferee of the Letter of Credit (or any
Person
for whom any such transferee may be acting), the Administrative
Agent,
Issuing Lender, any Lender, or any other Person, whether in
connection
with this Agreement, the Letter of Credit, the transactions
contemplated herein, or any unrelated transactions (including
any
underlying transaction between the Company and the beneficiary
named in
the Letter of Credit); or (B) any draft, certificate, or any
other
document presented under the Letter of Credit proving to be
forged,
fraudulent, invalid, or any statement therein being untrue
or
inaccurate in any respect. To the extent any funding of a draft
has
been made by Lenders pursuant to SECTION 2.1(e), the
Administrative
Agent shall promptly distribute any such payments received from
the
Company with respect to such draft to the Issuing Lender and all
other
Lenders funding such draft according to their Pro Rata Part.
Interest
on any amounts remaining unpaid by the Company under this clause
at any
time from and after the date such amounts become payable until
paid in
full shall be payable by the Company to the Administrative Agent
at the
Default Rate. In the event any payment by the Company received
by the
Administrative Agent with respect to the Letter of Credit
and
distributed to the Issuing Lender and the other Lenders on
account of
their participations therein is thereafter set aside, avoided,
or
recovered from the Administrative Agent in connection with
any
receivership, liquidation, or bankruptcy proceeding, each Lender
which
received such distribution shall, upon demand by the
Administrative
Agent, contribute such Lender's ratable portion of the amount
set
aside, avoided, or recovered, together with interest at the
rate
required to be paid by the Administrative Agent upon the
amount
required to be repaid by it.
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
18
<PAGE>
(d) If any draft shall be presented for payment under the
Letter of Credit, the Issuing Lender shall promptly notify
the
Administrative Agent thereof and Administrative Agent shall
promptly
notify the Company of the date and amount of such draft;
provided that
failure to give any such notice shall not affect the obligations
of the
Company hereunder. Issuing Lender shall make payment upon
presentment
of a draft for honor unless it appears that presentment on its
face
does not comply with the terms of the Letter of Credit,
regardless of
whether (i) any default or potential default under any other
agreement
has occurred and (ii) the obligations under any other agreement
have
been performed by the beneficiary or any other Person (and
Issuing
Lender shall not be liable for any obligation of any Person
thereunder). The Administrative Agent, Issuing Lender and
Lenders shall
not be responsible for, and the Company's reimbursement
obligations for
honored drafts shall not be affected by, any matter or event
whatsoever
(including, without limitation, the validity or genuineness
of
documents or of any endorsements thereof, even if such documents
should
in fact prove to be in any respect invalid, fraudulent, or
forged), or
any dispute among the Company, the beneficiary of the Letter of
Credit,
or any other Person to whom the Letter of Credit may be
transferred, or
any claims whatsoever of the Company against any beneficiary of
the
Letter of Credit or any such transferee; provided that, nothing
in this
Agreement shall constitute a waiver of the Company's Rights to
assert
any claim based upon the gross negligence or willful misconduct
of the
Administrative Agent, Issuing Lender or any Lender.
(e) If the Company fails to reimburse the Administrative
Agent
as provided in SECTION 2.1(c) within 24 hours of the demand
therefor by
the Administrative Agent, the Administrative Agent shall
promptly
notify each Lender of such failure, of the date and amount of
the draft
paid, and of such Lender's Pro Rata Part thereof. Each Lender
shall
promptly and unconditionally make available to the
Administrative Agent
in immediately available funds such Lender's Pro Rata Part of
such
unpaid reimbursement obligation, which funds shall be paid
to
Administrative Agent on or before the close of business on the
Business
Day on which such notice was given by the Administrative Agent
(if
given prior to 1:00 p.m., New York time) or on the next
succeeding
Business Day (if notice was given after 1:00 p.m., New York
time). All
such amounts payable by any such Lender shall include interest
thereon
accruing at the Federal Funds Rate from the day the applicable
draft is
paid by Issuing Lender to (but not including) the date such
amount is
paid by such Lender to the Administrative Agent. The obligations
of
Lenders to make payments to the Administrative Agent with
respect to
the Letter of Credit shall be irrevocable and not subject to
any
qualification or exception whatsoever (other than the gross
negligence
or willful misconduct of the Administrative Agent or Issuing
Lender)
and shall be made in accordance with the terms and conditions of
this
Agreement under all circumstances, including, without
limitation, any
of the following circumstances: (i) any lack of validity or
enforceability of this Agreement or any of the Loan Papers; (ii)
the
existence of any claim, setoff, defense, or other Right which
the
Company may have at any time against the beneficiary named in
the
Letter of Credit, any transferee of the Letter of Credit (or any
Person
for whom any such transferee may be acting), the Administrative
Agent,
Issuing Lender, any Lender, or any other Person, whether in
connection
with this Agreement, the Letter of Credit, the transactions
contemplated herein, or any unrelated transactions (including
any
underlying transaction between the Company and the beneficiary
named in
the Letter of Credit); (iii) any draft, certificate, or any
other
document presented under the 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; and (iv)
the
occurrence of any Event of Default.
(f) The Company acknowledges that the Letter of Credit will
be
deemed issued upon delivery to its beneficiary or the Company.
If the
Company requests the Letter of Credit be delivered to the
Company
rather than the beneficiary, and the Company subsequently
cancels the
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
19
<PAGE>
Letter of Credit, the Company agrees to return it to Issuing
Lender
together with the Company's written certification that it has
never
been delivered to such beneficiary. If the Letter of Credit
is
delivered to its beneficiary pursuant to the Company's
instructions, no
cancellation thereof by the Company shall be effective without
written
consent of such beneficiary to the Administrative Agent and
Issuing
Lender and return of the Letter of Credit to Issuing Lender.
(g) Issuing Lender agrees with each Lender that it will
exercise and give the same care and attention to the Letter of
Credit
as it gives to its other letters of credit, and that it shall
have no
liability to any other Lender with respect to the Letter of
Credit
(other than liability arising from the gross negligence or
willful
misconduct of Issuing Lender). Each Lender, Administrative Agent
and
the Company agree that, in paying any draw under the Letter of
Credit,
Issuing Lender shall not have any responsibility to obtain any
document
(other than any documents required by the Letter of Credit) or
to
ascertain or inquire as to the validity or accuracy of any
such
document or the authority of the Person delivering any such
document.
The Administrative Agent, Issuing Lender, Lenders, and their
respective
Representatives shall not be liable to any other Lender or
Company for
the use which may be made of the Letter of Credit or for any
acts or
omissions of any beneficiary thereof in connection therewith.
Any
action, inaction, error, delay, or omission taken or suffered by
the
Administrative Agent, Issuing Lender or any of their
respective
Representatives under or in connection with the Letter of
Credit, the
draws, drafts, or documents relating thereto, or the
transmission,
dispatch, or delivery of any message or advice related thereto,
if in
good faith and in conformity with applicable Laws and in
accordance
with the standards of care specified in the U.C.P., shall be
binding
upon the Company and Lenders and shall not place the
Administrative
Agent, Issuing Lender or any of their respective Representatives
under
any resulting liability to the Company or any Lender. Any action
taken
or omitted to be taken by the Administrative Agent or Issuing
Lender
under or in connection with the Letter of Credit if taken or
omitted in
the absence of gross negligence or willful misconduct shall not
create
for the Administrative Agent or Issuing Lender any resulting
liability
to any Lender or the Company. Notwithstanding any other
limitations of
liability provided in this SECTION 2.1, neither the
Administrative
Agent nor Issuing Lender shall be absolved from liability
arising from
its gross negligence or willful misconduct in connection with
the
Letter of Credit.
(h) Although referenced in the Letter of Credit, terms of
any
particular agreement or other obligation to the beneficiary are
not in
any manner incorporated herein. The fees and other amounts
payable with
respect to the Letter of Credit shall be as provided in this
Agreement,
and drafts under the Letter of Credit shall be deemed part of
the
Obligation.
2.2 REQUEST FOR ISSUANCE OF LETTER OF CREDIT. The Company
hereby
applies to the Issuing Lender and requests the Issuing Lender to
issue, execute
and deliver for its account on the Closing Date, the Letter of
Credit in an
amount of up to the Letter of Credit Commitment. Subject to the
terms and
conditions of this Agreement, the Issuing Lender hereby agrees
to issue the
Letter of Credit.
2.3 AMENDMENT PROCEDURES. The Company may, from time to time, on
or
after the Closing Date and the initial issuance of the Letter of
Credit, upon
not less than ten (10) Business Days prior notice to the
Administrative Agent
and Issuing Lender, request that amendments be issued to the
Letter of Credit
which modify the terms of the Letter of Credit, as may be
necessary. Any such
amendment shall not be effective until it has been approved by
the
Administrative Agent, Issuing Lender and Determining Lenders,
and acknowledged
and accepted by the Beneficiary.
2.4 EXTENSION OF CREDIT EXPIRATION DATE. The Company may request
that
the Credit Expiration Date be extended to a date which is no
later than the one
year after the then-current Credit
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
20
<PAGE>
Expiration Date; provided that, (a) any such extension request
shall be made in
writing (a "FACILITY EXTENSION REQUEST") by the Company and
delivered to the
Administrative Agent no more than one-hundred fifty (150) days
prior to (but no
later than one-hundred twenty (120) days prior to) the
then-current Credit
Expiration Date; (b) no Default or Event of Default shall exist
and be
continuing; on the date of such Facility Extension Request and
on the date of
such extension, if applicable; (c) any such Facility Extension
Request shall be
accompanied by a detailed consolidated budget for the Company
and its
Subsidiaries for the next succeeding fiscal year (including a
projected
consolidated balance sheet and related statements of projected
operations and
cash flow as of the end of and for each quarter of such fiscal
year and as of
the end of and for such fiscal year and describing the
assumptions used for
purposes of preparing such budget); (d) no Facility Extension
Request may be
made which would have the effect of extending the Credit
Expiration Date to a
date later than July 28, 2011; and (e) the Administrative Agent,
Issuing Lender,
and each of the other Lenders must approve and agree, in
writing, to any such
extension. The Company acknowledges that (i) neither the
Administrative Agent,
Issuing Lender, nor any other Lender has made any
representations to the Company
regarding its intent to agree to any extensions set forth in
this Section, (ii)
the Administrative Agent, Issuing Lender, and the other Lenders
collectively or
individually, shall not have any obligation to extend the Credit
Expiration
Date, and (iii) the Administrative Agent's, Issuing Lender's, or
any other
Lender's agreement to one or more extensions shall not commit
the Administrative
Agent, Issuing Lender, or such other Lender to any additional
extensions. On or
prior to the date that is thirty (30) days after receipt by the
Administrative
Agent of a Facility Extension Request (the "NOTICE DATE"), each
Lender shall
notify the Administrative Agent of its decision regarding such
requested
extension and the Administrative Agent shall promptly notify the
Company of such
decision by the Lenders. Any Lender not responding within such
time period shall
be deemed to have declined such Facility Extension Request.
Failure of the
Administrative Agent to provide the Company with written notice
of renewal or
non-renewal on or prior to the applicable Notice Date in respect
of the original
Credit Expiration Date or any extended Credit Expiration Date,
as the case may
be, shall be deemed a nonrenewal of the Letter of Credit beyond
the original or
extended Credit Expiration Date, as the case may be. If the
Administrative
Agent, Issuing Lender, and all of the other Lenders agree to
extend the current
Credit Expiration Date, the Credit Expiration Date of the Letter
of Credit
shall, effective from the Notice Date, be such extended
date.
2.5 MANDATORY LETTER OF CREDIT COMMITMENT REDUCTION. The Company
shall
immediately notify the Administrative Agent in the event of any
prepayment,
reduction, or cancellation of the EIB Loan. Upon the occurrence
of such event,
the Company shall cause the Beneficiary to immediately notify
the Administrative
Agent and Issuing Lender that it desires to reduce the Letter of
Credit by a
pro-rated amount. Upon receipt of such notice from the
Beneficiary, the Letter
of Credit and the Letter of Credit Commitment shall be
permanently reduced by
such amount, and the Committed Sum of each Lender reduced by its
Pro Rata share
of such reduction.
SECTION 3 REIMBURSEMENT AND PAYMENT OBLIGATIONS.
In consideration of the issuance of the Letter of Credit, the
Company
hereby agrees to pay to the Administrative Agent and the Lenders
without
condition or deduction for any counterclaim, defense, recoupment
or setoff the
amounts set forth in this SECTION 3 on the dates and in the
manner provided
herein:
3.1 REIMBURSEMENT OF DRAWINGS UNDER A LETTER OF CREDIT. An
amount equal
to the face amount of each Drawing made under the Letter of
Credit, which amount
is due and payable to the Administrative Agent in accordance
with SECTION
2.1(c).
3.2 FEES AND COMMISSIONS. The following fees and commissions for
the
issuance, arrangement, maintenance and amendment of the Letter
of Credit:
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
21
<PAGE>
(a) LETTER OF CREDIT FEE. A rate per annum on the Available
Amount equal to the Applicable Letter of Credit Fee for the
Letter of
Credit, payable to the Administrative Agent (for the Pro Rata
benefit
of the Lenders) quarterly in arrears from the date of issuance
of the
Letter of Credit, commencing on the Closing Date, and continuing
on the
last Business Day of each June, September, December and
March
thereafter through and including the Credit Expiration Date; and
any
accrued but unpaid fee as of the Credit Expiration Date shall be
due
and payable on the Credit Expiration Date.
(b) ISSUANCE FEE. 0.125%, per annum, on the Available
Amount,
payable to the Administrative Agent (for the benefit of the
Issuing
Lender) quarterly in arrears from the date of issuance of the
Letter of
Credit, commencing on the Closing Date, and continuing on the
last
business day of each June, September, December and March
thereafter
through and including the Credit Expiration Date; and any
accrued but
unpaid fee as of such Credit Expiration Date shall be due and
payable
on the Credit Expiration Date (the "ISSUANCE FEE").
(c) OTHER FEES. Such other fees for the administration and
fronting of the Letter of Credit as shall be agreed to between
the
Company, the Administrative Agent and the Issuing Lender in any
letter
agreements entered into in connection herewith, such fees to be
solely
for the account of the Administrative Agent or the Issuing
Lender, as
applicable.
3.3 COMPUTATION OF RATES AND FEES. All computations of interest
and
fees payable hereunder shall be calculated 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-day year).
3.4 ADDITIONAL COSTS. Amounts sufficient to compensate the
Administrative Agent, Issuing Lender and each Lender for any
additional actual
costs resulting from the introduction of or change in any Law,
guideline or
request or in the interpretation thereof by any Governmental
Authority, central
bank or comparable agency charged with the administration of
such Law or
guideline which directly or indirectly: (a) imposes or modifies
or deems
applicable any reserve, special deposit or similar requirement
against letters
of credit issued by Issuing Lender or the participation
obligation of the
Lenders; (b) increases the amount of capital required or funded
against letters
of credit issued by Issuing Lender or the participation
obligation of the
Lenders (except to the extent such increase arises as a result
of the individual
creditworthiness of the Issuing Lender or a Lender); or (c)
imposes on the
Administrative Agent, Issuing Lender or a Lender some other
banking or monetary
requirements affecting the cost of issuing the Letter of Credit
under this
Agreement, and the result of any event referred to in CLAUSES
(a), (b), or (c)
above shall be to increase the cost to Issuing Lender of issuing
or maintaining
the Letter of Credit, or to increase the cost to any Lender of
maintaining its
participation arrangement in this transaction, payable on
demand. Promptly after
the Administrative Agent, Issuing Lender or an affected Lender
becomes aware of
any such introduction, change or requirement, the Administrative
Agent, Issuing
Lender or such Lender, as the case may be, shall notify the
Company thereof;
provided that the delay or failure to promptly provide such
notice shall not
affect the Administrative Agent's, Issuing Lender's or affected
Lender's rights
under this SECTION 3.4; provided further that the Company shall
not be required
to compensate the Administrative Agent, Issuing Lender, or other
Lender, as the
case may be, pursuant to this SECTION 3.4 for any increased cost
incurred more
than 180 days prior to the date that Administrative Agent,
Issuing Lender or
such affected Lender notifies the Company of the event giving
rise to such
increased cost and of its intention to claim compensation
therefor; and provided
further that, if the event giving rise to such increased cost is
retroactive,
then the 180 day period referred to above shall be extended to
include the
period of retroactive effect thereof. A certificate in
reasonable detail as to
such increased cost, which states the basis of calculation
thereof, submitted by
the Administrative Agent, Issuing Lender or an affected Lender
to the Company
shall be sufficient for the purpose of making any
22
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
<PAGE>
such claim. Such certificate shall certify that such costs are
generally being
charged by the Administrative Agent, Issuing Lender or an
affected Lender to
other similarly situated companies in connection with the
issuance and
maintenance of, or agreements to issue, similar letters of
credit. Such increase
in cost shall, with respect to Issuing Lender, be based upon a
reasonable
allocation of Issuing Lender's aggregate cost related to the
Letter of Credit
and, with respect to the affected Lender, be based upon actual
cost incurred.
In the event that any Lender shall claim payment of any
increased costs
pursuant to this SECTION 3.4, the Company shall have the option,
to be exercised
in writing, to (a) compensate such Lender for the specified
additional costs on
the basis, if any, negotiated between such Lender and the
Company, or (b)
replace such Lender with another commercial bank or other
financial institution;
provided that such replacement commercial bank or other
financial institution
shall: (i) be an Eligible Assignee; (ii) unconditionally offer
in writing (with
a copy to the Administrative Agent ) to purchase all of such
Lender's rights and
assume all of such Lender's obligations hereunder and under this
Agreement
without recourse at the principal amount of such Lender's
participation plus
interest and fees accrued thereon to the date of such purchase
on a date therein
specified; (iii) pay in full the obligations of the Company
owing to the Lender
being replaced (other than the requested increased costs) to
such Lender
concurrently with such replacement; (iv) execute an Assignment
and Acceptance
Agreement, pursuant to which it becomes a party to this
Agreement with a
participation commitment equal to that of the Lender being
replaced; and (v)
upon such execution of such documents referred to in CLAUSE (IV)
above and the
payment by the Company of all of the requested costs accruing to
the date of
purchase, the replacement commercial bank or other financial
institution shall
constitute a "LENDER" hereunder with a participation commitment
as so specified
and the Lender being so replaced shall no longer constitute a
Lender hereunder;
provided that: (A) if a Lender accepts such an offer and such
commercial bank or
financial institution fails to purchase such rights, interests,
and obligations
on such specified date in accordance with the terms of such
offer, the Company
shall continue to be obligated to pay the increased costs to
such Lender
pursuant to this SECTION 3.4, and (B) if such Lender fails to
accept such
purchase offer, the Company shall not be obligated to pay to
such Lender such
increased costs from and after the date of such purchase
offer.
3.5 EXPENSES; INDEMNIFICATION.
(a) The Company shall promptly pay after request therefor:
(i)
all reasonable out-of-pocket costs and expenses paid (or
incurred, to
the extent such costs are presented by the Administrative Agent
to the
Company for direct payment) by the Administrative Agent in
connection
with the syndication of this Agreement, (ii) all reasonable
out-of-pocket costs and expenses paid (or incurred, to the
extent such
costs are presented by the Administrative Agent to the Company
for
direct payment) by the Administrative Agent and Issuing Lender
in
connection with the preparation, negotiation, execution,
delivery, and
administration of this Agreement and the other Loan Papers and
any
amendment, waiver, consent or other modification of the
provisions
hereof and thereof (whether or not the transactions contemplated
hereby
or thereby are consummated), and the consummation and
administration of
the transactions contemplated hereby and thereby, including
all
reasonable attorneys' fees, disbursements, and other charges
of
external counsel; (iii) all out-of-pocket costs and expenses of
the
Administrative Agent, Issuing Lender, and each of the Lenders
incurred
in connection with the enforcement, attempted enforcement,
or
preservation of any Rights under this Agreement or the other
Loan
Papers (including al
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